V.P. Yemi Osinbajo

Vice President Yemi Osinbajo has argued that there is a nexus between an improved economy and stable security situation in a country. He said this when he delivered a lecture at The National Defence College, Course 28 Lecture on 31 January, 2020.
This is contained in a press statement signed by Laolu Akande, Senior Special Assistant to the President on Media and Publicity, Office of the Vice President on 1 February 2020
In the words of Osinbajo: “Improving human capital development especially education, and providing more opportunities for earning a living, will reduce the numbers of young persons available for recruitment into the ranks of the Boko Haram and ISWAP terrorists in the North East, and the bandits and other criminals around the country.”
“The poor are especially vulnerable to jeopardizing national security and that is why it is important for government to make adequate provision for that class of people”.
“Man is central to the economy, if anything makes it difficult or impossible for him to function, the economy is weak and the whole progress of the community is stalled.”

Below his V.P Osinbajo in full:

Improving Economy is Central to Improving Security in the Country

By Yemi Osinbajo

Let us begin by talking about what National Security means today. The old conception of national security was solely the protection of territorial integrity and national sovereignty by military means. So national security simply meant the absence external or internal conflicts.

But today in the field of national security scholarship, the idea of human security has taken centerstage as a more holistic interpretation of the State’s sovereign responsibility to guarantee the safety and wellbeing of the citizenry.

As noted in the United Nations General Assembly resolution 66/290, “human security is an approach to assist Member States in identifying and addressing widespread and cross-cutting challenges to the survival, livelihood and dignity of their people.” It calls for “people-centred, comprehensive, context-specific and prevention-oriented responses that strengthen the protection and empowerment of all people.”

Our constitution recognizes the principle of human security in the Fundamental Objectives and Directive Principles of State Policy where it asserts that “the security and welfare of the people shall be the primary purpose of government.” So today human security is national security. Human security goes beyond absence of war and conflict, but the availability of the means to live, means to food, shelter and clothing. So clearly, the economy is central to human security because it is the economy that defines those parameters.

Chief Obafemi Awolowo proffered a nexus between national development and human development that we would understand today as an early articulation of the principle of human security. He argued that “Man is therefore, the prime mover in every economy. Without him nothing at all can be produced. He is the determinant of all economic and social change, and the generator of all the impulses of progress. Above all, he is at one and the same time, the initiator, innovator, accelerator, prime mover, producer, distributor, exchanger and consumer, in every economy. It should be crystal clear now to you and me that when we speak of the underdevelopment of an economy, we are in effect speaking of the underdevelopment of man.” “The characteristics of underdevelopment,” Chief Awolowo wrote, “are entirely and inseparably human.”

Man is central to the economy, if anything makes it difficult or impossible for him to function, the economy is weak and the whole progress of the community is stalled.

The national security community has embraced the new paradigm shift from a traditional state-centric focus to a more comprehensive orientation towards human security. As Nigeria’s National Security Strategy states, “National security is inextricably linked with and inseparable from economic security. We recognize that Nigeria’s greatest resource is its people and that the truest measure of our progress lies in the degree to which access to opportunities for empowerment and self-actualization are provided. Consequently, we will promote free enterprise, inclusive economic growth and continue to aggressively pursue the diversification of the economy with emphasis on developing our human capital.”

Having laid the theoretical foundations for our inquest, let us proceed further by noting amongst other things that Nigeria is currently the 7th most populous nation in the world with an estimated population of over 200 million people.

In thirty years, we will be the world’s third most populous country. After China and India. Nigeria is also a young country. There are 90million Nigerians under the age of 30 who require education, jobs, healthcare and social infrastructure.

To put this figure in perspective, if this population were imagined as a country of its own, it would be Africa’s second most populous nation. The main policy challenge which will shape our national security calculus both now and in the future is that of creating social and economic opportunity on a scale that not only matches our population growth rate, but also the aspirations of our youth. The sole objective of man is to live.

To live he needs food, shelter, and clothing. To do so, he must have the means to earn enough. Where the means are unavailable, his natural instinct to survive brings about a desperation, an alienation from society which makes him potentially a risk to the security of the community, as he must then device ways to survive or to react against a system that he feels dehumanizes him/her by depriving him/her of a means of livelihood.

This is why the presence of a large young unemployed working age population is a threat to national security. The correlation between high levels of unemployment, poverty, crime and conflict has been exhaustively documented. In the context of a large multiethnic and multi-religious polity, the availability of a young population that is not productively engaged provides fodder for extremists, demagogues and a host of hostile non-state actors.

