95 Views

Will Nigeria be left to repent at leisure if national assets are sold due to recession? – Oluseun Onigbinde

The recession in Nigeria, announced in July by finance minister Kemi Adeosun and confirmed when the National Bureau of Statistics subsequently published figures showing a 2.06% dip in economic growth, is indicative of the country’s vulnerability to the vagaries of oil.

When oil prices started to tumble in mid-2014, the government – its sights set on the following year’s elections – did not take steps to mitigate the economic impact. By early 2015, Brent crude oil was trading at $53 (£41) a barrel and growth was slipping fast.

The situation was compounded when Muhammadu Buhari, who won the presidential race after campaigning on the delivery of a robust economy, failed to act with the required speed. The early stages of his administration were fraught with delay in appointing ministers, stagnating public contracts and an inconsistent approach to the exchange rate that worsened the crisis, tipping the economy into recession.

The Nigerian government has sought solutions, but the recession has been further compounded by rising inflation that hit 17.6% in August. The inflationary spiral was triggered by the high cost of energy prices following the removal of state subsidies, combined with an alarmingly swift depreciation in local currency. Nigeria’s currency has lost 114% of its value in a year and there are signs that this trend might continue, raising local prices in a nation dependent on imports.

The government is considering raising $1bn in the eurobond market. However, the challenge lies in the cost of borrowing after ratings agency Standard & Poor’sdowngraded Nigeria’s credit rating from B+ to B, five steps below investment grade.

Another possibility being mooted by the government, as it looks to shore up itsforeign reserves to $24.7bn and boost foreign exchange liquidity to forestall the depreciation of the naira, is the sale of its national assets. The Nigerian industrialist Aliko Dangote, Africa’s richest man, recently proffered this solution, and the senate president, governors and central bank have all indicated agreement. The tone taken by the government is that state assets – including government shares in oil joint ventures, the Africa Finance Corporation, the Nigerian Liquefied Natural Gas Company and major airports – will be sold to shore up its foreign exchange base.

Nigeria has benefited from the good fortune of NLNG, the largest tax-paying entity in west Africa, which has turned over $33bn to the government in the past 16 years. However, the country has persistently underfunded its share in joint ventures with international oil companies. As of May 2016, the annual funding gap stood at roughly $4.28bn. While the sale of Nigeria’s share in the joint ventures is a positive step, there has to be deeper interrogation of selling NLNG, which has been valued at $16bn and is expected to return at least $8bn to the Nigerian government.

ALSO READ  Dr. Kanayo Nwanze Wins $100,000 'Africa Food Prize' Award 2016

There is the option of joining the International Monetary Fund programme, but the government – perhaps scarred by the memory of the punitive cuts to public efficiency that accompanied structural adjustment programmes in the 1980s – appears uninterested.

While the country is mulling over the sale of national assets, it has still not resolved the problems that are hampering the private sector. The Central Bank of Nigeria’s rate-setting committee maintained baseline interest rates at 14%, triggering commercial lending rates of up to 28%. Subsequently, the finance ministry supported a drop in interest rates to catalyse economic activity, contradicting the CBN and highlighting a lack of harmony on monetary and fiscal policy that – at a time when national debt has risen by 4.71tn naira inside a year – is likely to compound the uncertain nature of the government’s policy response.

In the end, Nigeria might have to put its assets up for sale, but analysts will remain concerned that it is a short-term fix for a country that needs new engines of growth for its exports. Is it not too hasty to sell national assets built up over years, such as NLNG, in response to a recession that has spanned just two quarters? In a distressed energy market – and with the outlook bleak for intensive energy markets – will these assets be sold at the right value?

As lead partner of BudgIT, an organisation that promotes transparent public resources, I am worried about the process and particularly concerned that national assets might be sold to cronies who will seek government bailouts to put them in shape. The sale of power plants in Nigeria, which triggered a round of bailout funds by the central bank, is an obvious example of the potential pitfalls.

