• Tuesday, February 27, 2024
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MOFI restructuring as FGN asset manager seen delivering value

Four knotty issues around MOFI’s takeover of FG’s stakes in DisCo

Nigeria’s Ministry of Finance Incorporated (MOFI) said it is taking significant steps to ensure that FGN assets deliver full value to the country.

MOFI said in a three-page statement on Monday, January 15 that it would be restructured and repositioned as an active asset management corporation.

Nigeria has been upping its game in a bid to unlock the N180 trillion trapped in dead or idle government assets as a renewed hunt for cash heats up.

MOFI said it is also developing a strategy for creating a National Assets Register that aggregates and profiles all national assets and investments.

Over 70 entities have been captured in a national asset register that aims to identify the country’s vast and mostly idle assets, according to the Ministry of Finance Incorporated (MOFI), whose work it is to build the critical database that will help unlock badly needed cash for the government.

The current asset classifications are six and include Corporate Assets (including FGN’s shareholding across various entities), Concession Assets (including assets for which economic rights have been concessioned, but ownership remains with the FGN) and Energy and Extractives (including oil and gas, and solid mineral assets).

Ministry of Finance Incorporated said it would also develop and implement policies and regulations that ensure the creation and management of assets from debt-related transactions; develop and implement policies and regulations that ensure the creation and management of assets from concession-related transactions; and create a robust pipeline of FG-owned and FG-linked investment opportunities.

The Federal Government (FG) recently transferred its 40 percent shareholding in electricity distribution companies (DisCos) from the Bureau of Public Enterprises (BPE) to the Ministry of Finance (MOFI).

Wale Edun, Minister of Finance and Coordinating Minister of the Economy, recently issued an Order to the Board of Directors of MOFI to terminate the Power of Attorney (POA) granted by MOFI to the Bureau of Public Enterprises (BPE) in 2012.

The Directors of the Ministry of Finance Incorporated (MOFI) were, also by virtue of the same order, to assume ownership, control and management of all outstanding Federal Government of Nigeria (FGN) equity in all existing electricity successor companies.

The other asset classes are Fixed Assets (including real estate and other fixed assets), Financial Assets (including FGN receivables) and Intangible Assets (including rights of way, easements, patents, and trademarks).

Edun directed the board of directors of the MOFI to assume ownership, control, and management of all equity holding of the Federal Government of Nigeria in Nigeria’s 11 DisCos.

BPE had last December disclosed plans to sell off the remaining 40 percent shares of the federal government in the DisCos and four other assets in 2024. Other assets that will be sold off via public offerings at the capital market include Eleme Petrochemicals Company Limited, Nigeria Reinsurance, NICON Insurance, and Nigeria Machine Tools in Osogbo.

The Nigerian Electricity Regulatory Commission (NERC) had on January 8 put up for sale the Kaduna DisCo, the sixth largest power distribution utility over a $130 million debt, less than two years after the lenders who took over the company failed to turn it around and make it profitable.

The power distribution company owes N110 billion ($130 million) to companies including the Nigerian Bulk Electricity Trader and power generation firms.

The federal government, AMCON and some banks were forced to take over Kano Electricity Distribution Company, Ibadan Electricity Distribution Company, BEDC Electricity Plc, Kaduna Electric, and Port Harcourt Electricity Distribution Company at different points due to alleged poor performance and liquidity crisis

MOFI is a statutory corporation-sole established by the MOFI Act, 1959 (“the Act”). The legislative intendment of the MOFI Act was and remains that the corporation is constituted as the holder and manager of all assets acquired by way of debt or equity capital from the funds of the FGN.

Obviously, these assets include the investments in the defunct National Electric Power Authority; which, under the repealed Electric Power Sector Reform Act, 2005 (EPSRA), evolved into Power Holding Company of Nigeria Plc and subsequently unbundled into the various electricity “successor companies”, including the eleven distribution companies (Discos).

“Acting under the Public Enterprises (Privatisation and Commercialisation Act) (“the NCP Act”), 1999, the National Council on Privatisation (NCP), a body in which the Minister of Finance is a statutory member and Vice-Chairman, decided in 2011 that the privatisation of the electricity successor companies would be by the sale of shares.

“At the time, Nigerian company law did not provide for a single shareholder company hence it was legally impossible for MOFI to be the sole holder of the shareholding of the FGN. This made it necessary that a second entity hold the shares in addition to MOFI. In addition, BPE, as the secretariat of the NCP, was the statutory entity tasked to provide support to MOFI in giving effect to the NCP’s decision.

Thus, in 2012, MOFI issued a Power of Attorney to the Bureau of Public Enterprises (“BPE”) whereby BPE was empowered to carry out the actions necessary to fulfil the NCP’s directives and complete the various electricity privatisation (share sale) transactions.

“BPE had since then held shares in the Discos on behalf of MOFI. This continued for over 10 years after the sales were completed in 2013, until the recent Order by the Honourable Minister of Finance.

“In the past 24 months, and particularly since the amendment of the MOFI Act by the Finance Act, 2023, MOFI has been reformed and restructured from a Unit in the Office of the Accountant-General to a full-fledged public sector (FGN) asset management corporation.

“This arose from the recognition that FGN assets across practically all economic sectors nominally valued at very significant sums were largely moribund or grossly underutilized and poorly managed. Consequently, it was determined in 2021 by the then Minister of Finance, amongst other relevant decisions, that MOFI would adopt a new, value-driven strategic direction in aggregating and managing FGN assets”, MOFI said in the statement.

“It was further determined that in line with global best practice, MOFI would take on an expanded and more active role, not to directly take over and run the corporate entities created around these FG assets but rather to work with its co-promoters and co-shareholders to develop and implement corporate policies and practices that ensure that these assets are operated for maximum value. This revitalised strategy is underpinned by a three-point agenda of establishing and confirming state ownership, professionalising state ownership and strategic resource mobilisation and investment.

“The process of reform and restructuring leads to the consolidation and assumption of the ownership rights of MOFI’s shareholdings across various asset classes. This strengthens the FG’s shareholder rights and ensures that entities in which MOFI holds equity stakes fulfil their socio-economic responsibilities and generate substantial financial returns for the FGN.

“MOFI’s resumption of its rights of management of the FG’s 40 percent shareholding in the eleven electricity distribution companies and the various equity stakes in related energy sector companies is an essential element of this consolidation. It will drive operating efficiency, best corporate governance practices and ultimately maximise the value derived from these electricity assets, in alignment with President Bola Ahmed Tinubu’s economic growth agenda,” MOFI further said.

“MOFI extends its gratitude to the BPE for its stewardship of these shares. As a reformed and active entity, MOFI is taking significant steps to ensure that these assets deliver full value to the country. We look forward to collaborating with our key stakeholders and, through our concerted efforts, making a tangible impact in contributing to a thriving, resilient and growing Nigeria,” the statement reads.