So, it is clear that our current security challenges are both a cause and consequence of socio-economic conditions. I say a cause, not the only cause. Improving human capital development especially education, and providing more opportunities for earning a living, will reduce the numbers of young persons available for recruitment into the ranks of the Boko Haram and ISWAP terrorists in the North East, and the bandits and other criminals around the country.

But the insurgency, banditry and other crimes are also harmful to economic activity. Agricultural productivity in the North East and even parts of the North West and North Central have been hampered by terrorism and banditry. If you take a look at some of the figures, you’d see in those places, the production levels they recorded before insurgency and after insurgency. This has led to a situation where many are out of work. Unemployment is both a cause and consequence of poverty. So the central question for us as a government is how are we addressing the challenges of creating wealth and opportunities? How are we addressing the problems of poverty and unemployment?

Twice at the National Defence College, I have examined this topic and there I went into fairly elaborate details about the state of the economy then and steps being taken. I do not wish to repeat those contributions. So today I will focus on some of the latest actions and policies of government directed at creating an economy capable of providing decent livelihoods for our people. I will also speak to some of our thoughts and plans going forward.

Our economic policies are based on two broad premises; first is that the private sector, large, medium and small companies, must be given all the support to create wealth, jobs and opportunities. Government must provide the infrastructure and enabling environment for this to happen. Secondly, before the private sector is able to provide sufficiently for the majority of people, it is the responsibility of government to provide safety nets for the extremely poor, the vulnerable and those who cannot work. This is the premise upon which our social investment is based. The poor are especially vulnerable to jeopardizing national security and that is why it is important for government to make adequate provision for that class of people.

Very recently, an article featured in the Newsweek Magazine entitled “Black China: Africa’s first superpower is coming sooner than you think.” The essential point made in the article is that despite our challenges, Nigeria is the ‘last major open market on earth’ and that like China and India, its population and economic size will enable economies of scale and attract international investment.

Just last week, the Spur Group, an IT company from China indicated that it will be establishing a computer hardware manufacturing plant in Nigeria. The simple reason is because they see the market, they see that the potential is huge, over 147million people have mobile phones or some other computerized device.

Much earlier than this, in the course of last year, the Mara Group of Ashish Thakkar had also indicated that it will set up a manufacturing plant for Mara mobile Phones in Nigeria. Microsoft has also indicated that it will build its hundred million-dollar Africa Centre here in Nigeria.

It is not difficult to see why Nigeria remains an attractive destination for investments. Even the insufficient 2.5% growth rate predicted by the IMF for the Nigerian economy in 2020, comes to about $10billion dollars, which is bigger or just about the size of some of the economies to which Nigeria is often erroneously compared.

In other words, the scale of the Nigerian economy in African terms is such that our still relatively low growth is bigger than several African economies. The point then is that what happens here in Nigeria, will fundamentally affect our sub-region, then the rest of Africa.

It is easy to underemphasize this point, just to make this point clearly; Rwanda’s economy has been growing at about 6-8%, and it is well run. Rwanda has a GDP of $8.7billion as at 2018, the Federal Capital of Nigeria has a GDP is $29.2billion, Akwa Ibom State’s GDP is $14.2billion, Bayelsa State GDP is $8.8billion, Lagos State GDP is $90billion and Delta State’s GDP is $11.2billion.

So, there are a number of States in Nigeria whose economies are larger than Rwanda’s, which gives a sense of what we are talking about. Ghana’s GDP is $65.5billion (2018) which is less than that of Lagos which is $90billion. So, this gives a sense of the size of the economy we are dealing with, a size of the challenges too in terms of the population. You cannot compare the socio-economic issues in a country of 200million people with a country of 24million or 5million. The differences are huge.

So, I have found that in making comparisons, we are better off looking at countries that have the sorts of challenges and attributes we have in terms of size and diversity. Some of the comparisons we make in formulating polices are in comparisons to countries like India, Brazil and China. These are types of economies we compare with both in terms of private sector economic policies, as well as social investments, safety nets we provide for.

Another often overlooked part of the Nigerian population story is our large diaspora. The overseas remittances into Nigeria were estimated to be $25billion from formal sources, although some students of the Nigerian economy think it could be as high as $40billion if informal flows are taken into account.

