Recession: Furore over asset sale proposal

 

The recent National Economic Council’s endorsement of the recommendation by the Minister of Budget and Planning, Udoma Udo Udoma, on the need by the Federal Government to sell some national assets to tackle the ongoing recession have provoked a major controversy in the country.

The country begins to experience recession said to be the worst in the last 29 years as soon as the price of crude oil, Nigeria’s major source of revenue, started to decline in the international market.

As a result, the recession has made it difficult for government at all levels and private sector concerns to embark on projects that could increase economic activities in the country.

To therefore bail the country out of the recession, various initiatives have been suggested. Chief among them is the call on the Federal Government to take the diversification of the economy seriously. This is apart from the government’s plan to invest in solid minerals aimed at shifting the country’s focus from oil.

So, when the National Economic Council and other supporters of the assets sale, including the richest African businessman, Alhaji Aliko Dangote, and the Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, openly expressed their support for the recommendation, little did they know that they had stirred a hot argument in the polity.

Various groups, including the Petroleum and Natural Gas Senior Staff Association of Nigeria, the Trade Union Congress and the Nigeria Labour Congress have opposed the proposal. They said rather that selling the assets, the Federal Government should seek other ways to increase its revenue base, while plugging loopholes and leakages in public finances.

The unions also threatened to shut down the country should the Federal Government go ahead to sell the assets.

According to them, the planned sale of the assets, which are targeted at bringing a short term solution to the economic recession, is a self- destructive decision. They argued that the idea was meant to hand over the collective wealth of the country to a few individuals and further impoverish the citizens.

Some of the national assets being considered for sale are the Federal Government’s shares in the Nigeria Liquefied Natural Gas Company Limited, Nigierian National Petroleum Corporation, refineries and financial institutions.

Supporters of the proposal are of the opinion that the money that would be realised from the sale should be used to cushion the biting effects of recession on the economy.

Like Dangote, the Senate President, Dr. Bukola Saraki, and the Emir of Kano, Alhaji Lamido Sanusi, hinged their reason for supporting sale of assets on the belief that it would provide the country an escape route from the current economic crisis.

Sanusi had, however, advised that the option of selling the assets could be explored with the consciousness of preserving notable interests in such assets by making the sale transparent and also positioning it to yield expected value.

According to him, “One option is to sell down some assets; sell down some refineries in a manner that does not hurt your strategic interest; sell down some oil assets; sell down some refineries in a transparent manner that gives you value. You can also have options to buy them back later. You should expect basically forex.”

Likewise, Saraki, before the Senate rejected the recommendation seeking the sale of national asset early in the week, had argued that Nigeria’s habit of borrowing over the years had not been helpful. He said the “singular strategy we are using of borrowing obviously is not working, hence the need for the government to look for alternative ways.”

Some experts have equally shared their views on the issue. A Professor of Energy Economy, University of Ibadan, Adeola Adenikinju, who told Saturday PUNCH that he has conditional support for sale of national assets, urged inventory of the assets proposed for sale.

He expressed optimism that if the sale was transparently done, the country could still generate revenues from them in future.

Adenikinju’s position contradicts that of a former CBN Governor, Prof. Charles Soludo, who said that the proposed sale of the national assets was based on a convenient, but false foundation.

The ex-CBN boss had argued that any sale of assets would amount to chasing pennies when by acts of omission or commission, the country would be losing pounds.

“Such a hasty auction of national assets can only benefit a privileged few with cash and access while jeopardising Nigeria’s long term economic interests,” Soludo had said.

But Adenikinju explained that the reason some opposed the sale was because they had lost confidence in the government. He said Nigeria could still bail itself out of the current economic crisis with the sale of the assets and still acquire productive ones in future.

He said, “Nigeria is in deep economic crisis and we cannot borrow ourselves out of the crisis. We need to rejig the economy and sell the assets that are not productive to those that will manage them well.

“We only need to ensure that the bid process is transparently done to ensure that those who buy them pay just and required value for them. They should be people who have commercial and technical knowhow to manage them effectively.

“We also need to have an inventory of what we are talking about. Is it the refineries that have not been working after huge amount of money have been spent in maintaining them? If that is the kind of asset we are talking about, then I will support it. We can sell the refineries off and get the private sector to move in and ensure that they are efficiently managed. It is an embarrassment that we continue to spend a lot of our foreign exchange to maintain assets that are not functioning well.

“If you are also talking about NNPC, which is supposed to be a producing commercial enterprise, ask yourself, how much have we been able to get from NNPC, which has not been declaring profit for a long time? Why don’t we get a better management by reducing our shares and get people who have robust experience and technical knowhow to mange this asset and then the country will benefit by getting revenue through taxation? Countries depend on taxation.”

Dr. Lanre Olaniyan of the Department of Economics, University of Ibadan, seeks a clarification from the Federal Government on the difference between sale of assets and sale of business enterprises.

Olaniyan, who said he found it difficult to understand what people considered as national assets, identified human capital resources as the main assets of Nigeria, which he  said cannot be sold.

Olaniyan said, “Human resources are assets any country can have. The definition of assets is anything that a company has which can be used in production of goods and services. And the main assets any country can have are the human beings. In order to use the assets, a country can set up business enterprises which exploit the assets (human beings).

“A country does not sell its assets because the assets are the human resources available to that country to develop. A country can, however, sell its enterprises or business concerns. NLNG is a business enterprise which Nigeria can sell if there are justifiable reasons to do so.”

He is, however, of the opinion that any country can sell off its business concerns and use the proceeds to solve peculiar problems.

He said, “The question is how is the country going to implement it?  How is the country going to replace what it has sold? For example, we need to be sure that the reasons Nigerian government actually wants to sell the business concerns are purely economic, and not because some people want to use illegitimate means to become owners of those enterprises.

“There is shortage of cash to solve the immediate problem of the country. So, if you have problem that is short time, it is always good to use short time solution to solve it. We need to evaluate the problem to determine if we need short term or long term revenue (solution) to solve it. But if the business enterprises will continue to give Nigeria revenue in the long run, then it is not good to sell them to solve short term problem.”

Contrary to some people’s claim that the proposal was a lazy way of thinking, manufacturers welcomed it. According to them, many of the ineffective joint ventures in which the Federal Government has shares can be sold and the money realised from them used to reflate the economy.

The President, Manufacturers Association of Nigeria, Dr. Frank Jacobs, told Saturday PUNCH that a lot of benefits would be derived from the sale of inefficient enterprises.

He said, notwithstanding the sentiment expressed by labour unions, the association’s position is that the government should reduce its ownership in a number of inefficient companies in the oil and gas sector.

Jacobs said, “We understand the sentiment of the labour unions and other stakeholders who argued that previous sale of assets did not reflect in the economy.

“This time around, we believe that government can reduce its ownership of a number of joint ventures such that we can raise money from that to help shore up foreign reserves and arouse the interest and confidence of foreign and local investors in the economy. If that happens, they can invest in the economy and we will begin to have inflow of foreign exchange into the economy. That will contribute to the process of getting Nigeria out of the current recession.”