So you want to sell the golden goose. And tomorrow?

By Rafiq Raji, PhD

It is all coming together now. The Nigerian president, Muhammadu Buhari, wants emergency economic powers. His officials have advised him to sell some national assets to raise cash for stimulating the economy. Assets sale, they call it. We Nigerians are a creative lot. Privatization it used to be called once. But then that involves a myriad of longwinding processes, approvals, due-diligence, and so on. A lot of hassle for a government eager to lift the economy out of an ongoing recession. Laws are crafted precisely for a situation like this. With emergency powers, President Buhari would not need anyone’s approval to sell any national asset to anyone. He would have the unprecedented powers to choose the assets to sell and to whom. It is a recipe for increased disaffection. My view.

Make ‘State of the Nation’ address compulsory
The legislature plans to ask Mr Buhari to address a joint session of the National Assembly, albeit principally to present his views on the economy. This is a welcome idea. But it should not be adhoc. Most countries have an annual address by their head of state, to their legislature or citizens. Reading the budget does not suffice as one – finance ministers do that in better climes. Actually, I think there is an opportunity here. We should have an annual ‘State of the Nation’ address by the president. It should be made a matter of law, a way to hold any sitting president accountable. And put pressure on the office-holder to perform: it is not likely an incumbent would like to address the legislature year in year out without anything tangible to show for his stewardship.

Call it privatization. And follow the law
It is believed a prominent businessman first mooted the idea of selling some national assets to fund the government’s budget. Central bank governor, Godwin Emefiele, makes the case recently that he suggested it much earlier – last year; and back then, such a sale would have garnered better valuations than they would currently. A leader in the Nigerian legislature either read the mind of the leading mogul or was privy to his thinking. For he all but read out what he suggested. $15 billion is the amount on everyone’s lips. They all probably mean well. But if you thought they were also being self-interested, you wouldn’t be blamed. I’ll elect to think their views are well-intentioned. Truth is, what is being proposed is essentially a privatization of some majority- or minority-owned government assets and entities. But the government already has a process for that. A National Council of Privatisation (NCP) needs to be constituted. Only issue might be that an NCP, statutorily led by the vice-president, might make the incumbent, Yemi Osinbajo, all too powerful for the liking of Mr Buhari’s inner circle. Otherwise, all that is being proposed potentially falls under the purview of the NCP. And there is a reason the system was designed thus: to prevent the abuse of power.

Liquidity might be a problem. Lever assets instead
There seems to be a consensus in any case: if you must sell assets, sell only the non-performing ones. Incidentally, the non-performing assets are mostly illiquid. They cannot be sold easily and readily. So if the issue is speed, asset sales would not cut it. At least the type that does not amount to pilfering our commonwealth. We often talk about how we saved little during the boom years. And yet, coveted government stakes in the Nigeria LNG Limited, a liquefied natural gas producer, and Africa Finance Corporation, a development financier, have turned out to be quite fortuitous. It is almost a miracle that these investments were ever made during those heady years. These crown jewels must not be sold. Not at this time, at least. More optimal would be to leverage the other so-called non-performing but still quite valuable assets: use them to borrow. Don’t forget that even potential buyers would borrow to fund their purchases. So why not the government be the entity that does the borrowing using assets it already owns. An argument has been made about higher debt service costs consequently. It is weak. If the objective is to get out of the current economic slump at the earliest possible time – optimists reckon a recovery could be palpable by the fourth quarter of this year, higher debt service costs in two years or so, when the economy would hopefully have revved up, would matter little. In any case, there is always the IMF – it agreed to lend $12 billion to Egypt last month. It is no longer the villain we are quick to label it. We should not be afraid to seek the fund’s help. It is now more flexible. Its conditions are not as stringent. And the fund’s endorsement is increasingly de rigueur for raising capital in global financial markets, whose participants now worry that African countries are backtracking.

Policy consistency is what inspires confidence
All these troubles have a source. Confidence. The lack of it. It would take a while for international investors to believe the government would stay the reformist course it has embarked on. I won’t harp on the authorities’ past mistakes, amply discussed in earlier columns anyway. And some were really just honest mis-steps. Even so, some of them are being repeated. For instance, finance minister Kemi Adeosun probably meant well when she advised the central bank to cut interest rates recently. But she didn’t need to say so publicly. An investor might think: was the phone faulty? Thankfully, the bank chose to look at the facts and decided to take the efficient path, as it saw it. A central bank that articulated a tightening stance only just recently after acknowledging an earlier easing move was ineffective was not now expected to reverse course only too soon. At least, not a central bank that knows what it is doing. In any case, a policy rate is a guide. It is not a directive. If policy is not reflective of the prevailing economic realities – and consistent, it would simply be ignored.

Also published in my BusinessDay Nigeria newspaper back-page column (Tuesdays). See link viz. http://www.businessdayonline.com/en/so-you-want-to-sell-the-golden-goose-and-tomorrow/

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