Osinbajo: what to expect from Buhari’s second term

Vice President Yemi Osinbajo gave the 50th convocation lecture at the University of Lagos (UNILAG) on Monday. The lecture titled ‘Nigeria Rising…The Path to Prosperity’, Osinbajo itemises what has been done to reposition the country and what needs to be done. Excerpts:

I suspect that the choice of the subject of this lecture: ‘Nigeria Rising…The Path to Prosperity’ was informed by the curiosity of the university about what to expect from the Buhari administration in the next four years.

I will speak to this in several parts.

Perhaps I may begin by affirming the belief of the Buhari Administration that Nigeria’s prosperity means a decent existence for all. Second,  that prosperity so defined will be attained if we are able to address the issues of extreme poverty, productivity, corruption, the rule of law and the deficiencies in the quality of Human Resources caused by poor education and healthcare ) . This last point is possibly the most fundamental.  How to ensure that we maximise the potential of the abundant Human Resources that we have. This implies that we must have a robust enough healthcare system that ensures that the average person is in good health, an educational system that guarantees education capable of preparing children for the opportunities and challenges of a knowledge economy, a thriving private sector-led economy supported by a business-friendly environment , a system of wealth creation options and safety nets capable of taking millions out of poverty and providing for those who cannot work. The wealth creation options must include access to cheap credit for smallholder farmers, traders and artisans. The safety nets include government created job schemes for the unemployed and cash transfers for the poorest and most vulnerable.

In planning the path to prosperity we also took into account the age-old weaknesses of the Nigerian economy , and the illusion of prosperity that frequently distorts our understanding of the actual fragility of our economy. First is the focus on GDP growth figures, without a clear understanding of the underlying dynamic. 60% of GDP growth is dependent on oil revenues. How? While the oil sector contributes between 8-12percent, the non-oil sector contributed between 88-92 percent of GDP. However, between 50-53percent of the non-oil sector is also dependent on the fortunes of the oil sector.

This means the economy rested on a tripod where two of the three legs were dependent on highly volatile oil prices and production.

This shaky economic structure enabled Nigeria to keep growing as long as  revenue from oil and foreign reserves were high enough and of course we celebrated this fragile growth structure. By the very nature of extractive industries  high oil revenues does not mean more jobs or better human development indices.  Jobs are only created where there is value added. A thriving petrochemical industry would of course have created jobs directly from the oil and gas industry . The economy  had also been running a consumption growth model which is only advantageous if consumption is been met by domestic production of goods and services. However our structure was based on consumption of large portions of imports. As long as there was plenty of oil based foreign exchange in the reserves to import and fuel consumption our economy kept growing in GDP terms but few jobs were being created and more people were going into poverty. The majority of the affluent in this economic are the professionals, financial services contractors and others able to plug into the rent seeking opportunities that are created when the biggest business is government owned. The productive sector, the real manufacturers, the value adding businesses are relatively few.  The main source of the income coming to this class of individuals is oil revenue. When oil revenues fall, not only does GDP growth fall but  this most affluent  but unproductive sector suffers. Also in understanding the problems of the Nigerian economy, the place of corruption, especially grand corruption is crucial . The same oil earnings meant to develop infrastructure, fund education and healthcare end up in private pockets. The feeding frenzy is worse in times of high earnings from oil. A combination of theft of public revenues and the consequent failure to invest in infrastructure as well as a largely rentier or rent seeking business class is what accounts for Nigeria’s economic quagmire. The other problem is that of extreme poverty. A problem that  for reasons already adduced  increases even where oil earnings are high.

It was clear to us that we needed to devise an economic plan that prioritise:

1. Building of infrastructure especially rail, roads, power and ports.
2. Productivity as we diversified the economy from oil and gas,
3. The fight against public sector corruption,
4. Developing a new educational curriculum that emphasizes Science, Technology, Engineering, Arts and Maths
5. A new approach to resourcing healthcare
6. A Social Investment programme that deals with issues of extreme poverty and unemployment. The Economic Recovery and Growth Plan effectively addressed these issues.

