About this time in 1985, a huge debate was ranging all across Nigeria. It was the great IMF debate: to take or not to take the famous IMF loan. The military government under President Ibrahim Badamosi Babangida was grappling with a short term liquidity crisis at the time. Fast forward to 2016, about 31 years later and under a democratically elected government, another bout of recession envelops import-dependent Nigeria and the debate is whether to sell our national assets, the nation’s crown jewels to resolve a short term liquidity crisis whose origin is well known.
Apart from the collapse of crude oil prices in the past 18 months, the reasons for the recession are clear and it is simplistic to off-handedly suggest the sale of Federal Government investment in the Nigerian Liquified Natural Gas company (NLNG) and all of Nigerian National Petroleum Corporation (NNPC) as a solution to the short term liquidity crisis.
The argument has been made. The National Economic Ccouncil (NEC), comprising of state governors and a motley of other public servants, want the assets sold. Many state governors are ever eager to get easy money from Abuja and never propose solutions that will task their imagination. The Senate also took the subject serious and held a full plenary session on tackling the recession and came out with a set of watery prescriptions, the most important of which is to sell Federal oil and gas assets. The labour movement is against the asset sale proposal. The history of privatisation in Nigeria is woeful. No one wants to use the word privatisation. It is expected by the CBN governor that asset sale would quickly bring in some $15 billion to the Federal Government.
In 2006, it was these assets that produced the $12.4 billion that was applied to pay off the negotiated balance of the Nigerian foreign loans.
At present, the most sought after asset for sale is the NLNG; the most profitable and efficiently managed Federal Government investment in Nigeria, and one that brings in billions of dollars in dividends and taxes to the Federal Government annually. Till date, there is no worry about the quality of management of the NLNG. Then why sell the NLNG? It is not broken, then why fix it?
The next set of assets for sale are those held by the NNPC. Yes, the Federal Government’s holding in joint venture (JVs) operations through the NNPC can be reduced to aid efficiency and profitability in the JVs. In this way, the cash call palaver would end. But this is not the first time that the Federal asset sale is being proposed.
In the first quarter of 2015, this argument was canvassed in London for these assets to be sold. The reason was unknown then and there was no recession. Apparently, some interested parties definitely want these assets sold to them. Today, we have enough problems with the Avengers over the oil assets in the Niger Delta; where land and territory were acquired by the Federal Government for overriding national interest. Now, these resources are to be sold to outsiders and I wonder if Nigerians truly believe the militants in the Niger Delta will accept this situation.
In discussing the sale of Federal Government oil assets under NNPC, it would have made better sense if the Senate zeroed in on the passing of the Petroleum Industry Bill (PIB), which has been in the National Assembly for nearly seven years. The best contribution the Senate can make now to the economic health of this country is to have an understanding with the House of Representatives and quickly and urgently pass the PIB. The NNPC needs to be reformed. Pass the PIB and let the component parts be managed professionally. Pass the PIB and within the context of a reformed NNPC, the Federal Government may undertake a systematic asset disposal programme.
The concern shown by the Senate in proposing measures to address the present recession is commendable but the senators ought to tell Nigerians how to stop 21 senators currently receiving pensions from government as ex-governors and ex-deputy governors and are also receiving their emoluments as senators. Even the salaries and allowances of the National Assembly members are shrouded in secrecy, mainly because they are indefensible and totally preposterous. If the proceeds from Federal assets sale are used to maintain the present life style of senators and state governors, the asset disposal exercise would be a fiasco.
If we do not reform the nation’s present expenditure and consumption pattern, proceeds from the sale of Federal assets will be definitely be wasted.
Nations in financial difficulties sell non-core assets and borrow. Nigeria has a well-staffed Debt Management Office (DMO) and can borrow. The ratio of Nigeria’s debt to its GDP is still not much higher than 15 per cent. Let the Federal Government borrow to fund its forex needs. Proceeds of asset sale and borrowed funds must be judiciously applied to facilitate recovery and eventual loan repayment. No nation sells its crown jewels. No nation sells its strategic assets. However, these assets can be leased out and upfront lease payments to cover five years or more can be structured.
- Chief Omokhodion is a former bank managing director.