Nigeria is currently battling its worst economic recession in 29 years, leading to suggestions to sell national assets. Omololu Ogunmade writes on the controversy
Since the business magnate, Aliko Dangote, advocated the sale of national assets to cushion the biting effects of recession on the economy, the matter has become a national controversy which has polarised Nigerians into two main camps.
The recession has made it difficult for Nigeria to secure low-interest foreign loans as a result of poor credit ratings.
Hence, Dangote, Africa’s richest man, had in an interview with a cable television, CNBC, advised the federal government to sustain its foreign reserves by disposing its stakes in major assets such as the Nigeria Liquefied Natural Gas Limited (NLNG) and the Nigeria
National Petroleum Corporation (NNPC). Other assets being considered for sale are refineries, financial institutions and airports.
Dangote’s call received the immediate backing of the Governor of Central Bank of Nigerian (CBN), Godwin Emefiele, and his predecessor, Muhammadu Sanusi II, as well as the Senate President, Bukola Saraki.
According to Emefiele, when the idea of selling the national assets was first conceived in 2015, it was reported that the sale of the assets had the potential to yield a whooping $40 billion to the nation.
However, he said with the current flexibility in the market, sales output from the assets could only yield between $10 billion and $20 billion at present. Nevertheless, Sanusi and Emefiele added that the assets could still be sold with a caveat that the federal government could buy back such assets when the economy eventually recovers.
Said Emefiele: “In the short run, we can sell assets. You will recall that as at April 2015, I had an interview with Financial Times of London during which even before the government came on board, I had opined that there was need for the government to scale down or sell off some of its investments in oil and gas, particularly in the NNPC and NLNG as at that time when the price of oil was around $50-$55 per barrel
“We actually commissioned some consultants that conducted the study and at the end of that study, we were told that if we sold 10 per cent to 15 per cent of our holding in the oil and gas sector, we could realise up to $40 billion.
“Unfortunately, the markets have become soft. Now, if we choose to do that now, we could still get $10-$15billion or maybe $20 billion. I would imagine that that option is still on the table because more people, even in the cabinet, have made the same suggestion and if it happens, that will be fine, including the option to buy back the assets at some premium if we contemplate buying back when the crude prices move up and the assets value also move up. You know that in government, there are those against and those in favour. The argument in favour of selling the assets has gained a lot of credence recently.”
On his part, Sanusi said 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.
“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,” he said.
In the same vein, Saraki who had earlier told the Financial Times that disposing of the assets could provide an escape route from borrowing at the International Monetary Fund (IMF), argued that Nigeria’s habit of borrowing over the years had not been helpful to the nation. He said the “singular strategy we are using of borrowing obviously is not working,” and hence, the need for the government to “look for alternative ways.”
Saraki found a better and more visible platform to express his opinion on the sale of the nation’s assets on Tuesday when upon the resumption of the National Assembly from a two-month recess, he bluntly advocated the sale of the assets as one major way the nation could come out of the current recession.
Saraki’s call altered the shape of events in the polity as it provided the broader platform for more Nigerians to join the debate over the calls for sale of the nation’s assets.
According to him, the move will help the federal government to raise capital and consequently improve its foreign reserves, calm investors and in the long run, stabilise the economy.
“The executive must raise capital from asset sales and other sources to shore up foreign reserves. This will calm investors, discourage currency speculation and stabilise the economy. The measures should include part sale of NLNG Holdings; reduction of government share in upstream oil joint venture operations; sale of government stake in financial institutions e.g. Africa Finance Corporation; and the privatisation and concession of major/regional airports and refineries,” Saraki said.
However, the call stirred the hornets’ nest as it awakened the consciousness of notable institutions, organisations and individuals to the depth of seriousness of the call and its consequence for the troubled nation. The intensity of the actions and reactions which followed Saraki’s call since Tuesday have shown that Dangote’s quest which many had earlier dismissed as mere investment drive is now seen as a serious matter after all.
RMAFC Opposes Asset Sales
Against this background, the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), organised labour, the National Economic Council (NEC), senators and a host of Nigerians have either agreed to or rejected the calls.
Opponents of the calls have argued that selling promising assets will be counter-productive, saying it makes greater sense to call for the sale of non-performing assets which require a huge sum of money for their maintenance.
Examples of non-performing assets which Nigerians want to be sold are some of the aircraft in the fleet of the presidency. There were reports, for instance, that in the past 15 months since President Muhammadu Buhari ascended the seat of power, it has cost the nation a huge sum of N5 billion to maintain nine aircraft in presidential fleet.
Therefore, many Nigerians believe that there is no better time to sell some of the aircraft which they consider to be drains on the nation’s income than now. According to them, selling five of such aircraft and other unproductive assets this season will help Nigeria to raise money which can assist it in addressing the economic crisis bedeviling it.
