VP’s Remarks At The Nigeria Diaspora Investment Summit

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REMARKS BY HIS EXCELLENCY, PROF. YEMI OSINBAJO, SAN, GCON, VICE PRESIDENT OF THE FEDERAL REPUBLIC OF NIGERIA, AT THE NIGERIA DIASPORA INVESTMENT SUMMIT ON THE 20TH OF NOVEMBER, 2020

PROTOCOLS

I am very pleased to be here again, to speak to this inspiring gathering of Nigeria patriots in the diaspora, but who are actively engaged, in investing and even in shaping policy in Nigeria. This is the third summit and this is my third appearance and my reason each time I accept the invitation is the same, our diaspora is one of the most vital resources that we have, a literally endless reservoir of talent, of trade, of investment opportunities, of tourism, education, culture and sports opportunities.

But perhaps more important is the share range of well-trained, honed and experienced talents that our diaspora represents. It is that potential, not necessarily just remittances that make a diaspora network, an endless source of economic hope and social aspiration. When we met last year, little did we know that the world will be afflicted by possibly the worst health crisis and the most devastating economic downturn in a generation.

For us in Nigeria as with many developing countries, it meant, you know, as of last quarter, a -6% slowdown in GDP. A sad development, especially after 12 consecutive quarters of growth. So, in response, we designed an ambitious N2.3trillion Economic Sustainability Plan and the focus of that plan is on creating jobs, first by mass agriculture programme. Already, we have enumerated 5 million farmers and geotagged them to their farm lands.

Also, a mass housing programme, where we are building 300,000 homes in all States of the Federation using local materials and using small to medium-sized construction companies and using direct labour. What we plan to do is that in every one of the sites, already we are active in about 11 States, we are engaging very small contractors, small construction companies, not any of the big ones, although we are using some of the big ones as coordinators. On the sites, we ensure that we have facilities for block making, for making of panels, windows, doors, et cetera. All of these locally produced. The whole idea is to generate jobs, generate opportunities and income in every locality that we are functioning in.

We also have a solar programme to make 5 million connections across the country. In other words, we are going to be putting 5 million solar home systems across Nigeria. That will service in all, about 25 million individuals. So this particular project, the solar homes project involves a credit extended to solar home systems, assemblers and retailers by the CBN. In fact, all of our programmes are actually supported by credit facilities, which the CBN is offering, and that credit facility is about N1.3trillion in all. And it is, of course, as you can imagine, a substantial part, more than half of the N1.3trillion. So the whole idea is that the CBN is offering these credit facilities through the commercial banks to support a housing programme, to support the solar home systems programme, and also to support the agriculture programme.

And what we have also tried to do in response to COVID-19 and also in furthering our own economic policy, is to attempt to make the fiscal environment as attractive as possible. This is important for us because the only way by which you can actually attract local investments, not to even speak of the sort of investments that we are expecting from the diaspora, the only way to attract local investments is to ensure that we have a fiscal environment that’s attractive. To have an environment that makes sense for people to invest it.

So what we have done is to use the instrumentality of the Finance Act to make or propose significant reforms. Let me just very quickly explain the Finance Acts. Every time we have a budget now, since last year, we have also proposed a finance bill to the National Assembly. Basically the finance bill looks at several fiscal issues that we want to legislate on or amendments we want to make into law, which would make it easier for us to implement the budget and also to ease the fiscal environment or make the fiscal environment more friendly. So we started passing Finance Acts from last year and where we are now proposing a second Finance Act this year.

I’d just talk briefly on what we achieved with the Finance Act last year. Last year, we passed a legislature giving small companies with a turnover of less than N25million a year, tax exemption from Companies Income tax, while medium-sized companies with their turnover of between N25 million to a N100 million will now pay Companies Income tax at a lower rate of 20%. So for those companies, they used to pay 30% income tax. Now they are paying 20% ,well since last year, when this was introduced, they have been paying 20%, and then services provided by micro finance banks are completely exempted from tax, from VAT.

No microfinance bank pays VAT now for its services, withholding tax rates, also on roads, on bridges, on buildings and power plant construction contracts have been reduced from 5% to 2.5%. So those who are doing construction contracts and proposing for construction contracts, pay a reduced rate and they no longer pay 5% but they now pay 2.5%. Now in the proposed 2020 finance bill, we have gone a bit further, we are reducing by 50%, the minimum tax rate. So the minimum tax rate used to be 0.5%, but now it is reduced to 0.25% for gross turnover for the financial year ending between January 1st, 2020 and December 31st, 2021. So we have reduced the minimum tax rate by 50%,by half.

