Government’s engagement with private sector remains consistent, robust, says Osinbajo
Vice President Yemi Osinbajo, who heads Federal Government’s Ease of Doing Business Council, was the guest of the Lagos Chamber of Commerce and Industry (LCCI) at its 2016 Presidential Policy Dialogue at the Eko Hotel and Suites, Victoria Island, Lagos. In a subsequent interview with select journalists, including MARCEL MBAMALU, the News Editor of The Guardian, the vice president explained how government would continue to engage the private sector in deepening economic diversification through consistent and robust policies.
There is a sense that government is trying to fix things on its own without enough of engagement with the private sector; how would you respond to the point about creating an enabling environment for the private sector to thrive?
Our engagement with the private sector has been consistent and quite robust. There may be some situations where the private sector could say that it is not sufficient, but I must say that it is really robust. For example, I have met with the manufacturers association of Nigeria not less than three times. At various times, I have met with farmers — wheat farmers and rice farmers — on individual basis about three or four times. I have met with the segments o the business community, the professional groups. I’m here in Lagos for the dialogue of the Lagos chamber of Commerce and Industries. The Ministry of Budget and Planning was in Lagos last week engaging on the Medium Term Expenditure Framework.
It is a great deal of engagement with the private sector. As you can imagine, the private sector is a large segment of the Nigerian society; and you would always find an individual or group who say ‘this is not quite enough because you haven’t spoken to us yet.’ But I think we have tried to create the right platforms for our engagement. In any event, we have no choice, and we are committed to engaging the private sector. How do you have any kind of economic environment without active engagement with the private sector? The private sector is business; they are the economy. It is inevitable and we will continue to do so. We will have our quarterly briefings with the private sector beginning next quarter.
I think its is really the outcome of these engagements that the people would like to see; can you speak to specific initiatives, in terms of policies, that have come out of these discussions with segments of the private sector?
Yes, before those initiatives can even take root and take effect, there must be a gestation period. There is no way you can have a dialogue today and expect to see tremendous change in the economic environment tomorrow. But, practically, every step we have taken so far is deliberate. For example, the Ease of Doing Business is one of the most important initiatives of government and the technical committee of our Ease of Doing Business Council, which I chair, is headed by a private sector personality, who is a partner at KPMG. Of course, that is a very robust platform for engaging the private sector.
We have several other ways in which we have engaged the private sector. For example, looking at the whole issue of tariffs in various sectors of the economy, we have engaged the private sector trying to look at the issues around tariffs.
Even with the budget, we have extensive consultation for undertaking with the budget. Look at the Agriculture, the wheat farmers and the rice farmers for example, the Anchor Borrowers Scheme, the CBN’s programme, was on account of engagement with rice farmers. For Example, we discovered that many rice farmers preferred credit that will enable them buy their own inputs to subsidy on fertilizer. In Kebbi State, because we were able to implement the Anchor Borrowers programme on their own terms, we saw a tremendous increase in the hectrage of rice. It moved up from 3.5 tonnes per hectare to 7.5 tonnes per hectre. They are doing close to a million metric tonnes of paddy rice now. That’s again, on account of our engagement with the private sector; it is the same scenario with wheat production. As I said, it is practically impossible to make policy outside of those people the policy is supposed to affect, and we will continue to engage
Many Nigerians are comfortable with government’s mantra of economic diversification but desire to see more practical steps towards that direction, especially with regard to budgetary allocations. How would you react to the fact that government’s allocation to agriculture, for example, is less than one per cent of the entire budget?
Let me say that first, the diversification effort of the Federal Government is rooted in the reality of our circumstances. I am sure you would agree that the real question is not that the economy is not diversified; rather it should be the deepening of diversification. When you look at it, Agriculture and Services are the largest contributors to GDP. Oil that we talk so much about is about the third contributor when we talk of size, although it is the largest revenue earner. So, in actual terms, the economy is actually diversified; the real question is how to deepen that diversification and enable this to be much more fruitful.
Aside from budgetary allocation, there are issues that need to be dealt with. So, just looking at budgetary allocation for a particular sector in isolation is not enough. For example, in agriculture sector, one of the key issues is infrastructure — rural roads, the road network generally, rail for movement of agricultural product and all that. So, a lot of what is being spent on infrastructure obviously will benefit the agricultural sector and the reason why so much is being spent on infrastructure, including irrigation, is because we expect this will benefit the agricultural sector.
Power is absolutely important for the entire economy; you cannot really diversify without power. As at February 2015, we had peaked at 5000megawatts, the highest in the history of the country. You are familiar with the fact that the Forcados export terminal was bombed in February — that was 40 per cent of gas production lost in that single incident. And, of course, several other bombings and sabotage of pipelines have taken place. So, there has been drastic reduction in power supply, which obviously affect other diversification efforts into manufacturing and all of those. The efforts at diversification have suffered from some of these acts of sabotage, especially in the power sector.