RMAFC on its part, vehemently disagreed with advocates of the sale of the assets. In a swift reaction to the calls, its Acting Chairman, Shettima Abba Gana, said acceding to such calls would be an unwise decision by the federal government. Instead, the commission advised the government to secure loans from IMF and subsequently deploy revenues realised from the assets to offset the loans over a period of 10 or 20 years. The commission reasoned that after the loans would have been offset within a decade or two, the nation would still continue to enjoy the income from such assets.
Buttressing its argument that it will not be strategic to sell income yielding assets, RMAFC recalled how the National Extractive Industries and Transparency Initiative (NEITI) 2013 audit and financial report on Nigeria’s oil and gas industry, had shown that whopping $12.9 billion was paid to the Nigeria National Petroleum Corporation (NNPC) by NLNG within a period of eight years. But regrettably, NNPC failed to remit the income to the federation account. It added that another audit report showed that NLNG remitted a dividend of $1.289 billion in 2013 which he said implied that the asset was highly productive.
RMAFC therefore submitted that Nigeria should not sell valuable assets such as “NLNG and other strategic national resources…to meet a short-term financial obligation.”
NLC, TUC, NUPENG Reject Calls
RMAFC is not alone in the opposition to the sale of the assets as the organised labour had not only rejected the move but also warned the federal government against yielding to the calls.
During the week, the Nigeria Labour Congress (NLC), Trade Union Congress (TUC) as well as oil workers vowed to resist the move.
According to NLC President, Ayuba Wabba, an asset such as NLNG, which yields over $1 billion to the nation every year, is a valuable asset which should be treasured.
NLC believe embarking on such venture would be fruitless as it recalled how past sales of assets have added no value to the lives of citizens because it was skewed in favour of only few individuals at the expense of the citizenry.
“It is on record that dividends, in excess of $1billion, have accrued annually to the national coffers from the gas company over the past 12 years. These calls are more worrisome when one considers the history of sovereign assets divestiture in the past.
“Where are the proceeds from sales of the assets in the power sector for instance? With the benefit of hindsight, it is obvious that these assets were distributed to favoured individuals and surrogates of the ruling elite without any appreciable benefits to Nigerians,” NLC said.
In the same vein, TUC said the federal government should be prepared for turbulence if it proceeds to sell the assets. According to the congress, proponents of the idea are Nigeria’s enemies.
“The Trade Union Congress of Nigeria warns those calling for the sale of national shareholdings in Nigeria Liquefied Natural Gas Company Limited and concession of the country’s airports to drop the idea if they do not want to incur the wrath of workers. Those suggestions are disgraceful and portray them as enemies of the state,” TUC President, Mr. Bala Kaigama, and the Acting Secretary-General, Mr. Simeso Amachree, said in a statement.
Echoing the labour unions, National Union of Petroleum and Natural Gas (NUPENG), through its President, Igwe Achese, said instead of selling the assets, the federal government should attract investors by building refineries and set the tone for economic recovery through short-term, medium-term and long-term economic measures to alleviate the plights of traumatised Nigerians.
Senators Also Reject Calls
Nigerian senators during the week distanced themselves from the call by their president, Saraki, for the sale of the assets. The senators, while lending their voices to debates on the economic recession on Wednesday and Thursday, said the sale would do more harm than good.
For instance, Senator George Akume (Benue North-east), criticised the calls for the sale of government assets. He recalled how two former governors of CBN, Charles Soludo, and Sanusi, had once alleged that several billions of dollars were missing. He said if such funds were recovered by the federal government, the calls for sale of assets would be unnecessary as he argued that selling oil assets in this era of drastic fall in oil prices would be at a great loss. He also accused those making the calls of being unpatriotic and possessing ulterior motive to acquire the assets.
“From these and from monies going through other sources, at least, we should be able to recoup over $50 billion. If we succeed in doing this, do we still have to sell our assets as it is being canvassed? The thing is very straight forward – there is a buyers’ market and there is a sellers’ market. If you want to dispose of your oil assets at this time when the prices of oil have crashed, precisely how much are you going to realise?
“We are making a mistake here – what we are intending to do is to be very unpatriotic and ensure that those who are within the bracket of the stolen dollars still come to buy. I believe that this is not the time to strip these assets.
“Fortunately, the CBN governor made a very powerful statement that the worst days of the recession are over and therefore, we have to look elsewhere and not sell our assets. We should rather focus on industrialisation through agriculture and try to revamp this economy. I am worried because people who are telling us to sell these assets are people who have huge pockets. Our assets must remain for us: even Saudi Arabia didn’t sell parts of their national assets as alleged,” Akume submitted.