The potential of the Nigerian economy is also being boosted by investments in agriculture, manufacturing, technology and creative industries. The story of increased rice production in Nigeria is well known with production of paddy rice in 2019 estimated at 7.3million metric tonnes compared to about 5million metric tonnes in 2015. It is important to point out that with the production of paddy rice, if we were milling at the rate of production, we would be self-sufficient in rice production by now, but milling is far behind in terms of that value chain.

We have worked hard in getting more investments into milling; Dangote has invested about a 1000 milling machines to be located in parts of the Northwest and Northeast. There are several other small and large investors in milling and I believe that if we are able to ramp up our milling, we should completely eliminate the importation of rice.

A little noticed phenomenon taking place in agriculture is the use of technology to attract crowdfunding into the sector. These programmes (there were up to 17 of them at the last count) enable a wide variety of people to invest in agriculture without actually having to engage in farming or manage farms. Given the huge interest in agriculture and the relative ease of investing through such platforms, we will see a huge increase in investment in agriculture and subsequent increases in agricultural output across the value chain.

These companies are technologically enabled, formed by young Nigerians, some of them are ThrivAgric and FarmAlly. They look for funds online from people interested in investing in farming, people choose the farm, watch the progress of the farm and get dividends. These companies generate billions of naira into the agricultural industry. In order to enable them, government policies are crucial which is why we have the payment systems, new licenses for payment systems which the Central Bank of Nigeria permits. We had to be proactive in doing so in order to encourage more platforms to invest in agriculture.

The Manufacturing Purchasing Managers index is used to get a feel of activities in the manufacturing sector and outlook for the future. It stood at 60.8 index points in December 2019 which was the highest level in about three years (since November 2018), but perhaps more significant is the fact that all the component parts such as inventories, employment level, supplier deliveries, new orders, production levels reported positive growth. It is clear that there is far more attention today being paid to manufacturing and processes than ever before.

This positive outlook for the manufacturing sector can be seen from the Leventis Group which for instance, continues to make substantial investments in the Nigerian manufacturing sector through its subsidiaries, the Nigerian Bottling Company and Beta Glass. The Nigerian Bottling Company will soon be commissioning its new Asejire Plant which has taken a substantial part of a recent $500million investment in Nigeria, while Beta Glass which makes the bottles for the pharmaceutical sector and for beverages like Coca-Cola and Star Beer has invested another $30million to expand its furnace capacity.

The Nigerian technology sector continues to hold out great promise. Recent reports show that Nigerian start-ups attracted $122million out of the $492million in funding to the African start-up sector in 2019. Perhaps more compelling is the increasing use of e-payment channels within the economy, multi-billion-naira companies founded by Nigerians mostly under 30, for example, Paystack, Softcom, Paga, FarmAlly, KiaKia, Mall of Africa. There are hundreds of them today, churning large amounts of money and taking a space that used to be unoccupied. A lot of banks are used to their traditional banking systems but what these young men and women are doing is the ability to transfer large amounts of money quickly and without much charge to various parts of the country, including the unreached parts of the country.
When we started our N-Power programme of providing jobs for graduates, 500,000 young men and women, we needed a platform where these young people would apply. We got a Nigerian company called Softcom to put together this robust platform. This platform would take up to 5million applications, process them and conduct tests, and then make payments through the platform to 500,000 people practically every month.

These are local entrepreneurs building the platforms for our micro-credit loans to 2million traders in Nigeria; these platforms, the payment, the collections, the repayments, are all done through those platforms and they are all technology platforms built by Nigerians.

The value of point of sale transactions (POS) is reported to have reached N3.2trillion in 2019 as compared to N2.3trillion in 2018, an increase of 38%, while the volume also increased by 153million transactions to a total of 438million transactions in 2019.

Now POS transactions are also a way of knowing what consumers are doing, what’s going on, how many of these transactions are going on, these are recorded transactions on POS. So, with the registration of payment service banks and the increase in the minimum level at which stamp duty is payable on sums in excess of N10,000, it used to be N1000, we are set to see more quantum leaps in the use of electronic transactions with the attendant positive effect on the economy.

Our creative industry and tourism are also a source of encouragement about our economic prospects. The quality of such offerings from our film and entertainment industry; Nollywood has films like Wedding Party and Wedding Party 2, Chief Daddy, King of Boys, I’m sure all of you guys are too busy to watch any of these movies, but these are made in Nigerian movies grossing large amount of money at the box office all around the world, attracting large audiences and reaping huge rewards.

In terms of quantity, Nollywood is the second largest film industry in the world, producing about 50 movies a week, second to India. It is true that that the quality of such offerings has improved greatly. So, what do these stories tell us? They are indicators of the emergence of the post-oil Nigeria in which sustainable prosperity will be hinged on our people’s capacity for invention and ingenuity.

