Keynote Address

Senator Udoma Udo Udoma, CON, Honourable Minister, Ministry of Budget and National Planning

Protocol

Introduction

I am honoured and delighted to address you on the occasion of the Annual General Meeting and 60^th Anniversary of the Nigerian Employers Consultative Association (NECA). I wish to thank the President and Executives of NECA for inviting me as a Keynote Speaker at today’s event. Being 60 years old is no small achievement. It means the organization was formed three years before Nigeria’s independence! This is a milestone worth bringing out the drums to celebrate. Please accept my congratulations.

2. We are, as Government, very appreciative of the platform NECA provides for us to consult with the private sector when developing policies on the economy, as well as policies on labour issues. We also acknowledge, and are appreciative, of the willingness of members of your Association to serve on committees that Government has set up, from time to time, to review and develop government policies. Such committees include the Presidential Committee on the Resuscitation of the Economy [1999 – 2003]; the Presidential Committee on Harmonizing Skills and Competences for development [2004]; the Wages, Salaries and Emolument Relativity Panel [2004 – 2006]. We also thank the members of NECA for your active participation at the Quarterly Presidential Briefing Sessions that this Administration has introduced to dialogue with the private sector on the economy.

3. Distinguished Ladies and Gentlemen, you have asked me to use this occasion to speak to you about The Economic Recovery and Growth Plan.

4. It will be recalled that when campaigning for the 2015 elections, President Muhammadu Buhari promised three things. He promised to fight corruption; he promised to restore security; and thirdly, he promised to fix the broken economy. The Economic Recovery and Growth Plan is the blueprint the Administration intends to use to fix the broken economy. Distinguished Ladies & Gentlemen, there is no doubt whatsoever, that successful implementation of the ERGP will revitalize the economy and put it back on the path of sustained, inclusive, and diversified growth and development.

Background to the Current Challenges

5. But what is the background to our current economic challenges? Simply put, the Buhari Administration inherited a very challenged economy – an economy that depends on crude oil exports for government revenues. And, even more worrying, an economy that depends on crude oil exports for over 90% of its foreign exchange earnings. Thus, with the collapse of oil prices from over US$110 in 2014 to as low as US$30 in January, 2016 and with no fiscal buffers, the economy began a downward spiral. The economy was further weakened by the wide-spread corruption of the previous Administration, the disruption of oil production in the Niger Delta region, and the gradual loss of confidence in the economy by local and foreign investors.

6. These developments resulted in a sharp decline in government revenues, slowing down of GDP growth, rising levels of inflation, weakening balance of payments, rising public debts, weak capital market, rising unemployment and declining foreign reserves.

The Strategic Implementation Plan (SIP)

7. When the Cabinet was sworn in November 2015 it was clear to the Government that some urgent interventions would be required to stop this slide as quickly as possible, and begin the process of restoring confidence. Our first step was to craft an expansionary budget for 2016 with 30% capital provision aimed at injecting the needed fiscal stimulus to reflate the economy and stem the downward spiral that we were faced with. Together with the 2016 Budget we launched the Strategic Implementation Plan (SIP) for the 2016 Budget of Change. The SIP was a compendium of interventions in key priority areas. As a result of these short-term interventions, we have recorded success in some areas such as agriculture and the solid minerals sector, amongst others.

B. The Economic Recovery and Growth Plan (ERGP)

8. We followed this up with the development of a more comprehensive medium term plan for 2017 to 2020. This was the Economic Recovery and Growth Plan (ERGP). The ERGP, which is a product of an extensive consultative process with all stakeholders across the country, builds on the SIP and sets out government policy direction for the economy over the medium term. The Plan is intended, not just to get us out of recession, but to put us on a strong, diversified, inclusive, and sustained growth path.

9. In developing the ERGP we held consultations with the State Governors and Commissioners of Planning & Economic Development of the States. We also held consultations with the leadership and membership of the National Assembly. Amongst others we consulted were our development partners, such as the UNDP, the World Bank and the IMF. We also consulted leading Nigerian economists and development experts. And, most importantly, we consulted the private sector, as this is a plan that requires extensive collaboration with the private sector for its effective implementation.

10. In this connection, let me specially acknowledge the various inputs we received from your members during the development of the Economic Recovery and Growth Plan (ERGP). The success of the Plan depends on the responsiveness of the private sector to the initiatives being rolled out by Government under the Plan. As is stated in the executive summary of the Plan, “the role of government in the 21^st century must evolve from that of being an omnibus provider of citizen’s needs into a force for eliminating the bottlenecks that impede innovation and market based solutions”. Another way of putting it is that our role as Government is to create the environment for the private sector to invest and create wealth and jobs so that the country can prosper.