On his part, Deputy Senate President, Ike Ekweremadu, said only non-performing assets should be sold as he emphasised the need to restructure the system by unbundling the federal government. According to him, selling productive assets will be unfair to the next generation as he disclosed that countries such as the United Arab Emirates (UAE) and Saudi Arabia guard their assets jealously.
He said: “I have heard about the issue of selling of our assets. I need to caution that other countries are not doing the same. UAE does not even allow you access to the oil wells talk less of selling them. And of course, in a country like Saudi Arabia, their budget each year is run by investments from their oil revenue. While other countries are investing and with all the investments we have, I am sure we will not be fair to the next generation. So, if we must sell, we have to sell the non-performing assets so that people can turn them around and create employment. We need to amend Section 162 especially from 3,4,5,6 where each money in the federation account is enjoined to be shared among the other levels of government.”
Other senators who kicked against calls for the sale of the nation’s assets were Senators Ovie Omo-Agege (Delta Central), Andy Uba (Anambra South) and Adamu Abdullahi (Nasarawa West).
Omo-Agege described the call as misplaced, arguing that if selling assets would offer solution to the recession, what would the nation sell if it found itself in another recession in future? His position was backed by Uba.
But Adamu, without mincing words, said: “I will not join the team of leaders who call for the sale of our assets to solve national problems.”
However, Solomon Adeola (Lagos West) supported the sale of some of the nation’s assets with the intention to raise funds especially those that have become moribund such as refineries which he said usually consume resources of the country.
NEC Okays Sale of Assets
But while the debate on the matter was still generating controversies across the polity, some Nigerians were shocked on Thursday when the National Economic Council (NEC) presided over by Vice-President Yemi Osinbajo rose from a meeting in Abuja and threw its weight behind the sale.
The NEC said the endorsement was predicated on the recommendations of the Minister of Budget and National Planning, Udoma Udo Udoma, at the meeting.
The disclosure was made by the Senior Special Assistant to the Vice-President on Media and Publicity, Laolu Akande, in a statement on Thursday.
He said: “The President’s Economic Management Team is working on plans to generate immediate larger injection of funds into the economy through assets sale, advance payment of licences renewal, infrastructural concession, use of recovered funds et cetera to reduce funding gaps and implementation of fiscal stimulus/budget priorities.”
How US Managed Depression of 1929
The United States of America went through a bad experience eight decades ago when its economic recession snowballed into depression, popularly known as the Great Depression of 1929, without selling its assets. Instead, the US created institutions to manage the crisis.
The depression was so acute that it spread into other parts of the world and lasted for 10 years. But the US exited the depression within three years while it still continued to ravage other parts of the world.
It began on a “Black Thursday,” October 24, 1929 when 12.9 million shares of stocks were sold in one day. This figure tripled the usual figure being sold in the stock market at the time and thus resulted in the fall of the prices of stocks by 23 per cent.
The aftermath of the stock market crash of 1929 was the rise in unemployment rate from 3 per cent to 25 per cent. It also led to the crash of wages for workers by 42 per cent while the gross domestic product (GDP) reduced from $103 billion to $55 billion. Manufacturing industries were also dying as there was no money to purchase goods, resulting in a fall of prices of commodities by 10 per cent every year. The US government had to adopt what was known as Smoot-Hawley tariffs to protect domestic industries and jobs while the general effect was the decline in world trade by 65 per cent.
The agricultural sector was also hard hit by the depression as many farmers lost their farms while several US citizens became homeless and living in shanties. The depression was actually caused by the decision of the US Federal Reserve, an equivalent of Nigeria’s CBN, to introduce “tight monetary policies.”
The trouble began after the Federal Reserve continued to raise funds in the spring of 1928 in the stock market, leading to recession after the stock market crashed. This turned investors’ attention to the currency markets at the time that “dollars were backed by gold held by the US government,” while speculators began to sell dollars to secure gold in September 1931 which caused the dollar scarcity.
The situation compelled the Federal Reserve to raise interest rates in order to preserve the value of the dollar without increasing money supply to control inflation, a move which further led to scarcity of funds to run businesses. This led to the collapse of more industries.
The situation forced investors to withdraw their dollars from banks, resulting in the collapse of many banks and following the indifference of the government to the plights of banks, depositors lost confidence in the banks, withdrew their funds and kept them at home.
But hope was restored in 1932 when Franklin Roosevelt was newly elected as the US President. He came up with a number of initiatives which included the creation of 42 new agencies with the mandate to create jobs, provide the platform for unionism and unemployment insurance – social security. Some of the agencies created were the Securities and Exchange Commission (SEC), the Federal Deposit Insurance Corporation (FDIC) which helped to protect the economy and stabilised the economy.