So,how far have we gone and what is the next level?

We believe that creating an environment for productivity investment in hard and soft infrastructure is crucial. Soft infrastructure covers the whole gamut of the regulatory environment for business. For hard infrastructure we have focused on economically strategic roads, rail, power and ports accross the country. Roads and rail linking important commercial centres are prioritised.

As of today in two budget cycles despite earning over 60% less than the previous government we have invested 2.7trillion on capital the highest in the country.  We have recently commissioned the Lagos Abeokuta Ibadan end of the new standard gauge Lagos Kano Rail. The rail originates from the Apapa port which means that cargo will be moved by rail from the Apapa port, this will significantly ameliorate the congestion of that port. To expand port facilities generally we are currently dredging the Warri Port. In Lagos work is going on in the private sector led Lekki Port and the Badagry Port has also attracted significant foreign capital and interest. In Abuja after almost fifteen years we have completed and commissioned the Abuja light rail project starting from the airport to the city Centre. Similarly we completed and commissioned the Abuja Kaduna Railway. The Itakpe Warri Railway has also been completed linking the iron ore deposits to the Warri port.  Here in the southwest of Nigeria, work is ongoing on the Lagos-Ibadan Expressway, Lagos-Otta-Abeokuta Expressway, the Ikorodu-Sagamu Road, and the Ogbomosho-Ilorin Road.  The contract for the Lagos-Badagry Expressway has been awarded and work has already begun.

On Power, we have moved generation from 4000 to 8100 MW. But the effect of this increase in generation has not translated significantly to better service to the consumer. This is mainly due  to   distribution challenges. Over 2000 MW of power is not taken up by the discos for distribution to consumers largely because of problems they experience in  collection of Tarrif , but one of the reasons for this is  the fact that the discos have not invested significantly in metering. We have now embarked on a major metering Initiative The Metering Assets Programme which involves private   metering Assets providers ,. In addition  the Federal government  has in the past eighteen months taken on the deficiencies in  transmission head on through the TCN and the NDPHC we are completing transmission projects all around the country. But the more important strategy is to decentralize power production. So we have adopted an off grid programme. Which means that we are encouraging private investors to collaborate with government to build IPPs and supply power to willing buyers. This was made possible by what  is called an eligible customer declaration by the Ministry of power works and Housing. By this collaboration we have been providing power, especially Solar Power  to economic clusters such as markets across the country including , Ariaria market in Aba, 31993 shops , Sabongari market in Kano 13,598 shops,  Sura market in Lagos 1047. Isikan  493, NEPA 256,  Gbagi 8778, UMBC 2178, a  total of 81691shops servicing 320000 SMEs.In  Lagos we recently  commissioned the Sura market solar project, the businesses there now have 24 hour power. From printers, commercial tailors to small chop businesses, everyone is employing more and making  more profit.

The next level is to ensure completion of the major infrastructure projects. The main drawback is funding. We have established an infrastructure fund.

• The Presidential Infrastructure Development Fund
• Second Niger Bridge
• Lagos-Ibadan Expressway
• Mambilla Hydro Power Project
• Abuja-Kano Expressway
• East-West Road

If we stick to our agenda in the next two years we will see the most significant improvements, in our power sector in history.  Industrial Infrastructure is a major component of our economic transformation plan. Project MINE Made in Nigeria for Export is the major plank of our industrial policy.  The idea is to build Special Economic Zones which accommodate industries for local manufacture of goods for which Nigeria has a comparative advantage. These include cotton, garments, leatherware etc. The Nigerian EZ investment company, a public private partnership company is the delivery vehicle for the project.  The objectives  are to boost manufacturing share of GDP to 20% and make Nigeria the leading regional manufacturing hub for Sub-Saharan Africa, create 1.5 million new jobs in manufacturing, generate  $30bn in non-oil export earnings annually, improve the utilization of Nigeria’s resources and comparative advantage and whilst creating strong domestic value chains and create local models of global best practice in industrial infrastructure and enabling business environment. Already work has begun in three locations.