The definition of Nigeria as a nation that is all about oil is now gradually expiring, because as we see productivity which is key to any economy, as we see product enterprise, as opposed to rent seeking or just extraction, we are seeing the growth of a real economy, an economy that can blossom and give millions of jobs that are required in our country.

One of the major challenges in growing our economy is maintaining an environment favourable to business and the problem of low revenues or the litany of complaints about difficulty of doing business in our environment. The other problem is low revenues. Our budget this year is N10.6trillion, last year is about N8.9trillon. Aggregate revenue is forecast to be N8.4trillion, with a shortfall of N2.2trillion. So, we are not making enough to fund the budget and that means of course, we have to borrow, especially to fund our capital projects. The sources of our revenues are oil proceeds and taxes. The same problem with generating revenues that the national economy has, the States also have. Most States do not generate enough revenue in one year to pay their bills in one month.

For example, Adamawa State’s Internally Generated Revenue (IGR) was N6.2billion annually, which means that it generates about N517million a month. But in 2018, Adamawa State’s expenditure was N14.8billion a month. So, they generate N500million a month and their budget is N14.8billion. That is without federal allocation, I am talking about what they are able to generate. Of course, with federal allocation, that comes to quite a bit. But just in terms of what the States are able to generate.
Benue State for example, its IGR was N11.2billion in 2018 that’s about over N900million a month. But Benue State’s expenditure in a month comes to something in the other of N14.9billion. So, it generates about N900million, and it spends about N14.9billion. You can see the huge gap. Ekiti State’s IGR was about N538million a month, but its expenditure is N8.2billion a month. So, there is a huge deficit, it shows that both the Federal Government and the States Governments are simply not collecting enough revenue. Of course, these revenues are badly needed.

Let me talk briefly about the Finance Bill which tries to address some of the concerns that I mentioned. The Finance Bill is a new legislation, the first of its kind since 1999. It is the government’s fiscal response to the twin issues of generating enough revenue and creating an environment for businesses to thrive.
The Finance Act has two main purposes; the first is that it addresses the issue of domestic revenue mobilization, that is the issue of getting more tax which Nigeria has paraded an abysmal record off. The second is that it contributes to improving the ease of doing business in Nigeria. So, the two major objectives of the finance act which the president just signed into law a couple of weeks ago is first, to ensure generation of revenue and secondly, to create a better environment for doing business in Nigeria.

Now everyone agrees that the engines of commerce in any economy are the small and medium scale businesses. So, for us, one of the most important objectives of the Finance Act are the specific incentives for small businesses. The Act exempts small companies with a turnover of less than N25million a year from paying any Companies Income Tax. Medium sized companies with turnover between N25million to N100million a year will now pay Companies Income Tax at a lower rate of 20% from an upside of 30%. With these in place, the Finance Act has now done away with that whole cumbersome procedure for computing minimum tax for companies under the Companies Income Tax Act, replacing same with a simplified base rate of 0.5%.

For insurance companies, this is a sector that had complained about lack of growth there is good news as well. Before the Act, insurance companies were only allowed to carry forward losses for four years, even when companies in other sectors of the economy could carry forward their losses indefinitely. This anomaly has now been removed. They can now carry their losses forward indefinitely. There is also the special minimum tax for insurance companies which has now been abolished. So that in many senses, we expect to see growth in the insurance industry because they are now to be treated like just any other company and a lot of restrictions on their growth have been removed by the Act.

To ensure better revenue from dividends and this is a very important point, because dividends are of course, a major source of revenue for individuals, a major source of availability of consumer spends. What has happened now is that there are also provisions in the Act to mitigate the risk of double taxation of dividends. Before now, dividends paid out of retained earnings were liable to tax, despite the fact that such earnings would usually have been subjected to tax already. So, there was a double taxation situation ahead of the Finance Act. There is now no longer that, so you can’t have a situation where if you retain earnings, your retained earnings are already taxed. Today, after taxing profit, you are no longer allowed to tax dividends.

A similar provision has also been made in respect of franked investment income and dividends paid out of exempted profits. In other words, these sources of income will no longer be at risk of double taxation. It is very important to bear in mind that these tweaks in fiscal policy are crucial in releasing aspects of the economy that have been either under growing or simply not growing at all. Because as far as we are concerned, in other the create the jobs and job opportunities that we know are necessary, we simply must ensure that the environment for companies to thrive, small, medium and large companies, is as friendly as possible.

