Washington, DC — Speech by the President of the Senate of the Federal Republic Of Nigeria, His Excellency (Dr.) Abubakar Bukola Saraki, Con, at the United States Chamber Of Commerce
1. Good afternoon everyone. It is a pleasure to be at the United States Chamber of Commerce, the hub of the United States investment and business community. I thank you for the privilege to come speak to you and highlight to you new and exciting business opportunities emerging today in Nigeria. I will try and squeeze this within the very short time I have in this paper I have titled, ‘Doing Business and Opportunities in Nigeria”.
2. I have the special privilege of leading this delegation of Nigerian legislators on this visit to Washington DC. The aim of our visit is simple. It is to strengthen parliamentary and diplomatic relations between Nigeria and the United States. Trade and investment is without a doubt the most significant aspect of this mission. Therefore, the importance and timeliness of this roundtable. As representatives of businesses ranging from start-ups, SMEs and large multinational conglomerates, I hope that at the end of our interactions today, we will have provided you the background and tips to explore, commence, expand and strengthen your business ties in Nigeria.
3. Let me express my deepest appreciation for all those who have made today’s event possible. Thank you all so much. Let me also acknowledge the ever cordial, positive and progressive diplomatic and business relations we continue to share with the United States for a very long time now.
4. To start with, I am sure you would like to know where we are as a nation. When this administration was voted into office in 2015, the Nigerian economy was in a free fall as a result of the steep fall in the price of oil in the international market. This exposed the structural weaknesses in the economy. Our reserves plummeted and we it double digit recession of about -13.40%. We lost over N4m jobs as a result. Our exchange rate to the dollar fell by roughly 39.2% from N196 to the dollar, to N500 to the dollar.
5. It was this state of affairs that brought reality hard on us and the resolve to never find ourselves in this position became an imperative. The government set out an ambitious Economic Growth and Recovery Plan (EGRP)with a focus on diversification that leverages on private sector growth and free market, taxation reforms, national cohesion and social inclusion. The adherence to these pillars have led to our economy exiting recession and achieving moderate growth.
6. The Legislature and the Executive have as a result been deliberate on policy to leverage the private sector position by working to eliminate the various bottlenecks to investment and ease of doing business. The National Assembly has since passed key legislation to anchor these policies especially in the critical sector of the economy including Access To Finance, transport sector infrastructure market, the oil and gas sector, business regulation and the innovation and entertainment industry.
7. Today, things are beginning to look in the right direction and the indicators are there. Oil prices have edged up again and our production levels have picked up. Our World Bank current ranking has moved Nigeria from 186th – 145thposition on its Annual Doing Business Report; a key indicator that we are on the right tract. With a dynamic youth ful population of over 70% and projected to grow to 400 million by 2050, the indicators are firmly in place that Nigeria holds a major growth prospect and therefore a place that deserves your attention.
8. Our external reserves are at a four-year high with an upward swing above $39 billion as at the beginning of January 2018. The Nigeria stock exchange has gained 60% in value from end-2016 to mid-January 2018, led primarily by the financial sector stocks. We are ratcheting up our drive on the economic reforms broadly around to cure the institutional weaknesses, lessen regulatory burden, expand free market development and open up new market areas.
9. This refocusing then highlighted for us both the opportunities and challenges facing doing business in the aforementioned sectors of our current focus. Emphasis on crude also resulted in the Federal Government assuming the primary role of investor, regulator, financier, insurer of almost every aspect of our economy with the result that the institution is over extended in all directions and our social institutions suffer from inadequate allocation of resources. To see gains in education, health, security and indeed evolve away from being an aid recipient to a viable and respected business partner, we have to free up government resources tied up where domestic and international private sector businesses like yourself should be creating value and sharing prosperity for all. This is why since after the 2015 elections, we at the National Assembly set about creating by law, new free market frameworks that are designed to enable business grow and prosper and create opportunities for our people.
10. Further to all the aforementioned, we have identified key sectors for increased private sector participation in Agriculture, IT & Communications, Financial Services, Mining & Natural Resources; Oil & Gas, and Infrastructure. For those who venture, one thing is certain: few markets have greater potential in terms of return on investments than ours. Nigeria has an estimated population of about 193 million people, 60 percent of whom are under the age of 25. Ours is one of the fastest growing populations globally; and we are set to overtake the United States as the third most populous country in the world by 2050.
