Projection
Experts prefer privatisation to borrowing
The Federal Government is projecting to earn N90.73 billion this year as proceeds from its on-going privatisation exercise, latest data released by the Federal Ministry of Finance,
Budget and National Planning, shows. However, the amount is N114.42 billion (55.8 per cent) less than the N205.15 billion that government projected to realise from privatisation proceeds in the 2021 budget, according to data released by the Minister of Finance,
Budget and National Planning, Mrs Zainab Ahmed, during the public presentation of the approved 2022 Budget held in Abuja, last Wednesday.
According to the minister, the N90.73 billion privatisation proceeds will be part of the funds that will be used to finance the projected N6.39 trillion deficit for this year’s N17.13 trllion budget.
She disclosed that the budget deficit would be financed mainly by borrowings from domestic sources (N2.57 trillion), foreign sources (N2.57 trillion) and multilateral/ bilateral loan drawdowns (N1.16 trillion).
The minister restated that “the debt level of the Federal Government is still within sustainable limits.”
However, with the nation’s total public debt rising to N38.005 trillion as of September 30, 2021, according to Debt Management Office (DMO)’s data and official numbers also showing that Nigeria spent N2.49 trillion on debt servicing payments in the first nine months of 2021, the consensus among financial experts seems to be that government should focus more on privatisation of its assets to finance its budgets.
Indeed, at a meeting with Senate Committee on Privatisation in October 2019, the Director- General of the Bureau of Public Enterprises (BPE), Alex Okoh, advised the Federal Government to consider the privatisation of FG-owned enterprises to fund the N10.33 trillion 2020 budget, that had a total deficit of N2.28 trillion.
Okoh decried a situation where state-owned enterprises gulped about $3 billion of scarce public funds, but contributed very little to government coffers.
According to him, there was no justification for the ritual of yearly budget deficit with local and external borrowings when there were national assets that could be converted into liquidasset for that purpose. He said: “It is not good to keep borrowing on a yearly basis to finance deficit budget when a lot of very valuable national assets are lying fallow and moribund.
“Proceeds from outright privatisation or concession of the moribund assets should serve as the best alternative in funding yearly budget deficits since the assets are more or less becoming national liabilities.”
Insisting that the nation has earned tremendous benefits from the privatisation of public assets, the BPE D-G specifically mentioned the National Theatre in Iganmu, Lagos, and the National Stadium in Surulere as some of the national assets that should have been given out to private investors. New Telegraph reports that in July last year,
Okoh disclosed that government had realised the sum of N1 trillion from the privatisation of 234 public enterprises in the last two decades.
The privatised enterprises, according to the BPE boss, cut across several sectors, including agriculture, banking and insurance, hospitality, industry and manufacturing, oil and gas, power, port, mines and steel, automobile, paper and packaging, as well as telecommunications.
He also released a list of entities that the BPE was planning to privatise. They include Afam Power Plant, Yola DisCo, Aluminium Smelter Company of Nigeria in Ikot-Abasi, Akwa Ibom State, Bank of Agriculture, as well as, the sale of Nigerian Minning Corporation’ Mineral House in Ikeja, Lagos.
Others, according to him, include Lagos International Trade Fair Complex, Tafawa Balewa Square, River Basin Development Authorities, as well as the reform of the housing sector under which the Federal Mortgage Bank of Nigeria would be restructured, recapitalised and commercialised.
However, in October, at the public hearing of a bill aimed at repealing the Public Enterprises Privatisation and Commercialization 1999 Act, organised by the House of Representatives, the BPE and the Nigerian Labour Congress (NLC) asked the National Assembly to be cautious in enacting laws that seek to privatise and concession more government assets.
Speaking on behalf of NLC, the President, Comrade Ayuba Wabba, said privatisation had led to loss of jobs. He said: “As I speak, all privatisation processes have led to job loss. The terminal benefits of the workers have not been paid. I have thousands of the power sector workers whose benefits have not been paid.
“They said investors are coming from other climes to invest in our power sector. What happened is that they went to the banks where we saved our money, withdrew the money and bought those assets and added no value. We don’t support the idea that privatisation is the only way and we will not support it. We agreed that there are things we can do.
“They will not privatise moribund assets; they look at the viable ones. The issue of NITEL, what they did was assets striping, including the Power Holding. The assets were first stripped and sold and no value has been added.
Check the steel rolling mills, which were privatised. The first thing they did was shut down the place and sell off the assets. I don’t think we should continue in this light. We must be able to say no.”
