As regards my short article on selling the NNPC and the NLNG. It’s important I clarify my position so it’s clear.
I do not support the selling of any State Owned Enterprise (SoE) to raise cash for the Government to execute projects or close the deficit…NO I don’t.
I believe this and any administration armed with the power of fiscal means and legislative action can attract $billion without any asset sale, for instance, a diaspora bond, that pay just 3%, targeted to the Nigerian community alone can raise $10b… (I have written earlier how this is possible)
What I do support is a sale of the SoE to the private sector so that the role of government in the business is diminished and the productivity of the enterprises raised.
The Government of Nigeria has proved incapable of managing any enterprise it has appropriated, I am not being generalist, I am being literal. There is no federation asset, or corporation that is making a return to equity to the Federation in relation to its capital employed, or implied monopoly…. NONE!
NITEL with a monopoly for five decades could only provide 450,000 subscriber lines for a population of 120 million Nigerians. With GSM run by the private sector, Nigeria has 149m subscribers as at June 2016…
Eleme Petrochemical plant was almost moribund and then sold to Indorama in 2006 for $300m. Indorama has invested $3.5b into Nigeria since then, is investing an extra $1b to build a new methanol factory, and has returned N11b in taxes and N23B in Dividends as at 2011 ….
So it makes business sense to sell the assets because the Federation cannot manage them or has managed them suboptimal. This is without question. A second round of privatization will attract Foreign Direct Investment FDI and Foreign Portfolio Investment FPI to Nigeria, attract new industrial technology as well as acting as a stimulus to the economy.
Holistically Lets take NNPC, today it generates ZERO income to the Federation. If NNPC is sold 100% to the Joint Venture partners, the Nigerian federation losses operational ownership of the crude oil and NNPC but it removes the need to fund JV cash calls, maintain pipelines even fight corruption in NNPC.
NNPC will now be managed according to world class standards, production efficient will go up, investment to develop oil fields will pour in, and the output of the Nigerian oil fields will go up…thus our tax revenues will go up. This can be replicated wherever the Federation holds assets.
However, there are risks…
This administration has not shown sufficient prudence in managing forex cash, it has given subsidized dollars to religious folks and NLNG funded bailouts to state governors….
The Federation not the FGN owns the assets, thus if we sell NNPC for say $100b, $52b will go to State Governors…yes to people like Rochas Okorocha in Imo and Yahaya Bello in Kogi. Rochas may use his share to build an Easter Grotto….
If the FGN gets $48b in raw cash, what will it do with it? Buy new Private Jets for the Presidential Air fleet? Since June 2015? what capital project have been done? What social program has been started? Free meals? There is $2b in the ECA, yet children die of hunger in IDP camps
So let’s assume the very worst happens, we sell all our assets and the cash is wasted importing grass, then what?
That’s simply the equivalent of losing the $300m Indorama paid for Eleme petrochemical and getting nearly $4b in new investment…..
We will have these SoE in the control of the private sector that can than create new streams of future tax revenues.
In summary, the goal of a sale of SoE must not be to raise capital but to unleash the competitive power of the private sector to manage critical sectors of the Nigerian economy for greater good of Nigerians.
Its our problem, we can fix it
(Image credit VeraCity AMG)