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Selling national assets?

By Editorial Board   |   10 October 2016   |   3:30 am
The Minister of Budget and National Planning, Senator Udoma Udo-Udoma

The Minister of Budget and National Planning, Senator Udoma Udo-Udoma

This chronicle of events should not just be of interest to all Nigerians, it should make the debate on their current harrowing living more feverish: Budget and Planning Minister Udoma Udo Udoma on September 15 told a cabinet retreat on the 2016 Budget which attracted 234 participants that the President’s Economic Management Team had proposed a fiscal stimulus initiative for the country to spend its way out of the present economic recession via a “plan to generate an immediate large injection of funds principally in foreign currency estimated at US$10 – $15 billion into the economy through asset sales, advance payment for licence renewals, infrastructure concessioning, use of recovered funds, etc, to reduce the funding gap.” The National Economic Council met on September 22 and “expressed support for the plans and proposals of the Federal Government to steer the country out of recession.” Before emotions over-ride reason, however, there are more important points to ponder. There have been many missteps by the Muhammadu Buhari administration!

The federal administration attributed the final fall into recession to the sharp fall in foreign currency receipts due to low crude oil prices and disruptions of oil and gas production by militants in the oil fields. But that is only half-true considering the militants beforehand threatened to “crumble the economy” if their demands were not met. They subsequently proceeded gradually to stop the flow of gas to the electricity generating plants and cut off supply of crude oil to the NNPC refineries whose output, according to the Petroleum Minister of State, had begun to rise at the time. While the domestic energy supplies deteriorated, the Buhari administration simultaneously reduced total volume of imported petrol by 78 per cent from May/June 2015 to May/June 2016 on the altar of curbing pressure on external reserves.

Cognizant of the fact that energy consumption level is indicative of the intensity of economic activity, Buhari bears the major blame for precipitating the economic recession by both delaying interminably to dialogue with the militants and starving the economy of imported petrol, diesel and kerosene by turns.

Worse still, Udoma betrays a lack of understanding of the composition of a country’s external reserves as well as a market reflective exchange rate mechanism by celebrating at the retreat the plunging value of the naira since mid-June for bringing about “exchange rate gains (this actually represents money illusion) and an increase in naira proceeds in funding the 2016 budget thus helping us pay salaries and keep the state running” in total oblivion of the associated shooting inflation and dwindling effective demand.

Now, a more monumental economic misstep is the new plan to tie exit from the present recession to selling off some national assets for foreign currency under terms that possibly contain “repurchase options which will make provision for buy-back of those assets when the situation improves.” This novel forex-denominated self-destruct budget financing strategy of “sell profit-making assets cheap now and repurchase them dear later” not only runs counter to government’s economic mandate enshrined in Section 16 of the 1999 Constitution (as amended) but also represents a lame excuse for the failure that the administration expects from its inept management of the economy. Not a single national asset should be sold under such a pretext, which froths with intentions to transfer thriving national assets to cronies and foreign patrons of the present federal administration.

Nonetheless, it should be realised that Nigeria’s is a mixed economy where enterprises wholly or partly owned by government should complement private businesses in the overall national interest. The Federal Government should retain and make its enterprises function efficiently. Instructively, Nigerians have had some experience in sale, privatisation and concessioning of government enterprises with mixed results that largely verge toward the unpalatable. What is required is for government to learn from the previous exercises to draw up rules for a transparent and equitable disposal of any assets adjudged to be obsolete or surplus to government business at a fair price as and when necessary or as a matter of routine.

In the search for revenue to finance the budget, the Federal Government would have over N1trillion at its disposal by repudiating over 90 per cent of the purported national domestic debt, which is made up of mopped but sterilised excess liquidity funds that were not expended or invested. To help it to exit the economic recession and ensure eventual sustainable growth, the Federal Government should cut off such avenues for freeloading.

  • Anne Mumuney

    This article is addressing issues that should worry us all. I am so worried that I see no sensible plans being made to safeguard our future. When I read about the huge volume of “bad debts” owed the banks for this year alone, and the major sectors are oil and gas, and state governments (euphemisms for money laundering), I see forex regulations deliberately leaving loopholes for secondary market manipulations, and now, a panic driven resolve to sell assets? I wonder where we are really going. This is still business as usual. What I expected to see from this government is a drastic trimming down of recurrent and administrative expenditure at both federal and state levels, and a redeployment of liquid assets to areas of capital infrastructure. Thrift and cost efficiency must be insisted on at all levels of governance, but instead, we are still living the high life, with no money to back it up. Senators display their excessive lifestyles in the papers, and the country cannot afford to pay its teachers and doctors. How crazy are we? Is that the example we are setting. I don’t expect miracles. I know it will take at least 3 – 5 years for some form of system to be put in place, but all I see in the pages of the newspapers are shallow policies coated in complicated English, so that we don’t actually understand that there is nothing there. The government is trying to do a good job on anti corruption and security – done a good job so far on Boko Haram, but without drastically reducing the financial burden on the government by cutting out all the wastage everywhere including the legislature, and seriously investing in infrastructure we are not going anywhere. How can the second highest non performing debtors be state governments? And if we investigate, the bulk of the loans will be on administrative and recurrent expenditure, and they wont be in the health, education or infrastrucural sectors either. Na waoh! Its time for the government to stop blaming, and start working to fix us. Its not hard, if we really want to.We all know that the past 56 years have been negative. We are tired of hearing it. Lets move on and start taking sensible decisions, or are we genetically incapable of doing that? If so, maybe we should start looking for coionisation again.

  • real

    The simple fact is that we don’t have capable hands running the economy. what happen to the simple rule of living within your means. if the government doesn’t have the funds to funds every aspect of its budget. Then the funds it has needs to be focus on the core engines of the economy, agriculture and power.
    if any assets are to be sold, it should be sold as publicly traded entity, one that would continue to generate revenue for the government, give the people the ability to own part of it, and allow for capable people to operate it. I am for one of the opinion that all our refineries should be publicly traded companies, with the federal government owning not more than 25% of the company.

  • vincentumenyiora

    ;Problem in selling Assets is that if you accept it it become a precedence and if you’re able to sell and obtained a fair and reasonable arrangement for your own part of the deal the next administration may not be able to the same as you did and so the policy becomes a danger to the growth of your economy! And in Nigeria where the leadership is not nationally oriented, you will remain at the mercy of the policy makers! Do not sell but you can do public/ private partnership so that those who can organize the Assets can take up shares but are allowed to manage the Assets for the interest of the people and not an outright sales! The danger in the out right sales is that the new owners, if they want to do you the economic harm – sabotage, can run the whole business down and leave the country at your peril and so you end of with abandoned and Elephant projects as it were! Nigerian political and economic problems are dependent on the thinking and psychology of the managers and your leaders who are not ‘Nationally Oriented’ – I observed this and said it as early as 1989 to 1992! You need to do a lot about the thinking in your leadership cadre!

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