But, all told, there is no question at all that the government is completely committed to diversification. That is why we have the Presidential Council on Ease of Doing Business; that is why we are trying to sift through the whole agro-allied value chain aside from agriculture itself and we are paying particular attention to developing petrol chemical industries and supporting massive investment in tomato, massive investments in production of rice and wheat and several other agriculture products with a view to deepening the diversification. I think we are on course in terms of the general framework.
I will like to know government’s plan on some outstanding public debts, especially the N400 billion owed local contractors and the $8 billion in cash calls for joint ventures?
You must recognise that these are legacy debts owed prior to the current administration. We have been talking to the construction industry and trying to find ways of addressing that concern. We’ are actually committed to ensuring that those debts are settled. There are claims, as I said, of about N400billion and we are looking at several different options for making that payment. They are also engaged with us in looking at the options for payment.
I think, for the first time, they are reasonably confident that they will be paid. It is really more of matter of for and when but they are reasonably confident that they will be paid. Which probably explains why they are so willing to go back to work on various sites even with payment of some of the sums that have just been released following the release of capital votes for the 2016 budget.
What about the $8 billion owed oil majors?
The $8 billion in cash calls. Again, these are legacy debts. I mean when oil prices were at $100, rather than pay those debts, the government at that time did not pay. Oil prices are now down to $50 and $8billion is owed. So, it is certainly a massive drawback, in terms of what it is that the oil industry itself can do and what the Federal Government can muster at this time.
But, again, we are talking to International Oil Companies, our joint venture partners, and we are getting reasonable responses from them.
Our major objective is to be able to move out of the whole cash-call issues and be able to get the JVs to borrow on their own account rather than make this the sole responsibility of government. So, we are working with them to find a way of settling these debts.
How is the Federal Government’s strategy for fixing the fiscal problems and to what extent is foreign investments part of that strategy?
Both local and foreign investments are crucial. We expect that deregulation and flexible exchange rate would lead to an increase in inflow of not just direct foreign investment but also portfolio investments; we expect that to happen. Of course, we are not overly excited or enthusiastic of portfolio investment. This is hot money and it will go and come. But we are focused on ensuring that enduring investments, in the form of FDIs, come in.
We are also focusing on local investments. Some of the investment that we are seeing are, to mention a few, Dangote’s 650,000 barrels refinery, petro- fertilizer plants, Sorghum plant by Honeywell, the 500km sub-sea pipeline by Dangote, among others.
These are very significant local investments. We expect that if these are encouraged (and we — they will be very significant in terms changing the physical landscape. for example, the 650,000 barrels of refining capacity means that domestic refining has come to be and it means that the impact of importation of refined petroleum product on our foreign exchange will practically diminish because we will obviously be doing everything practically locally. It is the same with fertilizer importation.
We also expect the flexible exchange rate to facilitate and encourage foreign investment. Everyone knows that Nigeria is the next frontier for investment and there may be difficulties and complications here and there now. Going by what we see today, many foreign investors are keenly interested in investing in Nigerian market.
Are there early signs of investments coming?
Yes, there ar. For example, General Electric is about making a very significant investment in the country. They are investing in rolling stock for railways. Obviously, this is important because we are doing two rail lines — Calabar- Lagos and Lagos-Kano rail lines. So, investments are coming in. When you look at it, this is a country of 170 million people, a very vibrant economy for that matter, and people are looking at investing
Even in Agriculture, there is a Mexican major, a leading producer of agricultural produce, who has come into Nigeria. He is already investing in 10 states, especially in vegetables, pineapples, bananas and other fruits.
Do you think that government’s approach in communicating what it’s doing, especially with regard to the billions of naira bailout for states, is really coordinated? That payment was meant to serve as stimulus budget to move the economy away from crisis; isn’t it?
What we plan to do is an expansionary budget, that is the whole idea and of that of course, has various implications and there are hard drawbacks, problems and challenges. One is meeting revenue targets and of course I am sure you are familiar with the fact that there is some difficulty in meeting revenue targets. Oil revenues have dropped drastically. On account of the sabotage going on in the Niger Delta, oil revenues are down to 60 per cent; and that is huge drop of our revenue expectation, although we are getting some good signs from non-oil revenue especially from the FIRS, and other non-oil sources.
However, the huge drop in oil revenue is a major drawback and that of course, will impact the possibility of being able to achieve all of our objectives in an expansionary context. So, there are difficulties there, but there is no question that there is an understanding of what needs to be done.
Deregulation has taken place in the downstream sector, a very important policy measure because it ensures that we are no longer expending the kind of resources that we spent in the past on that sector.