The Nation Newspaper’s First National Forum On The Economy
KEYNOTE ADDRESS BY HIS EXCELLENCY, PROF. YEMI OSINBAJO, SAN, GCON, VICE PRESIDENT, FEDERAL REPUBLIC OF NIGERIA, AT THE NATION NEWSPAPER FIRST NATIONAL FORUM ON THE ECONOMY, ON THURSDAY, APRIL 7, 2016.
I am pleased to be here with you this morning for ‘The Nation’s First National Forum on the Economy’. The Nation is a newspaper house that has carved a niche for itself as a locus of progressive thinking, through an array of distinguished columnists who serve up a menu of crisp, critical writing on a daily basis. This is, of course, in addition to its role as a newspaper of repute which tells the news as it is without garnish, sensation or hyperbole. This stance is well reflected both in the organization of this national forum on the economy, as well as its theme – National Economy: The Way Forward.
As this distinguished audience is well aware, our government led by President Muhammadu Buhari came to office with an agenda of ‘Change’. This was a compelling and ultimately victorious slogan, not just because our country’s former trajectory was unedifying and unsustainable, Change also resonated with the vast majority of our people because they have always believed, rightly in my view, that with committed leadership and seriousness of purpose, Nigeria can and will become a model for global economic development. Let me say without any equivocation whatsoever, that this government will deliver on this promise.
We recognised at the onset, that the plethora of challenges facing Nigeria could be overwhelming if not strategically handled. The multitude of things requiring decisive action also posed the attendant risk of trying to do everything at once and ending up scratching only the surface, without any visible or desired impact. Our approach therefore was to anchor the vision of the government on three critical constraints which if properly addressed, would have positive ramifications for national development. We accordingly resolved to improve security, tackle corruption and grow the economy in an inter-related manner.
Since insecurity does not arise solely from a vicious and callous world view, our security strategy is founded on the rule of law and respect for the rights of people in the realization that these are pillars for an orderly society and for improved governance without which change will prove difficult to achieve.
Thus, aside from sheer outrage at the plunder of resources that could have lifted millions of Nigerians out of poverty, our anti-corruption stance is also premised on an abiding commitment to transparency and accountability. It is a trite fact yet well worth repeating, that if not decisively tackled, corruption can eat deep into state institutions, undermine societal values and alter economic incentives. It also undermines national security and hampers development, so, it is inevitable that the way forward for our national economy requires that we slay the monster of corruption.
Our approach is a multi-faceted one that strives to prevent corruption, ensuring that there are consequences for acts of impunity and aiming to recover illicitly acquired wealth. The bedrock of prevention lies in codification of processes and requirements and reduced discretionary arrangements. Accordingly, in addition to ‘body language’, we have the Treasury Single Account which enables government to track payments to and from its Ministries, Departments and Agencies. Similarly, the Zero-Based Budgeting system we adopted, means that proposed expenditures are aligned to specific, verifiable items, while an integrated payroll system which prevents ‘black holes’ in recurrent expenditure.
Asset recovery is an important prong of our anti-corruption efforts as we are determined to track and bring back our stolen and laundered resources. We are aware that it requires clarity of purpose and a painstaking effort to achieve this objective. We have thus been developing partnerships with various institutions and agencies, especially in the international community while also developing the skills and knowledge needed to succeed in this task. In view of recent developments relating to diversion of recovered funds, mechanisms will also be put in place to ensure transparency and probity in accounting for these resources. To start with, a line has been created for recovered assets in the draft budget thus making the process subject to parliamentary and public scrutiny.
The starting point then to move our national economy forward is to build a foundation for a resilient and dynamic economy. Our desire for change must translate into imbibing the ethical values, on which we can build the nation that we want. It must be a change in orientation from a greedy, grasping attitude, to bringing about a fair, just and equitable society. It must also be a change in our approach to life and living styles itself. We must prefer simplicity to ostentatious living, we must imbibe thrift over waste, and above all, we must celebrate integrity over corruption. These are not just morally uplifting values, but are essential for reducing the red tape and transaction cost of doing business.
This modification of our values has become more urgent as the price of oil, the mainstay of our economy over the years, has collapsed from the dizzying heights of $140 per barrel in 2008, to as low as $27 per barrel just a few weeks ago.
The second step therefore, in our economic strategy to move the nation forward, is that we must move beyond oil which occupies an outsize space in our economic consciousness. The reality is that while oil only accounts for about 14.4% of our national economy, it continues to be the source of 90% of official foreign exchange earnings and prior to this year, up to 76% of government revenues. Indeed, such is the situation that this nation of over 170m people benchmarks its national budget on the basis of the price of one commodity – oil.
We must also look beyond oil because it distorts priorities. Having an easy source of revenue has denied Nigeria, the opportunity to engage in the critical thinking and prioritization that usually drives development. In our case, by lacking fiscal pressures, Nigeria has succeeded in wading through the forty years of boom and bust, without addressing fundamental structural issues. In order to move forward, we must reduce current dependence of the Federal and State Governments on the ritual sharing of revenues earned from oil. Doing so requires a broader revenue generation effort and diversification of our economic structures, in terms of the drivers of economic activity and sources of foreign exchange.