The Enyimba Economic City in Aba covering over 9500 hectares outside Aba in Abia State. Master planning, feasibility studies and detailed design have been completed for phase 1. Three international anchor tenants have been secured for phase 1. The city will be served by an existing IPP for power and will create 625000 jobs when fully built. There is also the Lekki Model Industrial Park in partnership with the Lagos State Government. It is set on 1000 hectares in the NE cluster of Lekki Free Zone. It has already attracted world class anchor tenants for textile and garments, agri-processing and light industrial manufacturing including the no 1 Chinese and No 9 global textile and garment group. The proximity to petrochemical feedstock from the Dangote refinery for,synthetic textile and garment manufacturing makes the park irresistible for investors. The third project in its early stages is the Funtua Cotton Cluster in Katsina State. Funtua has the largest aggregation of cotton ginneries in Nigeria. “The cluster will aggregate cotton from 800,000 farmers in Northern Nigeria and become the largest integrated cotton ginning, spinning and weaving complex in Sub Saharan Africa. It will re-establish the cotton value chain from seed cotton to finished fabric and provide feedstock for domestic and export oriented garment manufacturing”( Okey Enelamah)

We believe that the future for job creation and efficient and profitable businesses lies in innovation and technology. We have partnered with local and international tech companies and innovators, in the building of tech hubs, and promoting innovation. Our aim is to completely democratise access to  innovation and cyber commerce and create jobs.

We have established hubs  in collaboration with the WB and LBS..the climate change innovation hub . In Yola, the North East Humanitarian Hub.  We have also in collaboration with Cicvic Hub promoted technology and innovation in universities with the Students innovation challenge in the six geopolitical zones, and technology hubs in three.

Our technology agenda is premised on our new educational curriculum which emphasizes STEAM. Science, Technology, Engineering, Arts and Mathematics. We are currently developing  that curriculum  with the support of global players like MIT, Cisco, IBM and Oracle, a nationwide curriculum that incorporates 21st century STEAM thinking: coding, design skills, digital arts, robotics, machine learning, and so on.

The curriculum will cover primary to secondary education. The Arts component of that vision is extremely important to us. Visual arts, dance, music, film and theatre, comedy,  literature – these and many more are fields in which Nigeria is has proved to the world that it is full of talent and originality and ambition. At the highest levels of the government in Abuja, we are creating opportunities to engage with artists to better understand how we can, as a government, support you to succeed.

We believe that like technology entertainment and the arts require active support, especially in the development of policies as we engage uncharted territory in the coming years. Consequently the President directed that we establish a  technology and creativity  advisory group, to work on and formulate policies in these very dynamic spaces. We have had about three meetings so far.

Assembly Plants

At the top of the mechanisation chain are six assembly plants to be activated and spread across the six geo-political zones. The assembly plants will undertake the assembly of tractors and processing equipment as well as light manufacturing of parts which will be sent out to the Service Centers closer to the farmers across the length and breadth of Nigeria.

The first assembly plant, among a total of six (6) to operate, to assemble tractors and implements, will be located in Bauchi State in an already existing facility owned by a private operator.  It is projected that almost 5,000 tractors will be assembled in Nigeria every year.

Service Centres

There will be a total of 780 Service Centers spread across all the Local Government Areas in all the states and the Federal Capital Territory.

Primarily, the Service Centre will offer a technological package consisting of machinery and equipment services (agricultural mechanisation- e.g. rental of tractors), quality inputs (improved seeds varieties, fertilisers and pesticides), technical assistance and training for small holder farmers in order to ensure consistent results of productivity and quality of agriculture produce.

The Service Centre will also perform an important market function of being able to aggregate primary produce for processing and haulage to markets. This establishes a means for monetisation and loan repayment based on a percentage of its own agricultural production.

109 of these Service Centers will be located in the 109 senatorial districts in Nigeria and classified as “ Process Service Center”. Process Service Centers will, in addition to the already mentioned services, have processors which serve as a throughput with which value can be added to agricultural produce brought in by local farmers. Service Centers will be based on the comparative and complementary advantage each location has and also along value chain lines.