Nigeria might seem to be on track with diversification, but the political risks posed by the 2019 election are obvious. Even if the reserves get a boost, good plans can be undone by a change of government. For Nigeria to continue selling public assets as a short-term fix to a structural problem seems deeply introspective. The bleeding might be delayed but, if the portfolio of national exports is not expanded beyond oil, it will be back to the drawing board. National assets should only be sold as part of a long-term plan that is strictly followed through.

Get the best viral stories straight into your inbox!

Don't worry, we don't spam

Leave a Comment

Your email address will not be published.

Latest Posts

President Buhari Congratulates Obasanjo For Bagging PhD
Politics
35 views
Politics
35 views

President Buhari Congratulates Obasanjo For Bagging PhD

MT - January 21, 2018

President Muhammadu Buhari has congratulated former President Chief Olusegun Obasanjo for bagging a doctorate degree at the National Open University(NOUN).Buhari, who was the visitor at 7th Convocation…

Why My Daughter Donated Money To Kemi Olunloyo’s Medical Fund – Comedian, Seyi Law  
Entertainment
39 views
Entertainment
39 views

Why My Daughter Donated Money To Kemi Olunloyo’s Medical Fund – Comedian, Seyi Law  

MT - January 21, 2018

Comedian Law and his daughter, Tiwa Comtroversial journalist and daughter of former Oyo state governor, Kemi Olunloyo, was released from the Port Harcourt Maximum Prison, few days…

How I Fainted After Being Robbed By Okada Man In Lagos; Lady Narrates. [Photos]
Shocking
126 views
Shocking
126 views

How I Fainted After Being Robbed By Okada Man In Lagos; Lady Narrates. [Photos]

MT - January 20, 2018

A lady identified as Amarachi Azubuike, has recounted her horrific ordeal at the hands of a motorcyclist a.k.a Okada man who robbed her and threatened to rape…

Singer Simi Plays Chief Bridesmaid Role As Her Mum Remarries
Entertainment
122 views
Entertainment
122 views

Singer Simi Plays Chief Bridesmaid Role As Her Mum Remarries

MT - January 20, 2018

Early this year, there was a viral report that Ms. Jedidiah Ogunleye 'Love don't care' crooner,  Simi's mum will be getting married this January. Ms. Jedidiah Ogunleye and her…

Davido Buys iPhone For Friends To Celebrate The Release Of Umarudeen Kayode
Entertainment
118 views
Entertainment
118 views

Davido Buys iPhone For Friends To Celebrate The Release Of Umarudeen Kayode

MT - January 20, 2018

Dmw Boss Davido puts smile on alot of his crew member and friends Face by even going far to get them an iphone X just to celebrate…

Anti-open Grazing: Why APC Governors Are Begging Ortom To Reverse The Law
Politics
140 views
Politics
140 views

Anti-open Grazing: Why APC Governors Are Begging Ortom To Reverse The Law

MT - January 20, 2018

Governor Samuel Ortom of Benue State is under intense pressure to prevail on the state assembly to repeal the antigrazing law, which had become a sore point…

What Could President Buhari Have Told This APC Chieftain That Got Him This Way? (Photo)
Politics
120 views
Politics
120 views

What Could President Buhari Have Told This APC Chieftain That Got Him This Way? (Photo)

MT - January 20, 2018

President Muhammadu Buhari had this man laughing during the dinner hosted for APC Party Chieftains in State House yesterday.

Photos Of American-Nigerian Rapper, Jidenna Smoking Heavily
Entertainment
96 views
Entertainment
96 views

Photos Of American-Nigerian Rapper, Jidenna Smoking Heavily

MT - January 20, 2018

Caption This Adorable photo of Jidenna smoking Heavily Any caption?

