RECESSION AND THE SALE OF NATIONAL OIL ASSETS

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oil-and-gasDetermined to bring the economic decline facing the country to an end, the Federal Government has announced plans to sell off some strategic national assets, in particular the Nigeria Liquefied Natural Gas (NLNG) Limited, in order to raise cash and shore up its reserves. After contracting for two consecutive quarters, the Nigerian economy went into recession in the second quarter of the year, making it difficult for the federal government to fund the 2016 budget.

 

The proposed sale of national assets enjoys the support of the government, private capitalists and public officials including the Central Bank Governor, state governors, and the National Economic Council. On the other hand, a wide spectrum of Nigerians is vehemently opposing the sale. SPACES FOR CHANGE moderated an online conversation in its 11,800-member Discussion Forum on September 23, 2016, on the sale of national assets.  The excerpts below present an array of polarised viewpoints regarding the propriety, or otherwise, of the proposed anti-recession measure.

 

Temitope Adeyinka: I don’t see the point in selling government shares in the NLNG. I will consider it a core asset. People usually sell non-core or problematic assets. The company is run relatively well by the private shareholders and probably with minimal government interference. They already pay huge tax as well as dividends to government. They don’t require any annual outlay of capital from government, no cash call problems. Even if you want to sell a solid asset like that, this is not the best time. Gas prices are significantly depressed globally, so you will only get a fraction of its true value if you sell now.

 

Some of the other oil assets especially the Joint Ventures (JV) could be sold. The current JV models are not the best. Government hardly pays the JV cash calls. Government bureaucracy delays a lot of operations because they’re JV partners. If they sell all the JV interests, government can focus on regulation and collecting royalties and taxes more effectively. The private operators can run them better with less government interference/encumbrance and perhaps they can generate revenue better and faster. Same goes for some of the other assets like airports. Government is not managing them well and should sell to those who will manage them well and focus on collecting taxes.

 

Chiagozie Michael Nwabuko: The proposition is undesirable in Nigeria as experimentation with the privatisation of the power sector failed. Nigeria is being turned into a fascist hub. The immediate solution to the economic crunch is to cut down the cost of governance, particularly overheads. In the long run, we need to restructure the country in order to allow states or regions have greater financial autonomy. Auctioning national assets to escape recession is a fickle attempt to solve deeply-rooted challenges.

 

Chinomnso Awazie: Out of the 11 subsidiaries of Nigerian National Petroleum Corporation,( NNPC), NLNG is one of the few bringing in profits. If Nigeria sells NLNG, it will backfire! Is anyone under the illusion that there would be inaccurate remittance of royalties, taxes and all? Whoever buys that company will lay off certain staff, translating to massive job losses.  Consider the socioeconomic impact of such an action.
Even the refineries which have been down for months, I’m still opposed to their sale for humanity reasons. Economically, it makes sense to sell them, but when you consider that the government is not just about government purse, but also the citizens of the state, you will realize what a mistake it can be to push almost 5,000 workers in the top 1% of Nigeria’s labor market into the unemployment drum. Again, the ripple effects are dire.

 

Also, it is important to recall that when former president Obasanjo tried selling those assets, the host communities resisted their sale. With the President Buhari’s unpopularity in the South-South region, what do you think will happen if he attempts to sell those oil facilities? Mind you, the people of the region have an emotional example of their experience with the sale of Eleme Petro-Chemical Company Limited (EPCL) to Indorama to remind them of what will happen should the proposed sale go on as planned.

 

Cutting down the cost of running the National Assembly by at least 90%, is a better way of saving money.

 

Charlie Eassy: It will depend on the assets. If it’s our oil assets, I don’t think they should be sold. But, if we are talking about assets that are not properly managed or don’t contribute much to our revenue, we can dispose of such assets. For example, our airports, Lagos, Abuja, Kano and Port-Harcourt should be given to the private sector operators to manage in the form of a concession. Something similar can be done to our refineries. I do not think that government should sell assets that are commercially viable.