Another business-friendly provision in the Finance Act is the granting of tax credits to companies for early filing of their tax returns. So, if a company files its tax return early, large companies will get a 1% tax credit while medium sized companies will get a 2% tax credit just for filing their tax returns early.

Furthermore, in recognition of the special impetus required for infrastructure development, withholding tax rate on roads, bridges, buildings, and power plant construction contracts is now reduced from 5% to 2.5%. So those who are into infrastructure contract in the past paid a 5% tax. Today, that has been reduced by the Act to 2.5%, so that infrastructure, building of houses, power, roads, rail, is now cheaper and of course, brings more profit to those who are involved as contractors

Now let’s talk about increasing government revenues.

The reason government revenues are important is first of all because of infrastructural investment, but also in other to satisfy the secondary premise of our economy which is the provision of a social investment programme. So, government revenues are crucial for two of those reasons. It is a well-known fact that Nigeria’s debt to GDP ratio has also been very low, indeed one of the lowest in the world. This has by itself seriously hampered economic growth and limited the delivery of public amenities and these are essential preconditions for attracting investment.

The Organisation for Economic Cooperation and Development’s revenue statistics in their recent 2019 report puts Nigeria’s tax to GDP somewhere in the other of about 6%, which, considering the level of economic activities in Nigeria, is so low as to constitute a negative factor and serious drawback for the entire system. This is more so, considering that the average Tax to GDP ratio across 26 other African countries is still 17.2%, which is 11.5% basis points higher than Nigeria’s. So, Nigeria has very poor tax to GDP ratio.

Another area of revenue improvement is the Value Added Tax (VAT) rate, this has been notoriously low. Our VAT rates is one of the lowest, in fact it is the lowest in Africa until this recent change. Ghana for example, has a VAT rate currently of 12.5%. They recently reduced their VAT from 15% to 12.5%. Cameroon has a VAT rate of 19.25%, Egypt has a VAT rate of 14%, South Africa about 15% and Mexico somewhere in the order of about 16%.

Our VAT rate stood at 5% despite increased activities in our midst. That has been moved up to 7.5%, we expect to see an up take in revenues. But the Finance Act has also ensured that the increase in VAT rate does not impact the poor or so become a disincentive for small businesses in particular. So, there is a whole exempted class of basic food items and that is very comprehensively defined in the Act. All food necessities are not taxable and the new Act also has 16 very clearly articulated classes of food, all are exempted from tax.

Similarly, exempted services like; drugs, locally manufactured sanitary towels, pads, and tuition fees in all tiers of the educational system from nursery to primary. So, there is no VAT on fees, no VAT on drugs and a wide range of medical products.

Also, as a palliative measure for micro and small enterprises, the VAT compliance threshold is now set at a turnover of N25million. So, if your company is recording a lower turnover than N25million, you are not expected to register for VAT. So, for small companies, they are not obliged to register for VAT or render monthly returns for VAT. Also, services rendered by microfinance banks are exempted from VAT. And the reason why that is so is because the microfinance banks were trying to push between the BOI and Micro-finance banks for greater lending to the trading sectors and also to small businesses and so we need to remove VAT to enable that to happen.

An upside of the VAT rate increase, which we must not fail to note is that it will give additional much needed revenue to State Governments as well. And this is a very important point because of course, we have raised the minimum wage to N30,000. Many States complained that they cannot pay that easily, so with the increase in VAT rate, we expect that the States capacity to pay will be enhanced.

And just to explain how the VAT tax is shared; 50% of tax goes to State Governments, 35% goes to Local Governments, and 15% comes to the Federal Government. So, States obviously have the lion share of that proceeds. The rate will increase when you look at their own IGR as well.

Now, government needs to keep their focus on Internally Generated Revenue and there is absolutely no excuse. Sometimes, you hear people talk about non-viable States. The reason why States are not generating as much as they should, is because there is something coming from the Federal Government every month. If there is nothing coming from the Federal government, States will pull their weights. If the Federal Government itself did not have oil revenue, we will pull our weight.

If you look at what happened with the old regions; the Northern region, the Eastern region, the Western region, all of these regions in that period, paid all of their bills from internally generated revenues, tax and agriculture mostly.

In Western region for example, they had free education with over a million people at one point in time, they built roads all over the place and they were spending only 50% of what they generated and paying 50% to the Federal Government and all they were relying on was essentially just income tax from individuals and agriculture.

