This gamble is dangerous

The Senate last week handed over a 14-point plan to the Federal Government in order to find the quickest way out of the country’s current economic slump. Senate President Bukola Saraki read out the proposals in his welcome speech from Senate’s nine weeks’ old vacation. The recommendations include urging the federal government to raise capital […]

The Senate last week handed over a 14-point plan to the Federal Government in order to find the quickest way out of the country’s current economic slump. Senate President Bukola Saraki read out the proposals in his welcome speech from Senate’s nine weeks’ old vacation.
The recommendations include urging the federal government to raise capital from sale of national assets; engage in meaningful dialogue with Niger Delta militants; inject money into the economy by releasing funds for implementation of the 2016 budget; devise immediate strategies to ease the suffering of ordinary people; support agricultural sector and allied businesses to create jobs and boost value addition; re-tool export promotion policy with incentives such as Export Expansion Grant (EEG) and provide leadership-level engagement with the private sector. Saraki specifically advised the federal government to sell its holdings in Nigeria Liquefied and Natural Gas (NLNG) Company, Africa Finance Corporation and major airports and refineries.
Of all Senate’s recommendations, the proposal to sell national assets elicited the most public reaction. While Central Bank Governor Godwin Emefiele, Manufacturers Association of Nigeria (MAN), Emir of Kano Muhammad Sanusi II and foremost businessman Alhaji Aliko Dangote all supported it, the Revenue Mobilization, Allocation and Fiscal Commission (RMAFC) kicked against it, as did Nigeria Labour Congress [NLC], oil industry workers and many economists.  RMAFC’s acting chairman Shettima Umar Abba Gana said selling crown jewels that generate huge revenues for the country is unwise. Citing NEITI’s 2013 audit and financial report of Nigeria’s oil and gas industry, Gana pointed out that Nigeria National Petroleum Corporation (NNPC) received $12.9 billion from NLNG over an eight-year period which was not remitted to the Federation Account. The audit report, he said, also revealed that NLNG paid $1.289billlion as dividend in 2013.
Proponents of the partial sale of government shares in the NLNG argue that a reduction in government’s stake in the company is required to beef up the country’s foreign reserves and engender investors’ confidence. NLNG is worth $15billion with government having 49 percent stake in it through NNPC. They also want government to consider a partial sale of its stake in Joint Venture Companies [JVCs] owned jointly with Shell, Exxon Mobil, Chevron Nigeria, Total Nigeria and Agip. They urge government to include in the sale an agreement to buy back its stake in the future. This latter suggestion is dubious because no investor will want to buy something that will be taken back after some years.
This partial sale of stakes is expected to free government from costly JVC budget contributions and also earn billions of dollars for the government in the short run. However, it will also lose earnings from dividends in subsequent years. The Federation Account will still earn revenue from royalties, petroleum profit tax and oil company profit taxes. Proponents argue that this will be worthwhile if proceeds from the sale are invested in critical infrastructure and social projects that speed up the end of economic recession.
Not a few Nigerians are very hostile to this proposal. It is a dangerous gamble indeed to sell critical national assets accumulated over many decades just to buy our way out of a mild recession. The biggest worry is that the sale of similar assets in the past added no value to the country’s economy and the proceeds were mostly frittered away. The little consolation this time is that President Muhammad Buhari is not the kind of ruler that fritters away national revenue. But then, he is about the only changed factor. The rest of the big, greedy and wasteful bureaucracy and political actors in all three tiers of government are still very much in place.  Just like the three tiers of government colluded over the years to fritter away savings from the Excess Crude Account, so also could funds generated by selling national assets vanish without any visible impact. We therefore come down heavily on the side of the nay-sayers that for now, government should consider the Senate’s less tricky options and not attempt to sell key assets such as JVCs and NLNG.