Samagbeyi: Selling assets will provide cheap funds to finance budget
Temitope Samagbeyi is the Partner, Business Tax Services in Ernst & Young, West Africa. In this interview with ROSELINE OKERE, he bares his mind on the call for sale of Federal Government’s assets to get the country out of the economic recession.
There are calls for the Federal Government to sell equities in high stake ventures to remain afloat. Do you think this is a wise idea?
As rightly stated in 2015 by the Central Bank Governor, Godwin Emefiele, one way in which government can generate some form of revenue will be through the sale of some of its assets. This is a well-known methodology that has worked in so many climes. As reported in one of the dailies recently, a reduction in government’s 55 percent equity in the Joint Ventures by 10 percent — with Chevron, Royal Dutch Shell, ExxonMobil and Total, could yield $50 billion for the FG, while selling a 10 per cent stake in its NLNG equity holdings may yield between $2 and $4 billion.
Quite separate from the above, government could earn as high as $2 billion from the sale of scarce 4G spectrum and stakes in the National Independent Power Plants.
It has been shown that the government has no business been involved in certain activities. It is no longer news that Nigeria is in a deep recession and if care is not taken, things may go from bad to worse. At this point, the government needs funds to jumpstart the economy again and finance projects. Selling of the assets would enable Nigeria get cheap finance, to run its rising current account and budget deficits, and invest into infrastructure, as well as, agricultural projects that will help jumpstart and diversify the economy.
Should government engage in overdrive, to complete the privatisation effort of the previous governments?
For me, privatisation of “some” sectors need not be total. Government still needs to hold some stake in some sectors. As we all know, Nigeria operates a mixed economy, which allows the participation of both private and public operators. It is clear that the economy at this point desperately needs private participation in a number of sectors, which would free up some funds used by the Federal Government, in providing such services. I strongly advice that government should make efforts at completing some, if not all of the privatisation efforts of the previous government due to the successes recorded in the past by some privatized entities.
Some assets that were privatized in the past did not yield expected dividends. What are the advantages in selling and the disadvantages?
Generally, government policies have their advantages and disadvantages. It is however important to note some of the disadvantages of a government sale of assets, having already stated some advantages earlier.
First, it could lead to a concentration of the nation’s wealth in the hands of a few wealthy individuals, who could take advantage of the monopolistic situation and charge exorbitant prices that will all but worsen the current economic situation. This can however be avoided if there is a proper control system in place and a solid regulatory body of whatever sector the assets to be sold falls under. Another way of avoiding a monopolistic situation is by ensuring that such assets are sold to more than one entity, which would encourage competition and allow the forces of demand and supply determine the prices of such products. A good example of a highly competitive, but healthy industry, in the economy today is the Telecoms Industry.
The issue of key sectors being sold to the private entities might also pose as a threat to the economy. As a result of the technological knowledge required in the Power Industry for example, and the amount of capital outlay involved, a good number of stakeholders in the country might find this worrisome, with the assertion that when the going gets tougher than it already is, these private entities might not be able to weather the storm, leaving the fate of the entire country in the hands of a few individuals. Also, as suggested by Aliko Dangote, the involvement of other countries in the buying into some of our assets (be it a certain proportion) would pose security and control threats. Given that the Chinese or any other country would have the capital outlay and the human resource required for a productive operation, but I would suggest that these sales are carried out within, rather than outside the shores of the country.
Will selling to the rich not incapacitate government’s ability to regulate and provide necessary social safety nets for the vulnerable?
There is a point in this saying that “selling to the rich would only incapacitate the government’s ability to regulate and provide necessary social safety nets for the vulnerable”. It must, however, be noted that the poor do not have the fund to buy the required stake during privatization. The most important thing here is to have strong institutions that will develop and administer rules guiding operations in the said industries. A case in point here is the telecommunication industry that is closely monitored by the NCC.
This is quite different from the arrangement in the petroleum industry, where the NNPC should not ordinarily be concerned with the sales of Petroleum products, but rather focus solely on regulating the industry. It is understood that the Oil and Gas Industry is a very delicate one and as such should not be handled with ‘kid-gloves’, but in a properly deregulated economy, the NNPC should have no business with selling crude. An enabling environment should be created for the local private sector organisations to ensure they have the necessary support needed to refine our crude locally. With this in place, the economy would be positively impacted.
Will selling enhance better service or create more monopolies?
Selling could create opportunities for both. But a well-regulated structure in place will ensure that there will be no room for monopolies, but rather better products and/or services provided to the populace.
Government has been toying with the idea of unbundling NNPC and the oil and gas infrastructure; how much time is left to get things working well?
The idea of Unbundling the NNPC has been on for quite a while now. There are so many schools of thought around this issue. Literally, no one should be a judge in his own cause (Nemo judex in Parte sua). It is a principle of natural justice that no person can judge a case in which they have an interest. What is clear to me is that the unbundling would assist to resolve this classical case of NNPC being a regulator and an operator.
Unbundling of the NNPC should however not just be a political propaganda that would see the big elephant merely restructured, but left with the same objectives. The NNPC should be a regulatory body and should not be involved in the sale of petroleum products. With the nation already in its second recession quarter and no hopes of very positive revival in the 3rd or 4th quarter, there isn’t any time left for political and diplomatic deliberations.
Do you see call to sell public utilities as objects for political patronage?
If the government is finding it hard to run and maintain public utilities, then such utilities should be privatised or a Public-Private Partnership formed, to relieve some of the burden of its neck. The government has over the years failed in its handling of some public companies, such as the Railway and Water Corporations. Just like the BRTs in Lagos, Individuals should be allowed to partake in the provision of such basic services to allow for better services.