11. Agriculture is a major piece in the puzzle as we step up the drive for the diversification of Nigeria’s revenue base from oil dependency. And yet, we are nowhere near tapping into the Agricultural Value Chain in any sustainable way. From Rice to poultry, to dairy products, we are producing way below the required volumes. The unavoidable fact is that there is room for exponential growth, with the right collaboration and investment.
12. It is interesting to juxtapose the Herdsmen-and-Farmers crisis with the reality that, of our estimated 20 million cattle population, only 2.3 million are used to produce Dairy. 98% of dairy products consumed in Nigeria are imported; milk importation alone costs $480.3 million annually. This, in a sub-sector not well served by policies such as the lowering of import duty on milk from 10% to 5%, to the detriment of local production and contrary to the much touted goal of diversification.
13. In Poultry, our compare our 1.41kg consumption per capita to the 1.2 tonnes of Chicken we consume annually, and then factor in about 900,000 metric tonnes smuggled in through borders, then you start to get the picture. Conversely, the US consumes 15.923 metric tonnes of poultry and our brothers in South Africa consume 1.783 metric tonnes. When we come to the almighty Rice, you only need look at the pedestal on which Jollof Rice is placed, to get a sense of the importance of Rice as a staple food in Nigeria. Then consider the fact that we are the world’s second largest importer of Rice for the second year running. We consume over 5.151 metric tonnes of Rice, of which 2.1 metric tonnes is imported.
14. As I have said many times, there is absolutely no reason why Nigeria should not be self-sufficient in, of all things, Rice. With the right partnerships and investment boost, the opportunity is there to achieve sufficiency and even produce for export. Dangote is currently making huge investments in Rice production, and the projections are good for the company becoming the largest producer in five years’ time. Gone are the days when Agriculture was seen as the preserve of the lone farmer in Nigeria. The growth in trade for Agricultural products between Nigeria and the United States has been relatively small, rising from $3million to $9million, with immense potential still untapped in the sector, especially considering the enormous capacity Agriculture holds for diversifying our economy. Put simply, there is massive opportunity in this area. Africa is no longer a social event; it is being seen as a business venture. We have a huge labour force that when supported with the right technology and equipment will support production to meet our domestic needs as well as serve as a source of new processed food exports.
15. The 8th National Assembly, under my leadership, is focused on strengthening the legislative framework to boost Agriculture sector and make it more investor friendly. We are currently working on a Bill to ensure policy stability in this critical area of our economy, to tackle situations such as the earlier mentioned reduction of import duty on milk to 5%, a level at which local producers cannot possibly hope to compete. If there is anything we have learnt over the years about investment in the agriculture sector, it is that policy somersaults have made investment unattractive in this potentially rich sector, and we are working for greater stability in that regard. We have provided a further boost for Agriculture through legislation that not only supports existing businesses but encourages the entrance of new investors into the sector. Legislation such as the Commercial Agricultural Credit Scheme Bill, Agricultural Quarantine Service Bill, the Food Security Bill and the Soil Science Bill - are some of the laws we have passed, making Nigeria a very attractive destination for investment. This is with a view to stimulating Agriculture as a steamroller for our diversification agenda, and Nigerians are beginning to see the benefits.
IT, COMMUNICATIONS & FINTECH
16. Thanks to the convergence of the mobile telecommunications and finance sectors, Nigeria is one of the top three destinations in Africa for tech investors. Tele-density has grown from less than one per cent to 108 per cent in 16 years of the liberalisation of the telecoms sector, making ours one of the fastest growing telecommunications sectors in the world. Investment in the sector is in excess of $68 billion, contributing up to 15 trillion naira to the treasury. The sector has created hundreds of thousands of direct and indirect jobs, while also driving businesses and innovations in the ICT sub-sector. This explosion is clear evidence of the uniquely expansive market when you have a burgeoning, youth-driven population such as ours. Remittance via mobile phone has picked up at a rapid pace in Nigeria, where mobile money services have been in use for over eight years.