 

Chika Onuegbu  shared a PRESS RELEASE dated 22/09/2016 of the Trade Union Congress of Nigeria (TUC) tagged – ‘WE SAY NO TO SALE OF NATIONAL ASSETS’, which warns…

… those calling for the sale of national shareholdings in Nigeria Liquefied Natural Gas Company Ltd. (NLNG) and concession of the country’s airports to drop the idea if they do not want to incur the wrath of workers. Those suggestions are disgraceful and portray them as enemies of the state. These two sectors drive economies all over the world except in our dear country. Aviation is Ethiopia’s cash cow. Likewise so in countries blessed with oil and gas. Nigerian Textile Mill (NTM), Nigerian News Print, Oko Buku, Daily Times Newspaper, Aluminium Smelter Company of Nigeria Ltd., Ikot Abasi, etc. were sold, yet they have not been functioning well till date. We expect the advocates of sale of our other assets to know better. In addition, these are critical assets which expectedly should be bequeathed to generations unborn. It is our thinking that if those clamouring for the sales pay their appropriate taxes there would be enough money to bring the country out of the woods without sacrificing our national assets. The Congress will mobilise and resist any further sale or concession of our national assets under whatever guise. Signed by Comrade Bobboi Bala Kaigama (President), and Comrade (Barr.) Simeso Amachree (Ag. Secretary General).

 

Yahdi Alayah: Selling the national assets is not entirely a bad idea. My only worry is that nepotism would again assert itself in sales. If we can get firm with required expertise and with proven record in managing such facility, it might be appropriate to sell 40% of its worth, 20% retained by the government and the rest shared amongst Niger Deltans. I have nothing against capitalists like Dangote and other northern business moguls buying off the assets, but for security reasons, it will be an irreparable mistake should they be the ones to buy them. I am talking specifically about the NLNG plant. The same method of giving 40% debenture to capable indigenes of the area where an asset to be sold is sited should be applied. Most important for me is ensuring efficient management that would optimize each asset’s benefits.

 

Kalu Aja Yes, the assets can and should be sold to raise hard cash. Public-Private-Partnerships (PPPs) do not raise significant amount of hard cash in volume at once. We were offered $60billion cash by the Chinese for some oil blocks and we rejected it. This was a mistake. We should in my opinion sell 50% of our stake in the JVs, sell a further 25% of stake in NLNG which will further remove these institutions from the hands of government; then we should tax them. Transparency process is another matter altogether. I want it sold to all Nigerians and proceeds paid using bank verification number (BVN) accounts. A ban on transfer of shares should be imposed for 10 years; and also ban ownership of more than a certain number of shares.

 

Chinedu Chiefsan Asset sales, designed to increase dollar liquidity, shore up the country’s reserves and more importantly, translate to better management of these assets, should be a welcome development. But it must be at the right price with a transparent bidding process. We need to move away from a public sector-driven economy to one driven by exports, consumer spending and corporate investment – the private sector.

 

Victoria Ibezim-Ohaeri outlined a number of questions for deliberation regarding the sale of assets –

  1. How can transparency and accountability be ensured during the sale of national assets?
  2. Are there pre-existing mechanisms for ensuring that the assets are sold at appropriate prices or at a fair value determined on a basis of robust evaluations?
  3. Who will appoint the party to conduct asset evaluations – independent actors or the buyers themselves?
  4. What measures are in place to ensure that buyers have both the technical, operational and financial capability to manage the assets sold?
  5. Who are the independent and observer groups that will monitor the bidding process and sales for probity?
  6. Are there no lessons to learn from the power sector privatization and all other privatization exercises witnessed in the past?
  7. Without any form of consultation or engagement with Nigerian citizens, can the Federal and State governments in cohort with capitalists sell off these national assets?
  8. What options lie to the people when elected representatives act against the collective interest of the electorate?

 

 

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