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LCCI urges government to seek value from moribund assets

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With the total value of capital importation into Nigeria declining to $875.62m in the second quarter of 2021 from $1.91bn in the first quarter of 2021, according to the latest data from the National Bureau of Statistics, the Lagos Chamber of Commerce and Industry (LCCI) has urged government to seek a sustainable way of revenue generation and boosting foreign exchange inflows other than assets sale.

The chamber noted that Nigeria is an asset-rich nation owning hundreds of large state-owned companies, valuable parcels of land, and built structures in prime commercial locations that are grossly underutilised and contribute too little to the country’s fiscal and financial situation because their market values are currently not known.

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With debt challenges and poor capacity to attract capital, the LCCI stated that there is a need for government to take urgent steps to establish the market values of the assets, securitise the corporate assets and commercialise the real estate assets to raise revenue for the government and foreign exchange inflows for the country.

The chamber expressed worries about the country’s fiscal and financial challenges, noting that the government has increasingly resorted to debt to finance recurrent and capital obligations in the face of dwindling revenue.

“The country’s debt situation has become worrisome with debt servicing consuming a significant share of the revenue. The debt service to revenue ratio for the period of January to May 2021 stood at about 98% up from 83% recorded in 2020 according to the budget implementation report.

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“There is a need to replace existing debt stocks with asset-linked debt to ease the debt servicing burden; attract greenfield FDI into publicly-listed state-owned companies; generate new revenue streams from commercialized real estate portfolios”, LCCI Director-General, Dr. Chinyere Almona said in a statement issued at the end of the chamber’s council meeting at the weekend.

In addressing the challenges with assets optimisation, the LCCI stated that Nigeria should do an official identification of its assets in terms of location, purpose, and usage contained in a national asset register, adding that such register must be created at national, state, and local government levels.

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“From a valuation standpoint, assets can be broadly classified into financial and non-financial assets. Financial assets have established market values while non-financial assets refer to those assets with unknown market values.”

“However, most of Nigeria’s assets fall in the non-financial category because the market values of its assets are unknown. As such, they cannot be securitized to raise debt/equities or commercialized to generate revenue.

“Government needs to create a dynamic online digital platform where the financialized and commercialized assets can be offered for investment. This platform will avail private investors of relevant investment opportunities in those assets. Typical examples include Brazilian Partnership for Private Investment (PPI) and the Invest India websites”, the LCCI added.

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