Business - Business & Economy - News - October 15, 2021

Why States must run private sector-led economies, think like sovereigns – Osinbajo                      

By Bassey Udo

State governments must allow the private sector to take over and run their economies, to allow them focus on providing the enabling environment for sustainable development and growth, Vice President Yemi Osinbajo has said.

Also, state governments must see themselves as sovereign states, even when they are not, by not relying on federal allocations, but focus on  deepening investments in areas of their comparative advantage.

Osinbajo was speaking in Ekiti State at its First Investment and Economic Development Summit on the theme: “Investment Attractiveness and Economic Development: Lessons for Sub-nationals.”

“The State within the Federation is not a nation, but it must behave like one. It derives some resources from the federal pool, and generates some income. The sum (of the resources) will provide infrastructure and services to the community.

“The size of the sum and the quantum of opportunity available to provide livelihoods for the populace will depend on how the State enables local and external investors, small and large to put their resources into business and commercial activity business in the State.

“The funded portion of the State’s budget is after all a mere fraction of the sum total of economic activity or income-generating activity, formal or informal, within the State.

“So, the attractiveness of a State to commerce is a radical issue. The very lives and livelihoods of the people within the borders of the State, whether the people will live prosperous and happy lives, be educated, have access to affordable medical care, depends on it,” the VP said.

He noted the various reforms undertaken by the Ekiti State government to establish the foundations for a modern and thriving economy.

The reforms include the establishment of a modern, strong, consistently improving legal and judicial sector, with forward-looking laws, and a contemporary administration of Civil Justice Law, a first-of-its-kind Sustainable Development Goals law, a Tourism and Hospitality law,  as well as Property Protection law.

Others are a 2020 amendment to the Ekiti State Board of Internal Revenue Law, which, amongst other provisions, enables the service to collect all taxes due to the State Government and all the Local Government Councils in the State under any law through a centralized electronic payment platform.

The centralized electronic payment platform, the VP said, is particularly important, as it decentralizes payment electronically and removes the problem of multiple revenue collectors and multiple taxations.

He described Ekiti as a business-friendly environment based on the outcome of the inaugural edition of Nigeria’s own homegrown “Subnational Ease of Doing Business Baseline Survey”  by the Nigerian Investment Promotion Commission (NIPC), which ranked the state 18th overall out of the 36 States and the Federal Capital Territory (FCT).

The survey, he said, was commissioned to serve as a status report on the current attractiveness of business environments of States for small and medium-sized enterprises.

Ekiti State, he said, was strongest in the Skills and Labour and Infrastructure & Security indicators where it had an average score of 5.35 and 5.05, respectively, adding that in the last World Bank Doing Business sub-national survey on Nigeria released in 2018, the state also excelled in the area of “Dealing with Construction Permit”, ranking 4th in the entire nation.

“This is a State that has vast arable land for agriculture and its value, chains, a modern strong, and effective media and public communications system,  an experienced CEO of the State, Governor Fayemi, whose academic, civil society background, excellent relationships with international donors and DFIs, his experience as second term Governor, one-time Minister of Mines and Steel, and as Chair of the Governors’ Forum, whose important experience in extracting benefits for the States from the Federal Government; all these put the State at a distinct advantage”, Osinbajo said.

Citing Ekiti as a demonstration of commitment to a private sector-led economy, Osinbajo said the business of the development of the economy  should be left for the private sector, while governments should as much as possible facilitate, or at best, collaborate.

To buttress his point, the VP cited the example of the formerly State-owned, Ikun Dairy Farms at Ikun Ekiti, which after 40 years of inactivity, saw the state government divesting 76% of its shareholding to a private dairy company, Promasidor.

The decision to hand over the company to a private investor, he said, resulted in the company now producing over 80,000 litres of milk per month from a herd of just under 500 cows.

Also, he said the recent concessioning of hospitality facilities such as the Ikogosi Warm Springs shows another example of the benefits of the involvement of the private sector in the development of the economy.

A similar example, he said, was Eko Hotels, which for years was not making profits under successive governments, until the Lagos State government sold majority of its shares to a new owner.

“Today, Eko Hotels is a thriving business and Lagos State is earning significant dividends from it,” he said.

Other private sector investments functioning in the state as a result of the environment include those in the agro-allied value chain, JMK Foods, an integrated rice mill, FMS Farms, Promise Point, and Arog Limited, all with starch and ethanol production plants using cassava feedstock, and Egbeja farm, an export-focused snail farm.

The growing tech start-up companies include Kinplus Technologies, a software and web development company, building applications and enterprise promotion software, and JM Tech Centre, a research and technology institute in Ikun Ekiti.

Comparing the economies of most states in Nigeria to some countries in Africa, the VP said the gross domestic product (GDP) of Ekiti State of $2.8billion is five times the size of the GDP of São Tomé and Principe ($472million); Gambia ($1.902billion); Cape Verde ($1.704billion) and Seychelles ($1.125billion).

With bigger GDPs and more revenues than many nations, the VP called for a collective change of mindset by the states to begin to think like sovereign States.

The change in mindset, he said, should the states begin to think about what they would do to survive if they were like landlocked nations with no support from anywhere.

“There is a different mindset when you are sure of a monthly allocation of cash at least enough to pay salaries, whether you generate income or not. This is the challenge. The so-called Dutch disease, one becomes complacent.

“But what if you had to take responsibility for all those who reside within your borders, pay all salaries, from Internally Generated Revenues (IGR)?” he asked.

He said the surest way forward is for states to deepen their investments in niche areas or  areas of comparative advantage.

For Ekiti, he said although the state already has tremendous potentials in agriculture and dairy, he said the way of the future, especially for the huge population of young men and women seeking good-paying jobs, is technology.

“I think you are in the flow of progress with the planned establishment of the Technology Special Economic Zones. Clearly, the future of fast-growing economies is in the knowledge economy.

“Young men and women in Ekiti can work from here and earn world-class wages.

“There are three keys to the knowledge economy which in my opinion is the future. These are education, education, and education,” he said.

The acting Executive Secretary/CEO, NIPC, Emeka Offor, who also spoke at the Summit assured the Ekiti State government of the Commission’s support to drive responsible, inclusive, balanced and sustainable (RIBS) investments to the state.

Offor said Nigeria, and indeed sub-national governments, need to be deliberate in their investment attraction and retention approach to maintain a competitive edge.

He said due to  increasing global competition for capital occasioned by the devastating impact of COVID-19, efforts of sub-national governments were now more critical to ensuring that Nigeria remained a destination of choice for investment

“At NIPC, we consider the subnational governments to be incredibly crucial in economic development. Hence, we developed the Nigerian Investment Certification Programme for States (NICPS) to improve the capacity of States to provide effective facilitation and after-care support to investors. Their success is our success, their growth our growth.

“Also, through collaboration with the Nigerian Governors’ Forum, NIPC produced the ‘Book of States’, in an effort to drive greater attention to subnational investment opportunities in Nigeria. The ‘Book of States’ is a tool for investors’ location benchmarking in Nigeria,” Offor said.

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