How Senate Plans to Stimulate an Economy in Recession


Chuks Okocha highlights some of the steps taken by the Senate to stimulate Nigeria’s sliding economy

The passage of the Public Procurement Bill by the 8th Senate would not have come at a more auspicious time than now. The bill when concurred to by the House of Representatives and assented into law by President Muhammadu Buhari would turn out to be the tonic needed to grow the Nigerian economy that is said to be currently in recession.

The reasons for this are simple. The bill will help to curb the frequent capital flight and increase the patronage of local content by empowering local companies to produce locally made goods. Also, it will help fight and reduce corruption in this era of crusade against corruption. In other words, the bill when eventually passed into law will enhance transparency and competitiveness, the ingredients needed for national growth.

For instance, in section 34 of the bill titled, ‘Domestic Preference’ it says, “A procuring entity shall grant a margin of preference in the evaluation of tenders, when comparing tenders from domestic bidders with those from foreign bidders or when comparing tenders from domestic suppliers offering goods manufactured locally with those offering goods manufactured abroad.”
This is a welcomed development as preferences would be given to goods made in Nigeria.

This is by no means meant to whittle down standards. No. There are several made in Nigeria goods that can compete favourably with foreign made goods, but due to the craze for foreign goods, such locally manufactured goods suffer neglect, whereas goods that are of sub-standard qualities are given patronage by Nigerians. A very good example is in the textile industry. This law will help in curbing capital flight and improving the value of the local currency, the Naira. By so, doing, that is, by increased preferential patronage of the local industries, the usual practice of transferring profit to the home country of the manufactures would be gradually reduced. The new bill has capacity to also assist and support local business community to become competitive and efficient suppliers to the public sector.

One of the problems of public procurement in Nigeria is delayed payment by government agencies. But this bill has an answer that would cure this. In section 37, it proposed payment of interests for any delayed payment. This would act as a panacea to local competitors that took bank loans to execute government contracts.

There are several Nigerian companies (from all sectors) that are technically competent and with human capacity but lack the requisite capital to compete or bid for contracts to be awarded by government ministries and agencies, However in the proposed amendment that have been passed by the senate, the usual practice of 15 percent mobilisation fee is to be increased. Under the new plan, the mobilisation fee is to be increased to not more than 25 per cent. This idea is to give financial strength to technically competent Nigerians companies to bid and tender for big government contracts.

Another aspect of this bill, especially in this era of the anti- corruption mantra is the open competitive bidding. According to section 24 of the bill, “all procurement of goods and works by all procurement entities shall be conducted by open competitive bidding.” This means that everything that regards government procurement shall be transparently done. Bye bye to ‘long leg and god fatherism’. Every qualified bidder shall be given equal opportunity.

This bill that is currently awaiting concurrence by the House of Representatives will seek to harmonise all government policies as regards procurement in standards and benchmarks. It will also ensure application of fair competition, cost effectiveness and professionalism in the public sector procurement system.

It is in line with this position that the chairman of the Senate Committee on Industry, Senator Sam Egwu, said that he championed bill that amended the Procurement Act to encourage local manufacturers to invest more in local production. He also said the bill if passed by the National Assembly and assented to by President Muhammadu Buhari, would put an end to capital flight.

Sam Egwu who, threw more light on why he proposed an amendment to the existing act, said his decision was predicated on what he termed as “high quantum of capital flight taking place in the country on yearly basis.” He explained that the new legislation made it compulsory for ministries, departments and agencies of government to first seek to procure certain percentage of locally made goods before considering foreign products, where such local products are available.

According to the former governor of Ebonyi stated: “I was inspired by the fact that I realised that a lot of money is appropriated for capital projects every year and most of these funds end up in the hands of foreign companies that produce the goods and services that we need.
“This is because once a budget is passed, it simply goes for procurement of goods and services. Then you start asking yourself, what is the fate of this huge amount of money that has been appropriated in a local economy?
“You will find out that more often than not the money so appropriated just ends up in capital flight because the ministries, departments and agencies (MDAs) will end up the procurement with foreign goods and services, leaving our local manufacturers who produce such things without patronage.

“You know that importation is not done with the local currency; importation is done with foreign currency, and this causes a lot of pressure on the foreign reserve, and it keeps depleting everyday. But when we now patronise our made in Nigeria goods, there will be no need for much pressure on our forex”.

Egwu also stated that the Senate, in the new proposal, increased the contract mobilisation fee from the current 15 per cent to 25 per cent, as a means of addressing the issue of rampant cases of abandoned projects across the country. According to him, when contractors are mobilised with reasonable percentage of the contract sum, they will have no reason not to execute the project but when the mobilisation fee is small, they can be tempted to leave the contract undone.

He also stated that the improved mobilisation fee would facilitate timely completion of contract procurement process, which used to drag under the extant procurement Act. He further explained that the Senate decided to remove the power of the Federal Executive Council (FEC) to approve contracts and ceded the power to the National Council on Public Procurement, NCPP. The legislator pointed out that the National Council on Public Procurement would be made up of professionals and bureaucrats, who know the right decisions to take in order to make things work.

For instance, Egwu noted that the Senate also approved the inclusion of Nigerian institute of Architects and the Nigerian Institute of Quantity Surveyors as members of the Council.
The Senate President, Bukola Saraki, who did not hide his excitement over the passage of the bill by 8th Senate, said that the new amendments to the act would help stimulate the nation’s economy.

According to the Senate President, “We all have a role to play to ensure that the Executive comply especially in the area of giving first priority to locally produced goods.
“This has helped many countries to develop when they had issues of downturn in their economy.

“I want to commend my colleagues for passing this bill,” he said.
The passage of this all important bill is in line with the agenda of the 8th senate to encourage local manufacturers by championing procurement of made in Nigeria goods and enthrowing transparency into the economy.

– Okocha is a Special Assistant to the President of Senate on Print Media