The foundation for a strong economy requires that we have appropriate fiscal policies. Fiscal policy will leverage existing policy space arising from a very low rate of value-added tax rate of 5% and a low taxpayer base. We are focused on increasing the tax payer base in the first instance this year, fully conscious of the fact that increasing taxes may dampen the intended stimulus.
At the Federal level, the implementation of the budget will stimulate the economy rather than impose undue austerity. Accordingly, up to 30% of expenditure which has been devoted to capital spending and the N500billion for social interventions, will create jobs directly and indirectly while also boosting demand. Also noteworthy, is the fact that non-oil sources comprising mainly of Companies Income Tax, Value Added Tax and Customs and Excise duties, are expected to contribute about N1.45 trillion which is more than oil related revenues estimated at about N820 billion. This is unprecedented in a long while in our nation and is a near complete reversal of the previous ratio of oil to non-oil revenues. These are bold and clear indications that the Buhari administration is serious about change.
In terms of diversification, the way forward requires that we move from reliance on crude oil to the production of petroleum products. By this, I mean that instead of merely extracting and exporting crude oil, Nigeria must now take full advantage of its petroleum sector and its entire value-chain. This will mean refining our crude before it is exported, it will entail becoming an African regional petrochemical hub, it will require making full use of our natural gas resources domestically, and abroad and, of course, it will also require that we fully implement local content laws and regulations in the oil sector so as to fully utilize its abundant forward and backward linkages. It is for these reasons that the Federal Government will be prioritizing the adoption and execution of a national oil and gas master plan this year.
We also now have to move beyond the neglect of other key sectors such as agriculture, manufacturing, solid minerals and high value services. The rebasing of our economy in the not too distant past, revealed that the contribution of the oil sector to Gross Domestic Product, had fallen from 32.4% prior to the exercise to just 14.4% as I stated earlier. In other words, while we were all still focused on the fortunes of the oil market, other activities had sprung up that were driving the economy. These sectors have the potential to create jobs, boost domestic demand and just as important generate significant foreign exchange earnings, which is why the Federal Government has put diversification of the economy on its agenda this year.
Thirdly, Nigeria has to ramp up its competitiveness in global terms. This requires action in two directions. One of the things required is to ramp up our productivity. For this, we need first rate infrastructure and greater use of science, technology and innovation into our production processes. It is in realization of the key role of infrastructure that the 2016 budget has given priority to roads, power, and rail projects. We are also signaling the need to ramp up our human capacities in science, technology, engineering and mathematics-STEM- by extending bursaries to students studying these subjects in tertiary institutions, beginning this year.
Similarly, our desire to build a competitive economy requires that we reduce the transaction costs of conducting business in Nigeria. If we are to become a competitive economy, we just have to reduce the processes and expenses that the private sector has to contend with on a daily basis just to conduct business. This ranges from company registration, land titling, construction permits, and connection of infrastructure to dispute settlement procedures. This is yet another item that is high up on the Federal Government agenda and we hope to improve Nigeria’s ranking in the ease of doing business index of the World Bank going forward.
What most observers remember from the rebasing of Nigeria’s gross domestic product is that we are now the largest economy in the continent. Thus, while this is naturally quite heady news for investors and citizens alike, there are other equally interesting facts revealed by the rebasing exercise. Most notable is that the services sector grew faster than agriculture and industry which points to great promise in the telecommunications and IT sector, financial services, real estate, transportation and indeed creative industries, the latter of which compels us to take greater interest in intellectual property. Another fact often overlooked in the discourse is that Nigeria has become an exporter of human services such that remittances into the country were of the order of about $21 billion in 2015. Going forward, therefore, we will be taking full advantage of the opportunities offered in the services sector.
There is of course much work to be done, but we will be going about our business in a focused but flexible manner, which allows for improvements and up scaling of our policy interventions in an on-going manner. We are similarly committed to ensuring that Nigeria’s strengths are fully leveraged in all these efforts. Quite evidently, if we are to move the national economy forward, both Federal Government and the States, need to work together for the common good with singularity of purpose. I am glad that this spirit was demonstrated at the last NEC Retreat and I am very hopeful, that if we stay on course and implement the recommendations that emanated from there, we will succeed in meeting our aspirations as a nation.
In conclusion, it is important to underscore the point that we shall remain engaged with the Nigerian people, including stakeholders in the economy. For instance, we intend to start a quarterly meeting with members of the private sector and other economic stakeholders soon and thereby create a forum for engagement on an ongoing basis. Town-hall meetings at the presidential level would also be resumed across the country to explain progress and address the challenges with our people.
While the task of revamping our economy is a considerable one, our determination as an administration is firm and unrelenting. We urge the Nigerian people to remain patient and indeed expectant. We acknowledge the pains and are concerned by them. Which is why we are working diligently to address the tough challenges inherited from the nation’s past. Like I said at the beginning of this message, the plethora of challenges facing Nigeria could be overwhelming, and with it the multitude of things requiring decisive action. We are taking action and in due course, they would produce satisfying outcomes, for they are borne out of a leadership that has no other agenda but the progress and greatness of Nigeria
I thank The Nation for this opportunity to share a few thoughts and look forward to an interesting and engaging exchange of views.
Thank you for your kind attention.