Buhari Not Keen on Asset Sale, For Soludo, It Will be a Historic Mistake

 Source: Thisdaylive September 27, 2016

As the debate over the proposed sale of national assets rages, THISDAY can exclusively confirm that President Muhammadu Buhari is not in the least bit keen on the disposal of Nigeria’s strategic assets as a means of shoring up foreign exchange reserves and/or ending the economic recession in the country.

Buhari’s position which he has kept very close to his chest, came to light just as a former Central Bank of Nigeria (CBN) Governor, Prof. Chukwuma Charles Soludo, faulted the proposal that has been flaunted by members of the federal government’s Economic Management Team (EMT) and has received the blessing of the National Economic Council (NEC) and Senate President Bukola Saraki, among others, saying such a hasty auction of national assets could only benefit a privileged few with cash and access, while jeopardising Nigeria’s long-term economic interest.

According to sources very close to the president, Buhari would never sanction the sale of Nigeria’s strategic and all-important national assets, but has elected to keep quiet over the issue so that he would not be accused of expressing his opposition to the notion, just like he did with the issue of devaluation.

One presidency source, who spoke to THISDAY monday, said what the president was focused on implementing, as a “quick fix” to get Nigeria out of recession, was on external borrowing for infrastructure projects.

He said: “The sale of national assets is not on the president’s radar at all. What he is fixated on is on borrowings and as you are aware the Federal Executive Council (FEC) recently gave the Federal Ministry of Finance approval to borrow $29 billion from external sources.”

Another source also volunteered that about $3 billion would be coming in from the China Exim Bank for the rail projects within the next few days.

He said this would just be one of several facilities raised by Nigeria to meet its funding gap for infrastructure projects, which is a sure way of ensuring that money trickles down into the economy and employment opportunities are created through the award of contracts.

He also faulted the proponents for the sale of national assets, stating that if due process had to be followed, it would take a minimum of two years to sell any of the assets and was therefore not a quick and certain route out of the recession.

Meanwhile, Soludo, who is the founder of the African Heritage Institution, expressed his opposition to the assets sale yesterday in an article titled: “Nigeria: Sale of Assets as Dangerous Policy Myopia”, stressing that if the president endorsed the proposal, it would be a historic mistake made by the country.

While commending NEC as well as the Senate for advising the president, saying times such as this require all brains at work and all hands on deck, the former CBN governor held the view that the proposal for the sale of national assets was based on a false foundation.

“Our thesis is that in extreme, exceptional circumstances, the sale of certain assets could be a last resort option but that Nigeria is currently not near that threshold and the institutional framework for its effective use is also not in place.

“Furthermore, we argue that any sale of assets now amounts to chasing pennies when by acts of omission or commission, we are losing pounds.

“Such a hasty auction of national assets can only benefit a privileged few with cash and access while jeopardising Nigeria’s long-term economic interest. It will be a historic mistake for the reasons stated below.”

Soludo went on to express concern over the proposal to sell some valuable national assets “in order to build reserves and provide funds for immediate spending” and thus ensure that this recession will be the “shortest” ever.

He acknowledged that some people had bandied the same suggestion in the past but he largely dismissed it as a joke.

“But when the Senate and NEC joined the convenient but flawed call for the asset sale, I have a citizen duty to join others in letting our voice be heard.

“Part of the legacy of the oil resource curse on matters of public finance is a mindset that resorts to easy, albeit a lazy approach to ‘quick fixes’ — with a gaze on the short-term even when the issues are structurally long-term.

“So, I understand the mental framework that drives such a proposal, especially given the pressure to show immediate results,” he added.
He noted that the objective of the policy was mistakenly identified in terms of getting the economy out of recession.

According to Soludo, recession is short-term, adding that “with good rains and bumper agricultural harvest, Nigeria’s Gross Domestic Product (GDP) growth can easily recover and the economy would be out of the recession”.

Specifically, he pointed out that a GDP growth rate of even 0.01 per cent next quarter would be enough to take the economy out of the recession.

“What does this actually mean for the average Nigerian? Really very little! The fundamental issue to focus the attention of policymakers is that the economy has dramatically compressed by more than 50 per cent in US dollar terms.

“The GDP compressed in dollar terms from about $575 billion (as at the time this government took over) to about $252 billion currently—depending on the exchange rate used (currently estimated to be about third largest economy in Africa after South Africa and Egypt; with per capita income closer to $1,300 from over $3,000 in 2014).

“With the current policy regime, it will be a miracle if the current government can, after eight years in office by 2023, succeed in returning Nigerian economy just to the size of GDP (in US dollars) it met it in 2015.

“To be fair, the wheels of the economy were already falling off by the time this government took over plus other complications of the oil sector and I sympathise with it.

“But it is also fair to note that some of its policy choices have made matters worse. Now that the government is showing seriousness in tackling the crisis, focusing on short-term next quarter GDP growth misses the key point and has the danger of understating the serious work required,” he argued.

Furthermore, Soludo said there was little basis for the $10-15 billion being bandied around as likely income to be generated from the proposed asset sales.

He stressed that there was no basis for the expectation that shoring up reserves by this amount would magically restore investor confidence and stop speculation on the naira.

“There is more to investor confidence than a temporary boost in stock of reserves when everyone knows that the underlying political environment as well as the policy regime and its credibility make the flow of reserves unsustainable.