17. Analysts believe that FinTech opportunities in Nigeria could potentially redefine the financial services landscape over the next five years. According to KPMG’s Boye Ademola, “The fast growing young population (115 million people below the age of 35), exponential growth of mobile phone lines (estimated at 150 million as at July 2016), huge financial inclusion potential (less than 50 million people with bank accounts in a population of 170 million people, based on Bank Verification Number [BVN] data) and relatively strong talent pool (buoyed by Nigerians in diaspora) are pertinent indicators of the FinTech opportunity.”
18. Some of the important highlights on the opportunities in Nigeria’s financial services industry, include the following:
- The Nigerian economy is largely cash-driven, and has been responding well to the FinTech opportunity. This is partly demonstrated by the exponential growth in mobile money operations, and has seen a rise in the average monthly transaction value from $5 million in 2011 to $142.8 million in 2016. The growing FinTech penetration is attributed to a surge in e-commerce and smartphone penetration.
- Investments in Nigeria and Africa as a whole have been primarily focused on payment solutions; other FinTech segments such as lending and wealth management are in a relatively fledgling stage, with much growth opportunity in store.
- The payment space is one of the most attractive segments for FinTechs in Nigeria, and it has become a key source of revenue for banks and other payment service providers. Prominent in this area are FinTech start-ups like Flutterwave and Paystack - which jointly raised more than $100 million between 2015 and 2017 As part of its Payments Systems Vision (PSV) initiative to reform the payment industry, our government launched the Cashless Nigeria policy, paving the way for innovative payment systems propelled by changing consumer patterns, rising adoption of smartphones, increased internet penetration, and deployment of ATMs.
- Smartphone penetration in Nigeria is estimated at 21 million – only 28% of the population, with 76% of internet traffic routed through mobile phones. Internet penetration is still less than half the population; at 46.50%, it translates into 91.6 million of the populace, with potential expansion to 100 million more people.
19. With the size of annual diaspora remittances to Nigeria estimated at $21 billion in 2015, the country would readily yield to disruption from digital currencies given their speed, efficiency and cost benefits. Bitcoin remittance firms charge fees in the range of 3% compared to the 7 to 10% commission charged by traditional players. While Blockchain is still in early stages of adoption in Nigeria, consumers have used Bitcoin and digital currencies for several years. The Bitcoin Market Potential Index (BMPI) by the London School of Economics ranked Nigeria seventh out of 178 countries likely to adopt Bitcoin.
20. Over the past few years, there has been steady progress in improving financial inclusion in Nigeria. It is estimated that about 40% of Nigerians are still financially excluded. The Central Bank of Nigeria (CBN), as a signatory to the MAYA Declaration, has launched a Nigerian Financial Inclusion Strategy which aims to halve the number of financially excluded Nigerians, to bring it down to 20 per cent by Year 2020.
OIL & GAS
21. In the oil and gas sector, we are currently back to producing between 1.5 and 2.0 mbpd which we can take up to 3.0 mbpd with the right policies and legislation as we are trying to do. We engaged with strong discussions in the Niger Delta region to seek ways to address the issues and complaints of our oil-producing host communities and bring some stability and consistency to production. These action among others has resulted in the first of four key legislation reforming the sector, the Petroleuem Industry Governance Bill (PIGB), to be signed into law. The PIGB will provide for more local content in the petroleum industry, putting control of industry firmly in the hands of the Nigerian people. This means that foreign investments and partnerships in the oil and gas sector will better serve the needs of the people rather than special interest. The PIGB will also help promote openness and transparency in the industry by clarifying the rules, processes, and procedures that govern the sector. It will help alleviate those issues that cause regular fuel scarcity in the sixth largest oil producing country in the world. Such issues include: limited supply of Petroleum Motor Spirit (PMS); dysfunctional state of our refineries; poor import and planning schedule that leads to fuel importation constraints; corruption, diversion and smuggling as well as the lack of deregulation in the sector.
22. The remaining three components of the PIB – the Fiscal, Host Communities and the Administration Bills – are presently going through the legislative process, and we are very much committed to their passage. For one, the Host Communities Bill will address the needs of those whose livelihoods and immediate environment are affected by petroleum exploration activities. The Fiscal Policy Bill should be of great interest to those of you looking to explore opportunities in the Nigerian oil sector, because will it will help tackle uncertainty in the industry, therefore creating a more conducive business environment for foreign investors.
