In a frantic attempt to dig a hole out of the economic recession, there appears to be a consensus among government functionaries to sell some of Nigeria’s public assets. Although the government is still trying to make up its mind which assets to put up for sale, there has been a cacophony of suggestions from those who should know and the not-so-knowledgeable ones. From a group that boasts Africa’s richest man, Aliko Dangote; Senate President, Bukola Saraki; the Governor of the Central Bank of Nigeria, Godwin Emefiele; and his predecessor and now Emir of Kano, Muhammadu Sanusi; comes the advice that strategic sales of national assets should be targeted to ensure that Nigeria spends her way out of the present recession.
While Dangote is calling for the divestment of interests in such assets as the Nigeria Liquefied Natural Gas and the Nigerian National Petroleum Company to raise short-term capital, Saraki believes such a move would not only shore up capital, but would “calm investors, discourage currency speculation and stabilise the economy.” Emefiele even put a figure to how much could be raised, saying that if the move had been contemplated when the prices of oil were at between $50 and $55, it could have netted up to $40 billion. The CBN governor who, alongside Sanusi, advised a buy-back guarantee on such assets, said, “Unfortunately, the market has become soft. Now, if we choose to do that now, we could still get $10 – 15 billion or maybe $20 billion.”
On the other side of the divide is the usual group that is always interested in defending “national patrimony”. The membership here includes, but is not limited to, the labour unions – the Nigeria Labour Congress; Trade Union Congress; the Petroleum and Natural Gas Senior Staff Association of Nigeria and Nigeria Union of Petroleum and Natural Gas Workers – and other activists, who even contend that the history of privatisation or concession of national assets does not favour a continuation along that path. The Revenue Mobilisation Allocation and Fiscal Commission boss, Shettima Abba, has even suggested obtaining a loan from the International Monetary Fund as an alternative to the prospects of national assets sale.
The emotions raised are quite understandable. The Nigerian economy slipped into recession after successive negative growths in the first and second quarters of this year. But as dire as the situation may seem, experience suggests that this very critical step that is about to be taken should be guided by absolute caution.
It is a fact that governments sometimes sell assets and reinvest the sale proceeds to fund world-class productive infrastructure. But in our case, most advocates of assets sale appear to be doing so for all the wrong reasons. The suggestion to sell the few profitable shareholdings in the NLNG and the African Finance Corporation, for instance, appears curious and perfidious. We oppose this short-termist mindset. From this joint venture investment, the Buhari administration received a hefty $1.6 billion dividend shortly after he was inaugurated. With it, 27 states were given bailout to pay salaries in July last year. The same NLNG paid $12.9 billion in eight years to NNPC as return on investment. The economic consequences of selling valuable public assets such as the NLNG are likely to be a boom for a few wealthy Nigerians and investors, but raising inequality for ordinary Nigerians.
We agree with a former CBN Governor, Charles Soludo, that while the sale of certain assets could be a last resort, Nigeria is currently definitely not near that threshold and the institutional framework for its effective use is also not in place.One of the tragic manifestations of our national life is that public institutions have become clay in the hands of the moneyed and powerful. Soludo argues rightly that it will be a historic mistake because “such a hasty auction of national assets can only benefit a privileged few with cash and access while jeopardising Nigeria’s long-term economic interest.”
You do not sell shares that bring in healthy profits because of temporary adversity; instead you unload those that are either not profitable or you cannot run efficiently. Privatisation should target loss-making state-owned enterprises, not sale of minority stake in profitable private-sector-run concerns. Instead of frightfully throwing away our honey pots and slaughtering the cash cows, the Buhari government should come up with a wide range of policy options, including kick-starting the abandoned privatisation programme, exploring foreign loans window, improving on the Ease of Doing Business ranking from a dismal 169 out of 189 countries surveyed in 2016 compared to South Africa, 73 and Malaysia, 18.
This should be an opportunity to come out with a focused programme that should get the government out of running businesses. Beyond the cash, privatisation is a vehicle that promotes job creation, facilitates liberalisation and attracts foreign investments. Over the years, the government has shown its gross incompetence in the handling of business such as the running of the refineries. The country has four refineries with the capacity to refine 445,000 barrels per day, yet she is a net importer of refined products. Rather than save money through local refining of petroleum products, the government spends billions propping up failed refineries in the name of turnaround maintenance.
No serious country or investor injects funds into dormant assets anymore. The United Kingdom’s Gatwick Airport, after it had stockpiled £9.6 billion in debt, was sold to Global Infrastructure Partners for £1.5 billion in 2009. So did Serbia for its loss-making steel company – Zelezara Smederevo – sold for mere 46 million euros, to save the job of 5,050 employees there. All the four refineries should be among the first items the government should put up for sale. Privatisation will leverage a significant increase in private sector investment by putting assets previously owned by the government in private hands, enhance productivity in the economy and increase capital investment in the newly-privatised entities.
Other loss-making and inefficient national assets that should be disposed of include the airports and a good number of aircraft in the Federal Government’s fleet of 11 aircraft. While these assets may not throw up the quantum of money needed to power the country’s economic recovery, it is obvious that the taxpayers’ money that goes into their maintenance would be deployed in other areas. Aside from outright sale, some other assets should be concessioned and the business environment liberalised to usher in the much-needed investors. For instance, the 1955 Railway Act that limits investment in the rail sector solely to the Federal Government is long overdue for repeal. In fact, it should not be allowed to stay a day longer as it has become obvious that the government can no longer run such a venture single-handedly. Many foreign investors with investible capital are just waiting for the coast to clear to move into the Nigerian rail sector.
The CBN should, once and for all, address the excess liquidity problem in the economy. There is now increasing concern that the growth of liquidity poses significant inflationary risks. It also has adverse consequences for the ability of monetary policy to stabilise the economy.
While there should be a stronger resolve to recover very quickly all the money stolen from the public treasury, the state-owned oil company, NNPC, is long overdue for reform to make it more transparent and accountable.
