Nigeria must sell stakes in state-owned assets – Senate President 

Senate President Bukola Saraki says Nigeria has no choice but to sell shares in state-owned assets, including joint ventures with oil groups, to raise capital and avoid a prolonged fiscal crisis.
“We are in an economic emergency … and our options are limited,” Bukola Saraki, Senate president and Nigeria’s third-most senior politician, said in an interview on Monday. Funds were badly needed to implement the $30.6bn budget for 2016, Nigeria’s largest ever, and for planned heavy spending on infrastructure projects aimed at reviving the economy.
But none of the external borrowing options the government has been pursuing all year — loan talks with the World Bank and African Development Bank and possibly tapping the Eurobond, Chinese, or Japanese bond markets — had “come through”, he said. Asset sales could help avoid a worst-case scenario of entering an International Monetary Fund programme, he added.
“The singular strategy we are using of borrowing obviously is not working,” he said, adding that the authorities needed to “look for alternative ways” to plug a deficit of more than $11bn.
Low oil prices have exposed the fragility of an economy that gains 90 per cent of its export earnings from crude. A resurgence of militancy in the Niger Delta, the country’s main oil-producing region, has made matters worse and the country officially entered recession last month after two quarters of negative growth. Inflation is above 17 per cent and the value of the naira has plummeted.
Meanwhile, portfolio investment declined 84 per cent in the second quarter of the year compared with the same period in 2015, according to the national statistics office. Foreign direct investment fell to $184m in the second quarter, compared with $211m in the second quarter of 2015.
President Muhammadu Buhari was elected on a wave of optimism last year but his administration now faces criticism for worsening the crisis with a slow and inadequate policy response.
Foreign reserves this month dropped to below $25bn, less than five months’ import cover, from above $40bn before the oil price crash, and Mr Saraki said the real figure was closer to $20bn.
“Where we are today, we need to leverage capital,” he said, arguing that leasing concessions to run airports and other state-owned transport infrastructure was also needed and that the government should “look at the issue of privatisation”.
Saudi Arabia and Brazil recently turned to asset sales to make up for lost crude revenues, said Ayo Teriba, a Lagos-based economist. “The quickest way to attract foreign investment is to sell what you already have,” he said, adding that he had advised the Nigerian cabinet to pursue this strategy at an economic summit in Abuja last week.
Udoma Udo Udoma, Nigeria’s budget minister, said on Monday that the government was planning an “immediate large injection of funds” that would be financed through asset sales and infrastructure concessions, suggesting it has begun seeking alternatives to borrowing of the type favoured by Saraki.
Buhari, a former military leader in the 1980s and one-time state governor, has said he opposes selling national assets, such as its four rundown refineries, until they are fully functioning.
Saraki is a member of Buhari’s All Progressives Congress party but the two have fallen out. The Buhari administration is pressing corruption-related charges against Saraki, which the Senate president denies.
Saraki acknowledged that even partial privatisation was a sensitive issue but said he did not see other ways to boost foreign reserves and “open the economy” back up to fleeing foreign investors.
Selling down equity in Nigeria’s joint ventures with oil companies should also be considered, he said: “If you go down from a 60 to 55 per cent [stake], you are still pretty much in control but raising capital.”
Giving partners such as Shell and ExxonMobil a “larger say” would make the companies more efficient, he said. International oil companies say they are owed billions by the state-run Nigerian National Petroleum Corporation.

Sales of stakes in the joint ventures would be unlikely without reform of governance in the oil sector and successive parliaments have failed to pass such legislation since 2008.

Saraki said the fate of government efforts to resolve the militancy in the Delta, which at its peak this year cut production to near 30-year lows. would affect whether parliament’s discussions moved forward this year.
“We really need the private sector to come in,” he said, adding that for now, the belief among investors that the exchange rate was still being managed by the central bank was keeping capital out.
“When we are being seen to do the right thing I think confidence will pick up,” he said.

 

FT