VP’s Speech At The 2nd Nigeria Diaspora Investment Summit
REMARKS BY HIS EXCELLENCY, PROF. YEMI OSINBAJO, VICE PRESIDENT OF THE FEDERAL REPUBLIC OF NIGERIA, AT THE SECOND NIGERIA DIASPORA INVESTMENT SUMMIT AT THE STATE HOUSE, BANQUET HALL, ON 7TH NOVEMBER, 2019
It was a pleasure to be at the first summit and I wondered whether there would be a second summit. But if anyone knows Hon. Abike Dabiri well, she is certainly one who is so determined and committed. I am sure we are not going to have just a second summit, but several other summits.
But at that first summit, we were focused on the investment opportunities and our macroeconomic context. The theme of this second summit is clearly meant to be complementary – “Leveraging Diaspora Resources for Economic Growth.”
My very brief remarks today will focus on the “hows” of bringing in diaspora resources.
How do we mobilize resources for both Foreign Direct Investment and Portfolio Investment? And how do we effectively market these vehicles? Also, should we not, as have been suggested in some studies of the problem (there is a particular study from which I have taken quite a few ideas,) explore the prospects of international cooperation to make the mobilization of assets across borders easier? Could we for example, work out rules by which local banks can accept assets located abroad as collateral? How does that really work and make it easy? There is excellent work done by Aaron Terrazas, it is titled, “Diaspora Investments in Developing and Emerging Capital Markets.” It speaks to some of the concrete issues that we are meant to be talking about today. I have borrowed quite a few of some of the questions and ideas raised in that important survey.
Some international agencies such as USAID and OPIC, two US agencies, have supported diaspora investments in their countries of origin through risk reduction. USAID does this by focusing on the lenders in the country of origin, and OPIC on the other hand, focuses on diaspora investors who are US citizens. But there are several of our diaspora investors who have dual citizenship. Then they have the Development Credit Authority, DCA, also a US government initiative, that has provided partial credit default guarantees, for example, we have seen that being used for Ethiopian entrepreneurs in Diaspora, who have been able to access bank credit. I think that Nigerians in Diaspora can also access some of these products of US agencies, especially for those who live in the US.
The way it works is that the credit guarantee allows USAID to partner with banks to mobilize locally held assets and savings. The DCA then guarantees 50% of losses in cases of default. So, these two US agencies sort of work together, not only to guarantee losses, but also to even guarantee a specific value of those losses.
Also, OPIC supports US registered companies investing overseas by offering discounted insurance to protect against currency risk. The sort of currency risk they protect against is one that I think we frequently encounter, which is the possibility that an investor may have difficulty converting profit or capital from local currency to dollars, which is a risk we face in many emerging economies. There are also political and expropriation risks, but we don’t have those sorts of problems here.
Now it is entirely possible to work with both local and international agencies to seek ways of de-risking diaspora investments to encourage more interest in local investment opportunities. I am glad to see that our sponsor today, United Capital, is one that is in the forefront of these kinds of initiatives. I also saw Simplify, I think that is what they are called, which is also doing something quite innovative in this respect.
We may look for example, at ways by which The Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL PLC) can de-risk diaspora investments in agriculture and agribusiness. NIRSAL’s mandate is to stimulate the flow of affordable finance and investments into the agricultural sector by de-risking the agribusiness finance value chain. So NIRSAL presents a real opportunity in my view, for those who want to invest in agriculture from the diaspora, especially to look at how to de-risk their investments.
How can we make diaspora bonds or diaspora mutual funds work? Interest in previous attempts at diaspora bonds appear to have attracted mainly institutional investors. I think we had a bit of problems with establishing the diaspora bond has one that individual investors can put their resources into. It appears that the attempt we made was only able to attract institutional investors. We have to make this accessible and interesting for individual investors, that all of us in the diaspora can put in our resources.
How do we mobilize non-institutional diaspora funds? I think we can explore how diasporans in the financial industries in their countries of residence can partner with local private capital companies to raise capital in both jurisdictions for investment. So much is possible.
In the past four years, our major focus as a government has been on infrastructure development – rail, roads, bridges and power. Our infrastructure spend is by far the largest in Nigeria’s history. Yet the infrastructure deficits remain significant. We have major funding gaps as some of you following the debates budgets have seen. Part of the solution is private sector collaboration by way of tax credits for investment in public infrastructure. We have put that out there that we are prepared to partner with private sector individuals who want to put in their resources for tax credit. It involves a fair amount of money. We have had a few takers, but I am sure there are those in the diaspora that can mobilise the kind of resources that can be invested in this kind of public private sector partnerships for infrastructure and derive significant benefits from it, and if possible, tax credits.
The other is the Infrastructure fund. The fund at the moment has only received institutional investors, but there is, in my view, room for investment from diaspora funds as well. Such investments, especially when managed with the known expertise of the Nigerian Sovereign Wealth Fund, can be both safe and profitable. We think that diasporans can benefit from this significantly and we, as a nation, can benefit from it.
Our focus so far, has been on renewable energy in the power sector. It also presents an opportunity, especially with our green bonds – Africa’s largest sovereign environmental fund. It is the largest sovereign fund of its kind anywhere on the continent. We think there can be some interest from our brothers and sisters in the diaspora. The bond issuance has done so well and has been supported by lucrative investments. With the bond, we are focusing on certain areas of investments in renewable energy. For example, we have a programme called the Energizing Education Project. This programme is run by the Rural Electrification Agency. What it seeks to do is to improve access to power to thirty-seven (37) federal universities and seven (7) university teaching hospitals across the country. It will also impact the residents of surrounding communities of over one million people.
The whole idea of this particular programme is that we are providing private sector funding for solar power initiatives in our Federal Government universities. In total, we have 119 MW of power which will be provided, out of which 60 MW will be solar powered projects.
Only last month at the Bayero University Kano, BUK, we commissioned the largest hybrid solar plant in Africa. Investments in the green bonds serves as important economic and environmental purposes. The possibilities are many, and I hope we will spend some time at this summit to closely scrutinize the options for mobilizing diaspora capital for local investment. We should look at some of the local opportunities being provided now, government is providing some; financial institutions are providing a few and the Central Bank has been extremely proactive in providing products that can be of interest to our diasporans.
So, let me again commend the excellent work done by the Diaspora Commission under the inspirational and committed leadership of Hon. Abike Dabiri Erewa, the Executive Chairperson of the Commission and all of our brothers and sisters from the Diaspora who have contributed to the success of this summit.
The journey to full and effective partnership between our country and our kith and kin in the diaspora is becoming more exciting and more promising. I remember the days we used to talk about the diaspora, and how those in diaspora used to talk about being neglected and ignored, but that is all changing now. We are meeting regularly, we have a commission, devoted leadership, so I think the future is very bright and it will greatly benefit our country. I hope this summit will take us to the next level in that journey.
Thank you very much.