Then we have exemption of small companies, with less than N25 million turnover from payment of the 2% educational tax under the tertiary education trust fund or Tetfund. As you know, what happens is that companies pay a 2% tax in addition to whatever taxes they pay. They also pay a 2% Tetfund tax, an education trust fund tax. But what we are saying now is that for companies that have a turnover off less than N25 million, they are no longer required to pay that 2% tax for the education tax fund so their tax burden is reduced.

The other point is with respect to software acquisition by companies. Now when companies acquire software for their company operations, in the past, that was treated as an overhead. Now we are going to treat it as a qualifying expenditure for tax deduction,to improve the ease of doing business. In other words, we now regard software acquisition as a capital expenditure, and we think that is the right approach to it because software for different business processes and all that is essentially the machine that the companies work on. And so we see that it should be treated as a capital expenditure as well. This, of course, would improve the liquidity of companies and generally encourage ease of doing business.

We have also done some specific reductions, for instance, the transport sector is one which we think has been under a great deal of problems, a great deal of tension. What we have tried to do is that unless we do something about duties, especially for transportation for cars, trucks, buses, et cetera, we may find ourselves in a much more difficult situation than ever before.

As you know, we removed petroleum subsidies completely since March of this year and the implication of that, of course, is that at least in the short term, petroleum prices would go up. We expect that it would stabilize and with competition, it will actually reduce. But what we then saw was that this meant increase in transportation cost. This was not helped by the very heavy duties that we had around trucks, buses, and even motor vehicles generally.

What we have done now is that we have reduced duties on motor vehicles for transportation of goods from 35% to 10%. We are proposing a reduction of the levy on motor vehicles for the transportation of persons. In other words, you know, cars for transporting persons, there used to be a levey of 35% and that has now been reduced to 5%. We are also proposing a reduction in duties on tractors from 35% to 10%. So that, of course, will support some of the work that we are doing in agriculture, mass agriculture, and of course, several of the agricultural initiatives going on around the country.

There are also quite a few other innovations that are going on. Some of them may not be necessarily be relevant to business, but the Finance Act, as I said, is one of the efforts that we are making to constantly review the business environment and make changes in every budget cycle as we see fit.

So these are some of the, if you like, some of the new things that we are doing in the business environment to make things easier for those who are doing business and of course, to generally encourage ease of doing business around the country.

One of the critical things that you probably noticed is that food prices have gone up, this is of course on account of several different issues that have made this the way it is. One of course, again, is transportation. Transportation of food from the hinterland to many of the urban areas where we noticed that food prices have gone up. The other is flooding in several parts of the country, especially in the breadbaskets of the country. There has been considerable flooding in Kebbi State, for instance, where quite a bit of rice is grown but a lot of its rice fields was destroyed by flooding. And we have also had several problems, of course, the supply chain problems caused by COVID-19 and most recently by some of the riots that followed the #EndSars protests in different parts of the country. We are also looking very critically at how to remove those bottlenecks and deal with some of those problems and at the same time, ramp up food production. Dry season farming is important to us and this is one of the key ways by which we hope to address some of the problems around food production and the cost of food.

We are all indebted to the Nigerians in Diaspora Commission and the Nigeria Diaspora Summit Initiative who have organized this summit in the past three years with outstanding results. As an outcome of last year’s summit, a committee to work on the modalities for the setting up of the Nigerian Diaspora Trust Fund has been established and I’m told that they are working very hard.

The fund is to pay for development projects and programmes while guaranteeing investors in the fund attractive returns on their investment. There was also a very successful Nigeria-Saudi Arabia Investment Forum, which brought over 50 Nigerians in Saudi Arabia who, hitherto had no business dealings in Nigeria, to come home and invest in businesses within the country. So this has also further strengthened social cultural and economic relationships between Nigeria and the Kingdom of Saudi Arabia.

In addition, there are quite a few other testimonies from small and medium scale enterprises that got investments for their businesses through their participation in last year’s summit. I understand that even the Nigeria Medical Association, the NME, took advantage of the networking opportunities that the summit provided. So we look forward to more achievements this year, especially with the coming on board of the state diaspora focal point officers who will help in facilitating diaspora investments in the various States.

So let me again commend the CEO of the Nigerians in Diaspora Commission, the indefatigable Mrs Abike Dabiri- Arewa and her team, and all our brothers and sisters in the diaspora, many of whom of course, are joining us virtually this time and to say that the diaspora initiatives that we have, and all of your efforts are certainly appreciated and will result to a stronger economy for Nigeria and a much, much better country.

We all look forward to being able to meet physically again. I hope next year when I’m sure we would have somehow been able to deal with this COVID thing, that we will all be able to meet again and see each other physically.

Thank you all very much and I wish you all a very great time at the summit.