Today, that is no longer the case; very few States, including the Federal Government are not as aggressive in revenue generation. We are not as aggressive because whether we work or not, something will come from federal allocation and that is why there is need to ensure that we hold ourselves to account for revenue generation. A country of this size certainly can do far more than we are generating at the moment.

Let me also briefly mention the new provisions on Taxation of Digital Economy and Non-Resident Companies. This is a very important aspect of our taxation policy. Before the Finance Act, only companies that had a physical presence or a fixed base in Nigeria could be taxed. So, most digital companies, I mean any of the big technology companies, or multi-national digital companies, that did not have physical offices in Nigeria, made significant income from Nigeria from online activities, such as advertising, movie streaming, online gaming and e-commerce from subscribers in Nigeria, but paid no taxes whatsoever because they did not have a physical base in Nigeria. So now we are no longer relying on the fixed base or physical address criterion.

Under the Finance Act, once you have a Significant Economic Presence (SEP) in Nigeria, you are liable to tax. Whether you are a resident here or you are not resident as a company, as long as your economic presence is significant, you are liable to tax. If you are streaming online, advertising using Google adverts, whether you are resident here or not, you are now subject to tax.

So, non-residents who previously had no fixed base and no Nigerian tax liability will now be liable to tax based on the SEP criterion. The Minister of Finance is empowered to issue a regulation defining what Significant Economic Presence means. So, she just defines the scope of what we will be looking out for in terms of Significant Economic Presence.

I think it is also important to note what CBN is doing to improve credit flow to the private sector. Now, it is very important to understand also the monetary policy issues. The monetary policy issues determine what credit goes to the private sector, and as I mentioned earlier, the private sector is the focus of the economy. They are the job creators. So, how do they get credit? A major complaint of the private sector is that inability to access credit, cheap credit in particular.

The only way business can grow is as I pointed out, is loans to the real sector. But now, on account of the reform of the OMO operations, that is the Open Market Operations of the Central Bank, we now have a situation where interest rates have become much lower and also Loan-to-Deposit Rate is now at 65%, but interest rates have become lower and the interest rates especially for fixed bills, treasury bills, are now lower. So, you are looking at something in the order of between 3% and 6% for treasury bills while it used to be 14%.

Now, because of the lowering of interest rates and the ban on Nigerian companies, banks and individuals investing in treasury bills, it is now apparent that they must now lend to the real sector.

In the past, banks and individuals simply invested in treasury bills because treasury bills you could get 14%, 15% even higher just by investing in treasury bills. So, banks had no motivation whatsoever to lend to the private sector, because without any risk at all, they could earn anywhere from 14% upwards. But today, because they can no longer do so, they have the deposits, Cash Reserve Requirement, CRR, is now at about 27.5 and because of that, they have enough resources to lend to the private sector.

They have cheaper funds with them, and it is very obvious from what we are seeing today, that interest rates have dropped very sharply and we are not going to have the rather excessive rates we used to have. But the target of course, is to be able to bring interest rates to single digit. At the moment, only our development finance institutions such as the BOI are able to offer such types of loans.

So, net domestic credit has increased by a little over 30% and a further attempt to reduce the cost of doing business is as I have said before, reduction in fixed income yields, treasury bill rate.

Government itself has an advantage, if you look at our debt burden today, most of our debt burden comes from servicing our debt, most of that debt is domestic debts. That means most of it is on paying back treasury bills. But when treasury bills were reduced to 5% – 6% from about 14%, it means that the government pays far less to service its debt. So, we are paying considerably less.

The upshot is that government will no longer be paying double digits interest on treasury bills, thus reducing the debt service burden while at the same time it means that the rates payable on commercial paper will also not be so high as to discourage investment. But I want to point out also the downside.

The downside is that at the moment current account balance is negative and there is a need to improve Foreign Portfolio Investment Flows. But with low exchange rates, there is a low FPI flow. One of the things we want to achieve is to get FPI especially foreign investments in other to be able to boost our reserves, but if the interest rates are low, it of course means that we are less attractive as a destination for portfolio investment. That has its good and bad sides, but I choose to describe it as a downside because it means we are going to see some reduction in FPI at least in a short time.

With the signing also of the Deep Offshore Bill into law, we also expect enhanced revenues from the oil sector. This is another way of generating income.

Thank you very much.

• Lecture By His Excellency, Prof. Yemi Osinbajo, San, Gcon, Vice President Of The Federal Republic Of Nigeria, At The National Defence College, Course 28 Lecture On The 31st Of January, 2020.