11. 1 The Plan is driven by five principles which support this fundamental focus. The five principles are: (i) removing the constraints to growth, particularly supply constraints in fuel, power and foreign exchange, (ii) allowing the market to function to drive optimal behavior amongst market participants, (iii) leveraging the power of the private sector by harnessing the dynamism of business and entrepreneurial nature of Nigerians, from MSMEs to the large domestic and multinational corporations, (iv) promoting and strengthening national cohesion and social inclusion, and (v) upholding our core values of discipline, integrity, dignity of labour, social justice, religious tolerance, self-reliance and patriotism.

12. 1 The Plan has three broad objectives, namely, (a) restoring growth (b) investing in the Nigerian people to improve their living standards, and (c) building an economy that is globally competitive. To achieve these objectives the Plan outlines five key execution priorities which are to (i) stabilize the macroeconomic environment, (ii) invest in agriculture to achieve food security, (iii) tackle the country’s protracted energy problem to achieve self-sufficiency in power and petroleum products, (iv) improve transportation infrastructure throughout the country and (v) accelerate the pace of the country’s industrialization, particularly by encouraging the growth of SMEs.

13. 1 Distinguished Ladies and Gentlemen, through this Plan, Government is determined to fundamentally change the way we have been operating as a nation. Our aim is to change Nigeria from a nation with high import dependence to one that makes the products it consumes; from a nation that relies on a single commodity for survival to one that runs on multiple engines of growth, such as agriculture, manufacturing, construction, solid minerals and services. Our aim is to change Nigeria from a nation of consumers to a nation of producers. As Mr. President has said, the ERGP is this Administration’s blueprint aimed at building a new Nigeria where “we grow what we eat, consume what we make and produce what we use”.

14. 1 The ERGP has a number of ambitious targets. These include:

• Average Real GDP growth of 4.6% over the Plan period, with 7% Growth Rate by the year 2020;
• Manufacturing sector average growth of 8.5%, peaking at 10.6% by 2020;
• Agricultural sector average growth of 6.9% over the Plan period;
• Self-sufficiency in rice and wheat in 2018 and 2020, respectively;
• At least 10 GW of operational electricity capacity by 2020;
• The creation of 15 million new jobs by 2020;
• Reduction in unemployment rate from 13.9% in Q3 2016 to 11.23% by 2020;
• 60% reduction in imports of refined petroleum products by 2018 and net exporter of refined crude by the year 2020;

15. Ladies and Gentlemen, I must say that this Administration is very encouraged by the positive feedback we have been receiving on the ERGP. We thank Nigerians for all the words of encouragement.  Also, internationally, the ERGP has been well received.

16. 1 However, we cannot enjoy the benefits of the ERGP unless it is effectively and faithfully implemented. I must admit that as a country our track record on implementation of our plans has not been very good. Conscious of this the ERGP has dedicated a section, Section 7, to implementation. Firstly, we must focus on our priorities. Secondly, we must establish clear accountability. Thirdly, we must set targets and develop detailed action plans. Fourthly, we must mobilize and allocate resources to the priorities. Fifthly, we must create an enabling policy and regulatory environment. And, finally, we must set up delivery unit, or units, to monitor and drive progress.

17. With regard to establishing clear accountability, the schedule to the ERGP lists out the 60 key programmes and activities that are expected to be undertaken during the Plan period and identifies the MDA, or agency of government, that will be held accountable for the implementation of that particular programme, or activity. We are also in the process of developing a more detailed implementation road-map. This will lay out the roadmap for a step by step delivery of each of the strategies. Each strategy will be further broken down into component activities, sub-activities and actions. Each action will be supported by clearly assigned responsibilities, which will be sequenced against clear milestones and timelines for ease of monitoring.  We have also commenced the process of establishing a Delivery Unit, as well as Implementation Units, to facilitate the effective implementation of the Plan. This is to be complemented with the establishment of special task forces on the key execution areas of the Plan. In addition, we will be setting up sector-specific labs which will bring together all relevant stakeholders in the public and private sectors, to articulate practical solutions to the problems.

C.  ERGP and the 2017 Budget

18. 1 The most important instrument for the successful execution of the ERGP is the annual budget. Starting with the 2017 Budget, we are ensuring that all annual budgets are fully aligned with the ERGP.  As you are aware, in line with the ERGP, the thrust of the 2017 Budget is to partner with private and development capital to leverage and catalyse resources for growth.  Much of the capital provision is directed at those projects which will facilitate:

          (i)       economic growth

          (ii)      diversification

          (iii)     competitiveness

• ease of doing business
• jobs and social inclusion
• improved governance and security

19. Accordingly, the capital provisions and initiatives in the 2017 Budget are directed at projects reflecting the priorities of the ERGP. For instance:

• N46 billion as government’s contribution to the development, or expansion, of Special Economic Zones in the country’s six geo-political zones to drive manufacturing and exports;
• N6 billion for the revival of the Export-Expansion Grant in the form of tax credits;
• N15 billion to re-position our development finance institutions, namely the Bank of Industry and the Bank of Agriculture, to support Micro, Small and Medium Scale Enterprises (MSMEs);
• N500 billion for the Social Intervention Programmes;
• N148 billion for counterpart funding for various railway modernization projects;
• Over 65 roads & bridges construction and rehabilitation projects across the 6 geo-political zones of the country;
• N40 billion service-wide provision to settle reconciled outstanding electricity bills of FGN institutions as part of the strategy to revamp the ailing power sector.