Yewande Adekoya Celebrates Her 35th Birthday With Makeup Photos
Entertainment
86 views
Entertainment
86 views

Yewande Adekoya Celebrates Her 35th Birthday With Makeup Photos

MT - January 20, 2018

Actress Yewande Adekoya Stuns In New Makeup photos As She Celebrates 35yrs birthday Today. Yewande Adekoya (born 20 January 1983), is a Nigerian actress, filmmaker, director and…

Why Your Smartphone Can Make Emergency Calls Without A SIM Card
Technology
84 views
Technology
84 views

Why Your Smartphone Can Make Emergency Calls Without A SIM Card

MT - January 20, 2018

If you're an active mobile phone user, you will notice that your phone can actually make emergency calls without any SIM. I know you must be wondering…

PHOTOS: Inside Jubilee Syringe Manufacturing Factory In Onna, Akwa Ibom
Best of Nigeria
79 views
Best of Nigeria
79 views

PHOTOS: Inside Jubilee Syringe Manufacturing Factory In Onna, Akwa Ibom

MT - January 20, 2018

Today the Honourable Commissioner for Information and Strategy Mr. Charles Udoh led print, online and broadcast media professionals to see some of the achievements recorded in the…

World: Cristiano Ronaldo’s Girlfriend Enjoys Playtime With The Twins And Newborn Baby
Sports
93 views
Sports
93 views

World: Cristiano Ronaldo’s Girlfriend Enjoys Playtime With The Twins And Newborn Baby

MT - January 20, 2018

Cristiano Ronaldo’s girlfriend Georgina Rodriguez has shared a sweet snap of herself with twins Maria and Mateo and newborn daughter Alana Martina. Despite having her hands full…

I Spoke To Arsene Wenger About Iwobi’s Punishment After Misconduct- Super Eagles Coach
Sports
80 views
Sports
80 views

I Spoke To Arsene Wenger About Iwobi’s Punishment After Misconduct- Super Eagles Coach

MT - January 20, 2018

Super Eagles coach, Gernot Rohr, has revealed that he reached out to Arsenal boss Arsene Wenger over Alex Iwobi’s disciplinary issues earlier this month. Iwobi attended a…

My Experience At Port Harcourt Maximum Prison – Kemi Olunloyo
Entertainment
103 views
Entertainment
103 views

My Experience At Port Harcourt Maximum Prison – Kemi Olunloyo

MT - January 20, 2018

No one ever prays to go to prison; however, for the popular blogger, Kemi Olunloyo, 2017 is a year that she would likely not forget in a…

13 Steps To Help You Bounce Back From Betrayal
How Tos
68 views
How Tos
68 views

13 Steps To Help You Bounce Back From Betrayal

PH - January 20, 2018

  We suffer quietly through disloyalty from a partner, friend, or family member, but this embeds harmful emotions deeply into our being. Our trust in others erodes…

Residents of Ipoyewa community Laments 15yrs Blackout
General
57 views
General
57 views

Residents of Ipoyewa community Laments 15yrs Blackout

PH - January 20, 2018

Residents of Ipoyewa Phase 3, Adamo, Ikorodu area  of Lagos State have cried out to Governor Akinwunmi Ambode to come and rescue them from total darkness. The…

Friends Of TY Bello’s Throws Her Suprise Brunch To Mark Her 40th Birthday (Video)
Buzz & Trends
72 views
Buzz & Trends
72 views

Friends Of TY Bello’s Throws Her Suprise Brunch To Mark Her 40th Birthday (Video)

PH - January 20, 2018

Nigerian singer, songwriter and photographer, Toyin Sokefun-Bello, better known as TY Bello turned 40 last Sunday, January 14, 2018, and she was surprised by family and friends to…

2yrs After Partial Stroke, Nollywood Actress Iyabo Oko Returns From India
Buzz & Trends
87 views
Buzz & Trends
87 views

2yrs After Partial Stroke, Nollywood Actress Iyabo Oko Returns From India

PH - January 20, 2018

Veteran Yoruba actress, Kudirat Odukanmi Eluyemi otherwise known as Iyabo Oko has finally returned to Nigeria 2 years after she was diagnosed with partial stroke and flown abroad by her eldest son…

Loading...