Experts urge assets privatisation, securitisation to finance budget deficit
The Federal Government has been urged to finance its N5.2 trillion budget deficit through privatisation of moribund assets and securitisation through conversion to marketable instruments.
At the Chartered Institute of Stockbrokers (CIS) Economic Review for 2020 and 2021 Outlook Webinar, a professor at the Finance and Capital Market Department of Nasarawa State University, Keffi, Uche Uwaleke, said government needs to privatize key assets especially the Nigerian National Petroleum Corporation (NNPC), and subsequently list it on the stock exchange.
He argued that the planned increase in Value Added Tax (VAT), reduction of waivers, and other measures were not sufficient to generate the amount of revenue needed to fund the yearly deficit in Nigeria.
According to him, the securitisation of government receivables would also go a long way to fund the nation’s infrastructure deficit.
Securitisation is the conversion of an asset, especially a loan, into marketable securities, typically for the purpose of raising cash by selling them to other investors.
He said: “Securitisation has been embraced by many countries to fund infrastructure. Government receivables can be used for housing projects and road construction and subsequently setting up special purpose vehicles that would take up the bonds and issue securitization in the market.”
He urged the government to issue infrastructure/revenue bonds/project-tied bonds to ensure that the proceeds are ring-fenced, as opposed to the current resort to general obligations bonds, which proceeds often go into recurrent spending.
To achieve this, Uwalake advised government to mandate its agencies to issue infrastructure bonds as obtainable in other emerging economies.
“Infrastructure bonds should be the focus presently; it constitutes only 2.5 per cent. We should scale up infrastructure bonds because we do not divert this money. Agencies of government issue bonds in other countries, our agencies should also issue infrastructure bonds guaranteed by the government,” he said.
Also speaking, the Chief Executive Officer, Adedipe and Associates, Biodun Adedipe, said there is need to privatise the Nigerian Commodities Exchange (NCX).
According to him, the Central Bank of Nigeria (CBN) is also expected to provide funds to strengthen other commodities exchanges to serve as platforms where commodities of various types would be traded.
He said this would complement the successes recorded in agriculture, and ultimately boost the manufacturing sector.
“Private sector is in a better position to manage exchanges. The NCX has been having a number of challenges since it was set up. It has been inactive due to funding and infrastructure issues.
“If we privatize these exchanges, it will complement what is happening in the agricultural sector and link to manufacturing. If we achieve this and make them move as other international exchanges, we will see great things happening in Nigeria,” he said.
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