Experts raise concerns over FG’s plan to fund deficit from privatization
Zainab Ahmed, Nigeria's Finance Minister

BY EMEKA EJERE

The decision by the Federal Government to partly fund the 2023 budget deficit of N10.7tn from proceeds of planned sale or concession of some national assets is eliciting concerns among economic experts, with viability or otherwise of the policy step taking the centre stage.

President Muhammadu Buhari had early this month laid the 2023 Appropriation Bill tagged, ‘Budget of Fiscal Sustainability and Transition.’ before a joint session of the National Assembly.

According to the proposal, the N20.51tn budget will be based on the key assumptions of oil benchmark estimated at $70 per barrel, oil production benchmark of 1.69 million barrels, exchange rate of N435.57 to $1, while inflation is expected to grow at 17.16 percent with GDP growth rate projected at 3.75 percent.

In his presentation, Buhari had said, “We expect total fiscal operations of the Federal Government to result in a deficit of N10.78tn. This represents 4.78 percent of estimated GDP, above the three percent threshold set by the Fiscal Responsibility Act 2007. As envisaged by the law, we need to exceed this threshold considering the need to continue to tackle the existential security challenges facing the country.

“We plan to finance the deficit mainly by new borrowings totaling N8.80tn, N206.18bn from privatisation proceeds and N1.77tn drawdowns on bilateral/multilateral loans secured for specific development projects/programmes.”

On Wednesday, the Federal Government announced the emergence of preferred and reserve bidders for three out of four Airport and Cargo Terminals as approved for concession after the Request for Proposals (RFP), phase of the Nigeria Airports Concession Programme (NACP).

According to the Minister of Aviation, Hadi Sirika, the preferred bidder for the Nnamdi Azikiwe International Airport, Abuja, was Corporation America Airports Consortium, while ENL Consortium was selected as the reserve bidder for Abuja airport. TAV/NAHCO Project Planet Limited emerged as preferred bidder for Murtala Mohammed International Airports, Lagos, with Sifax/Changi Consortium as selected reserve bidder.

Sirika further disclosed that Corporation America Airports Consortium also emerged as the preferred bidder for Mallam Aminu Kano International Airport, Kano, noting that there was no reserve bidder for the airport. The Port-Harcourt International Airport did not, however, meet the RFP deadline of September 19, 2022. This, he said, was not the final stage for the NACP programme as negotiations and due diligence would be the next stage for the programme.

It is also in the public domain that government is considering selling or concessioning the Tafawa Balewa Square in Lagos as well as all the National Integrated Power Projects in Olorunsogo, Calabar II, Benin (located at Ihorbor), Omotosho II and Geregu II plant. It is also planning to sell or concession all the hydro power plants across the country, including Oyan, Lower Usuma, Katsina-Ala and Giri plants.

More than 25 of such projects will be turned into active assets that will be generating money in some ways to the Federal Government. Some of them will be offered to investors for equity while others will be totally sold to reduce waste.

The government is also said to be eyeing revenue from Calabar and Kano free zones as well as Abuja Water Board, Aluminium Smelter Company of Nigeria, National Film Corporation, National Theatre and Lagos International Trade Fair. It is also planning to relinquish the ownership of some of the basin authorities and hand them over to the private sector to manage.

Sources also said some of the government ministries such as the postal service will be concessioned or entirely sold to the private sector to enable them compete effectively with other privately- managed logistics firms.

It was also gathered that the Federal Government was seeking ways of enhancing the value of the Nigerian National Petroleum Company Limited by listing it in the stock market to raise capital as was the case with Saudi Aramco.

According to Buhari, the 2023 Appropriation Bill is aimed at maintaining fiscal viability and ensuring a smooth transition to the next administration. It is also designed to achieve the strategic objectives of the national development plan 2021 to 2025, including macro-economic stability; human development; food security; improved business environment; energy sufficiency; improving transport infrastructure, and promoting industrialisation focusing on small and medium-scale enterprises.

However, Nigeria’s oil production slumped to an all-time low, averaging 972,394 barrels per day in August 2022, according to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), an indication of a worsening revenue crisis.

Discordant tones

Speaking on the planned privatisation, Managing Director of Universal Insurance Plc, Mr. Ben Ujoatuonu stated that tackling deficit and debt with assets disposal is not the solution to the debt and deficit crisis plaguing the country.

Ujoatuonu said: “We are still suffering from the problem of even the privatisation and sale of assets that was done during Obasanjo regime and some other things. Of course you hear people still counting it as one of the pains of the PDP presidential candidate.

“And if you look at some of those infrastructures that were sold, the public is not getting the required divided. Even the fund realised from such sale, various agencies and government cannot account for it.

“Where is the justification that if these assets are sold and our common patrimony is given out to now use to fund deficit, it is going to impact the economy? What were the deficit used for?

“In the news today is that naira is overvalued and that naira should be revalued by 20 per cent. If it is done, it means that the official rate will be going at the range of about N550 to a dollar.

“So you should be expecting the parallel market to get to over N1000. So if you look at all of these, is it the solution to the economic problem? It is not.

‘‘Once these assets are sold, they are sold. These are short term measures approach to a long term problem. I don’t think it is the solution. Government should think; we need to block loopholes; we need to be creative. A lot of pressure is on naira because we are import dependent nation.

“We need to think of how to create productive lines that will cushion the effect and pressure on naira, so that naira will begin to regain itself in the FX market. Then our economy will begin to pick up, deficit will begin to go down. No matter what we do on this short measure on borrowing, we will continue to create hole that will be difficult to fill, I don’t think that is the solution.”

Also, a former President of the National Accountants of Nigeria, Dr Sam Nzekwe, expressed worries that these assets would likely be sold below market prices, with the government generating less than it should.

He said, “The problem there is that they sometimes sell these assets to their friends and families at giveaway prices. That is a major concern. When looking at some of the assets, why were these assets not working in the first place? They ran these assets down and the next thing is to sell them.”

Nzekwe added that it was not reasonable to use proceeds from asset sales to finance recurrent expenditure but capital expenditure.

“It is not a good thing, especially when the proceeds are used to finance recurrent expenditure but if they use it to finance capital expenditure, it is a different thing. So, we have to ask if they are using it to finance recurrent or capital expenditures,” he said.

Founder and Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE) Dr Muda Yusuf, observed privatising national assets is not new as the nation had done it in the past, though at different degrees of successes and failures

“There is logic behind that. An institute says the government has 50,000 properties that are abandoned and their estimate is around N9.5tn. So, I think it is a good idea to turn dead assets into assets that can yield value,” he said.

Speaking in a live interview 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.

Yusuf said: “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, 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.”

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