BY EMEKA EJERE
There is growing divergence in views as Nigerians debate on how best the federal government can finance the funding gap in the 2021 budget, without creating more economic problems than it plans to address.
President Muhammadu Buhari had late last year signed the 2021 budget of N13.5trn into law, with projected revenue of N7.89 trillion and a plan to fund the N5.39 trillion deficit through borrowing and privatisation proceeds.
“The deficit will be financed mainly by new borrowings totaling N4.28 trillion, N205.15 billion from Privatization Proceeds and N709.69 billion in draw-downs on multilateral and bilateral loans secured for specific projects and programmes,” Buhari had told a joint session of the National Assembly.
However, this has continued to elicit controversies among economic experts and Nigerians from all walks of life. While those who support selling some national assets to fund the budget deficit see it as giving out assets that are wasting away or assets that government can no longer manage well to people in the private sector who can put them into more economic use, those against privatisation fear that the process will be vulnerable to corruption and mismanagement.
On the other hand, while those in support of borrowing caution against spending the borrowed funds on recurrent expenditure, advising that government should ensure that the funds borrowed to finance the deficit were tied to key projects, those against it believe that debt service obligation is already too heavy for the nation’s economy to carry.
Making a case for privatisation, the Director-General, Lagos Chamber of Commerce and Industry, Dr. Muda Yusuf, observed that the process is not new as the nation had done it in the past, though at different degrees of successes and failures
Speaking on ‘Early Rush Show’, a live breakfast programme of STAR FM monitored by our correspondent, Yusuf described privatisation as a way of putting valuable public assets which are wasting away into better economic use by handing them over to the private sector either by concession or outright sale, pointing out that N205 billion out of a budget of N13 trillion is just about 1.5 percent.
“Sale of assets is not new. It’s something we’ve done in the past – some we got right, some we didn’t quite get right. When you privatize, there’re some revenue that come in. You can privatize either by outright sale or by concession.
“All of these are ways of giving out assets that are wasting away or assets that you can no longer manage well as government to somebody who can put them into more economic use.
“Take for instance, things like the former Federal Secretariat in Ikoyi, which has been rotting away now for about 5 years or more. Go there now you see miscreants and all of that. Go to former National Assembly Complex, and former Defence Building. These are valuable assets sitting on premium land. They’re wasting away.
“Rather than allow them to be rotting away, there is nothing wrong if you either partner with the private sector to manage it and make better use of it, make better accommodation, employ people and all of that or you sell it outright.
“So the component of privatization in the budget is N205 billion. N205 billion out of a budget of N13 trillion is just about 1.5 percent. So, when you talk as if government is broke and the only thing to fund the budget with is selling of assets; that may give a wrong impression. So that is what is in the budget,”
On the issue of unclaimed dividends, the DG called for more sensitization and simplification of the process to encourage the owners of the funds to come forward.
He said, “I don’t think it’s appropriate. You don’t take funds that belong to people. I think what they (government) need to do is to ensure more sensitization to encourage people who have some of those funds to come forward.
“Because some of them are still around but because of the processes or their parents have died or something, they just forget it. You can simplify the process to encourage the owners of this money to come and collect their money or their children or their relations as the case may be.”
Similarly, the member representing Oriade/Obokun in Osun State, Honourable Wole Oke, defended the federal government’s plan to sell some national assets to fund the 2021 budget deficit, arguing that it is not a new development.
Speaking on Channels Television’s ‘Politics Today’, the lawmaker said “The issue of the sale of assets is not new. Even in the previous budgets, there have always been other sources of revenue and the sale of assets is one of such.”
He argued that some of the national assets that are being planned for sale to fund the budget are already liabilities, noting that it is better for these assets to be run by private individuals instead of the government.
“But the critical issue we need to look at is: ‘What assets are we selling?’ Some assets are already liabilities, so what are we keeping them for? That is my humble opinion.”
While buttressing his point, he said a look at the various sectors of the Nigerian economy indicates that the government cannot run businesses effectively.
“Which business has the government ran and ran it very well?” he asked, stating that national assets that are idle need to be deployed productively by the Federal Government.
He said that apart from the government being a bad business manager, Section 16 of the Nigerian constitution backs the Federal Government to deploy national assets when they are not performing well.
Meanwhile, the Socio-Economic Rights and Accountability Project (SERAP), has asked the National Assembly to stop President Buhari from selling government properties to fund the 2021 budget.
SERAP, through a statement issued on Sunday by its deputy director, Kolawole Oluwadare, appealed to the Senate President, Ahmad Lawan, and the Speaker of House of Representatives, Femi Gbajabiamila to bar the President from carrying out such moves via a letter addressed on January 16.
“The National Assembly has a constitutional and oversight responsibility to protect valuable public properties and to ensure responsible budget spending. Allowing the government to sell public properties and to enjoy almost absolute discretion to borrow to fund the 2021 budget would amount to a fundamental breach of constitutional and fiduciary duties,” SERAP stated.
While cautioning that selling valuable public properties to fund the 2021 budget would be counter-productive, the Group said “this would be vulnerable to corruption and mismanagement. It would undermine the social contract with Nigerians, leave the government worse off, and hurt the country in the long run. It is neither necessary nor in the public interest.”
A public affairs commentator, Barr. Tunji Abdulaammed, says there is no law that prevents government from selling assets that belong to it as long as it follows procedures laid down by the law.
“I am not aware of any law which prevents the federal government from selling its assets”, Abdullammed said in another interview monitored by Business Hallmark
“What I’m aware of is the law which provides the guidelines, the procedure to be followed in doing that. In as much as it is confirmed that the asset belongs to the government, just like an individual, government has the right to sell its assets at will.
“However, it must be transparent; it must be in line with the procedures laid down by the law. Those are the only restrictions I know.”
The issue of borrowing has not been any less controversial. Commenting on the issue, the immediate past President, Abuja Chamber of Commerce and Industry,(ACCI), Adetokunbo Kayode, said government should ensure that the funds borrowed to finance the deficit were tied to key projects.
He said, “It makes a lot of sense to tie the debt components to specific deliverables because you can’t leave it floating. The capital and recurrent parity is really a big challenge for government.
“This is because government is still struggling with keeping the percentage for capital projects at a level that is progressive. The budget for capital projects should not be less than 60 or 65 per cent.”
Kayode, a former minister of Defence, stated that recurrent budget has been up for some time and that had remained a big challenge in Nigeria.
He said, “So I would think that it is better if government ties that portion of budget deficit that will be funded through loans to productive aspects such as infrastructure development.
“They should be specific about where the money will be spent on, rather than throwing it open, otherwise a majority of that fund will go for recurrent.”
However, the Lagos Chamber of Commerce and Industry DG had last week expressed worries over what he described as growing fiscal deficit and the corresponding growth in the debt service commitment, which he said raises “serious sustainability concerns.”.
In an interview with another daily Yusuf had said, “We are currently dealing with a scenario where the combination of recurrent (non-debt) and debt service budget are in excess of government revenues.
“This implies that our capital projects will be funded entirely from borrowing. Total projected revenue is N7.89tn; recurrent expenditure is N5.93tn; debt service is N3.12tn.
“Therefore, the combination of recurrent expenditure and debt service cannot be covered by revenue. And most often, actual revenues are less than budgeted revenues. And debt service is first line charge.”