23. To this end, 8th National Assembly has, since its inception, prioritised the passage of landmark economic laws, including: theWarehouse Receipts Bill; Secured Transactions in Moveable Assets Bill; and the Credit Bureau Reporting Bill. We have pursued as an overarching policy for the revamping of our industrial base through the made-in-Nigeria initiative under the Public Procurement Act (Amendment) Bill, and the Federal Competition Commission Bill. The Companies and Allied Matters Act (CAMA), which was passed very recently, is the most significant business reform law in Nigeria in three decades; and, along with the Investments and Securities Act (ISA), represents a paradigm shift that will reduce the regulatory burden of Nigerian businesses and create a globally competitive market regulatory regime in Nigeria.
24.Furthermore, outdated infrastructure related laws have been reviewed and bills passed to increase private sector participation in those sectors. Among these are: the Nigerian Railway Corporation Bill; the Federal Road Authority (Establishment Etc.) Bill; the Nigerian Ports and Harbours Authority Act (Amendment) Bill; and the National Roads Fund (Establishment) Bill. Creating an economic regulatory framework for these infrastructure laws is the National Transport Commission Bill, which is on the verge of being passed. We believe these are a very welcome development for our economy and for restoring investor confidence in our business environment.
25.As many of you will know, Nigeria is one of the Sub-Saharan countries eligible for preferential trade agreements under the African Growth Opportunity Act (AGOA) of Congress, which was started in 2000 to help enhance economies in the region and improve economic relations with the US. It is encouraging that AGOA has been extended by 10 years to 2025. And we are already seeing the positive impact of that extension, with African non-oil export under AGOA increasing from $1.3million in 2001 to $4.2bn by 2016. This is definitely the way to go, and it is our hope that we will take advantage of AGOA in the present to expand our trade engagements. But going forward, our vision is to exit AGOA at some point into a full fledge trade agreement based trade relations.
26.The unique history of Nigeria and the United States, make it imperative that she should remain by far our biggest and closest trade and investment partner. The evolving new vision for the Nigeria economy is within this context of our relationship matrix with the United States as we share similar and converging values. However, in recent times, it would appear that China has been the more willing and enthusiastic partner for business and investment.
27.China has already invested or financed a total number of $22billion projects $45bn in Nigeria with another $40b ready for the next phase of infrastructure financing and investments. China is approaching Nigeria and the African continent as an investment destination and offering very soft loans to the continent. We are indeed happy. But we are also aware that this is the primary place reserved for our core allies like the United States. We want to see the united States and investors like you here, to development a new lens for assessing Africa. We appreciate the aids and humanitarian gestures we receive, but it is no longer enough and in our mutual best interest to continue to ignore the vast opportunity for trade and investment on the continent particularly in Nigeria. We want to see the United States successful with Nigeria diplomatically and economically.
28. Another emerging sector that could interest you is in the health sector and in the provision of universal primary healthcare to our citizens. This year, we set aside in the budget, 1% of our Consolidated Revenue Fund (CRF) and subsequent budgets to boost the provision of Basic Primary Healthcare Services.
29. Thus, I urge you to take away from our conversations today to better harness the potentials of our investments, your approach to doing business with us has to be strategic and purposeful. We are opening up avenues for private sector to come in and play their own part.
30.With all that said and done, we are not blind to the challenges facing us and the information you hear about what is happening with the security challenges in the country. We are already taking steps to reform our security architecture in order to boast security for everyone in Nigeria. The National Assembly has moved in now to amend the constitution to enable the creation of state and local police to expand the security coverage in the country in a way that is more sustainable. We are already considering the passage into law of a new framework for policing and are working with the executive to build national and international confidence in the safety of our country.
31. Indeed, we see the challenges as underscoring the urgent need for radical action on our part as Nigerian leaders. We are determined to bridge the gap of economic disparity in Nigerian society, so as to lift 87 million people out of poverty while creating opportunities and prosperity across board. To do this successfully requires you, our partners, and investors, to join hands with us to build viable cooperation and partnership that will be of benefit to our two nations. Nigeria’ success holds the key to the success of Africa. Our vision is to ensure that we form the nucleus upon which Africa can attain collective and sustained development. In order to do this, Africa needs you and we look forward to working with you.