The value chain will cover Grains & Cereal, Livestock, Poultry, Fruits, Roots & Tubers, Horticulture and other areas.

Young technicians, from The N-Power Agro Programme will join the technical staff of the Service Centres to provide agricultural extension services and production planning, carried out jointly with small holder producers and geared towards market demand.

Impact

Through the implementation of the Green Imperative, 5 million people will be impacted, 100,000 technical personnel will be trained, and 4,848 tractors will be assembled each year, resulting in the ultimate injection of $12 Billion into the local economy over 10 years.

Additionally, it will increase production and productivity, leading to a reduction in food prices and the cost of living, a drop in food imports, as well as improved food security while boosting exports significantly. The Green Imperative is the next level for Nigerian Agriculture.

The third is the Social investment Programme .  The SIP is the largest and most ambitious social protection programme in the history of Nigeria. We provided N500b for it in  both 2016 and 2017. But total spend on the programme is  closer to 250 billion from both budgets. The programme has four components. The Npower programme our graduate employment scheme is the largest post-tertiary jobs project in Africa. 500,000  graduates have been recruited as teachers, agricultural extension workers, and as public health officials.  Each of these volunteers is provided with an electronic tablet containing relevant training materials including some with which they are trained to provide the required services on an on-going basis. The device also  empowers them to participate in the digital economy as data collectors and analysts.

Under the scheme we are giving microcredits to 2 million petty traders across the country.  The scheme enables them to draw further credit if they are able to pay back within six months. The credit schemes also achieve major By giving them credit to replenish and increase their inventories, we give them a stronger chance, to earn more, while they also service the value chain that they are a part of. But more importantly, we bring them into the formal sector, where they have access to government and private credit . GEEP has  led to one of the most successful financial inclusion outcomes, the opening of 349,000 new bank accounts/wallets for beneficiaries and intending beneficiaries.

Nigeria took the decision to embark on a School Feeding Programme as an important part of our Human Capital development agenda, by tackling  the broader issues of eradication of poverty, food and nutrition security, increasing school enrollment.  The At a cost of $0.19 per child per day we are able to provide a balanced meal for every one of the children.    9,300,892 million pupils in 49,837 public primary schools in 26 states across Nigeria benefit daily.     .lThe programme employs 95,422 cooks, and  over 100,000 small holder farmers linked to the program supplying locally sourced ingredients. This translates to 594 cattle, 138,000 chickens, 6.8 million eggs, 83 metric tons of fish that are procured, prepared, and distributed each week. As you can imagine, the quantity of starch, and vegetables required for this program on a weekly basis is equally impressive. Dietary energy and nutrients with established links to cognition- carbohydrates, protein, fat, iron and iodine as well as minerals with public health importance–are targeted by the NHGSF. The program aims to provide 50% of the Recommended Nutrient Intake targets for protein and prioritised micronutrients (iron, iodine, zinc, vitamin A, folate and vitamin C and 30% of energy because of the high burden of undernutrition and micronutrient deficiencies in Nigeria. There is also a deworming programme attached to the school Feeding programme.

By the end of the year the number of new States joining will increase,     the NHGSFP is set to become the largest school feeding programme in Africa.

Conclusion

We restored medium term planning with the Economic Recovery and Growth Plan which served as a useful lodestone in improving macroeconomic performance, boosting the real sector of the economy and building infrastructure.  The decline in growth which started at the end of 2014 has been reversed, inflation has stabilised at about 11% over the past six months and our current account was in surplus at about 1.3% of GDP last year.  Our foreign reserves can cover at least 9 months of import of goods and services and despite understandable concerns, our debt burden is only about 22% of the size of our economy which is one of the lowest ratios in the world.

We have very clear objectives. Clear plans. As you know the problem of our country is not the planning…or in designing great projects. It is in the actual implementation. We are fortunate that Muhammadu Buhari is not an orator…he is a doer.