20. Distinguished Ladies and Gentlemen, the health and success of the private sector is important to this Government. We believe in working with the private sector, wherever possible. For instance, as I indicated, the development of the Special Economic Zones will generally be made in joint venture with private investors. Indeed, many of the capital projects in the 2017 Budget will be in the form of Public-Private Partnership (PPP) projects. An example is the Bodo – Bonny Road, which is a joint venture with Bonny LNG Ltd, for which we have voted the sum N7 billion. Another is the provision we have made for the sum of N9 billion as Government’s contribution to a joint venture with the Nigeria Sovereign Investment Authority and other private sector participants for a programme to reverse medical tourism by upgrading and equipping high quality medical centres in various geo-political zones of the country. We have also set aside the sum of N100bn as Government’s contribution for a new social housing fund which is private sector led. The target is to raise up to N1 trillion for this Fund. All these are clear indications that we welcome, as indicated in the ERGP, private sector participation in all sectors of the country.

21. We know that the level of growth of any economy depends on the level of investments in that economy. Whilst the growth in Government investments is limited by how much tax we can raise, (and we are not thinking of raising the tax rates at this time) private investment is much less constrained. We want, by our policies, to attract a much larger share of available investments into Nigeria. And we want you to join us in telling the Nigerian story. The story of a country that is ready to partner with genuine investors, whether Nigerian, or foreign, to work together to transform the Nigerian economy.

22. I would also like to mention that we are taking steps to ensure that we return to a predictable budget cycle of January to December. This should help the private sector to plan. For this purpose, we have already commenced the process for the preparation of the 2018 budget. Our aim is to submit it to the National Assembly by October this year, to allow them sufficient time for deliberation and passage.

D.  Revenue Initiatives

23. Distinguished Ladies and Gentlemen, as you are all aware, the drop in crude oil receipts has created a revenue challenge. This is why we committed ourselves in the Plan to explore options for generating additional revenues by the restructuring and privatisation of carefully selected public enterprises and assets. Our revenue mobilization efforts also involve, amongst other things, introducing measures to increase our independent revenues from our revenue generating agencies, as well as, cutting out waste by intensifying our current efforts to plug revenue leakages and inefficiencies in government spending. It is in this respect, that the Ag. President recently signed an Executive Order on Submission of Annual Budgetary Estimates by all Statutory and Non-statutory agencies and Federal Government Owned Enterprises.

24. Furthermore, we are exploring ways of improving our tax revenue by expanding the tax base, as opposed to raising the tax rates. Our tax/GDP rate, currently at about 6%, is one of the lowest in the world. From available statistics, only 214 people in the entire nation of 180 million people pay taxes exceeding N20 million – with all of them based in Lagos State. Of an estimated 69.9 million eligible tax payers, only 14 million are active tax payers. As part of the effort towards improving our revenue performance, the Ag. President, Prof. Yemi Osinbajo recently declared a tax amnesty by signing an Executive Order called the Voluntary Assets and Income Declaration Scheme (VAIDS). This grants tax defaulters a time-limited opportunity to regularize their tax status without penalty.

 Conclusion

25. In concluding my address, I wish to state that in the last two years, government has been working hard to lay a solid foundation for attracting private sector investments and improving the ease of doing business in the country. Apart from the Presidential Enabling Business Council (PEBEC), which government established to specifically ensure policy alignment towards improving the investment environment, Government is also embarking on massive infrastructure development aimed at reducing the cost of doing business as well as tackling insecurity to protect lives and investment across the country. The “visa-on-arrival policy” has also commenced, to facilitate the entry of investors into the country. To further reinforce this, His Excellency, the Ag. President has also signed an Executive Order on the Promotion of Transparency and Efficiency in the Business Environment.

26. Government agencies will work with the private sector to support research with a view to developing high quality indigenous products and technologies. Government is committed to supporting made in Nigeria goods and services. In this regard, the acting President has also issued an Executive Order on support for local content in public procurement by MDAs. This will support local production to increase employment opportunities for our unemployed youths.

27. All these initiatives are driven by our determination to achieve the goals we set for ourselves in the Economic Recovery and Growth Plan. We know, however, that this is a plan that needs the active participation of members of your organization, the Nigerian Employers Consultative Association (NECA), for it to achieve its ambitious goals. You represent many of the leading industrialists and manufacturers in Nigeria. It is your success that will encourage new investors to come into Nigeria. Your success is therefore our success. You can therefore count on a listening ear from Government as we work together to transform this economy to become the engine of production of our region and indeed, our continent.

28. I congratulate you, once more, on your 60^th anniversary. Thank you for giving me your attention.