“The IMF calculates reserve adequacy in terms of the amount to finance at least three months of imports especially for countries with flexible exchange rates (which we claim to have), and of course also enough to cover short-term forex liabilities for countries with open capital accounts.

“Nigeria currently has much more reserves to cover even six months of imports (size of imports also depends on exchange rate). So, what is the problem?
“No amount of reserves can stop currency speculation in a poor policy environment. There is much more to confidence than absolute or relative size of reserves.

“Look around our West African neighbours that are doing far better in economic terms and check out the size of their reserves (even as a percentage of GDP).

“Until 2004, Nigeria never had more than $10 billion in reserves, and we have survived oil prices below $10 without selling Nigeria. The British pound has been down for months against major currencies since the Brexit vote in June, while China (with trillions of dollars in reserves) experienced major stock market and currency attacks recently and the Yuan had to be devalued.

“Before the 2008/2009 crisis, Russia had robust reserves but it lost tens of billions struggling to defend the local currency and eventually yielded to the market,” he added.

Continuing, Soludo noted that the argument that the sale of assets remained the only way to reflate the economy out of recession was troubling, and “suffers what economists might call policy myopia or time inconsistency problem”.

He added: “First, imagine if previous governments used asset sales as a strategy to ‘reflate the economy’ during previous periods of economic recession or crisis.

“Alternatively, if we auction away some valued national assets for the short-term goal of reflating the economy out of recession, what will happen during future cycles of recessions and economic crises?

“The global economic system is inherently and cyclically crisis-prone. Prudently managed economies are preparing for the next cycles of global crisis, and the IMF has already warned of persisting vulnerabilities. What shall we sell then?

“Besides, a hasty auction of the assets will short change Nigeria. Privatisation of national assets is not an ideological matter for me. It is plain pragmatism. Reasonable people can have a good debate about the composition of public assets for sale at any time.

“Although government is yet to be definitive about the assets being proposed for sale, it is reasonable to object to any scheme that will hurriedly sell performing public assets that guarantee future flows of revenue and forex to future generations such as the NLNG, AFC shares, JVs in oil and gas sector, etc.

“Even for non-performing assets, when privatisation is forced and assets auctioned on an emergency basis to meet short-term needs, the danger signs are there for all to see. Nigeria will never get value for money under the circumstance.

“We all know what happens when someone urgently needs to sell his or her property to meet an emergency. What happens to the valuation/pricing? If we price them properly and wish to go through proper due process, the deal might take several years to conclude thereby defeating the advertised purpose of immediate spending.

“On the other hand, if we insist on forced sale because we need cash urgently, we might as well imagine how the valuation will be done and how buyers will bid for them.

“In all, the proposal is largely self-serving and convenient. For some privileged private sector operators with cash and access, the temporary rump up of reserves as well as temporary strengthening of the naira will enable them to take whatever forex they can get (at the official rate) knowing that it is just a temporary elixir.

“They can then round-trip same a few weeks after and rake in billions. Furthermore, the attempt to sell valuable national assets under duress guarantees these same interests to cherry-pick the assets on the cheap.

“For our Senators and government, it is very convenient in the sense that it provides easy money to continue with the expenditure trends. So, for both government and its private sector collaborators in this scheme, it is a win-win. The only losers are Nigerians and the economy.
“In this apparent short-termism or myopia, no one seems to care about tomorrow.”

NLC Threatens Protest

Also restating its opposition to the proposed sale on national assets, the Nigerian Labour Congress (NLC) said yesterday that plans were afoot to declare a nationwide street protest across the country to oppose what it called reckless auctioning of the nation’s commonwealth to a “coterie of capitalists and government’s close associates”.

The proposal has attracted severe criticism from Nigerians, with many accusing the Muhammadu Buhari administration of attempting to sell off Nigeria’s national heritage to political cronies.
Speaking to the press in Abuja, NLC President, Mr. Ayuba Wabba, claimed that the clamour by the Buhari administration for the proposed sale of national assets was a complete IMF prescription, where the interest of Nigerians was being tinkered with.

He argued that these prescriptions ranged from “devaluing our currency, to the removal subsidy on fuel and increase in the pump prince of the commodity, while the fourth leg is the sale of our strategic assets”.

“It is the same approach and nothing has changed, it is the same prescription, it is the same advice that IMF comes calling with,” he charged.

Wabba said there was no iota of truth and sincerity in the notion that the sale of national assets would improve the economy and bring about the desired change which many Nigerians are looking for.

He added that the purported plan to trade off Nigeria’s national assets to some few individuals and the business class with links to the government, was an attempt by those who nakedly robbed Nigeria dry to buy off the nation through the back door.

“The Panama Papers leaks which up till now have not been investigated. But in other states (countries), it has been investigated and the veracity of the allegations have also been proven.
“I think because certain individuals who are also now canvassing that our national assets must be sold, I think that is why these issues have not been investigated. We are demanding that those issues must continue to be investigated.

“Therefore, transferring our commonwealth to the ownership of a few will further impoverish all of us. I think it is high time even for government to try to take stock of all enterprises that have been privatised before now to ascertain their state.

“What comes to mind is the power sector, which was privatised for over three years. I am sure that all of us will agree that no value was added. Instead they have been exploiting Nigerians.
“We have been paying bills upon bills that cannot be justified. Even to provide meters, has nearly been difficult even with the pronouncement by the court that they must reverse the tariffs, it has certainly not received any attention,” Wabba stated.

The NLC president contended since previous privatisation programmes had failed woefully, there was no need to sell the country’s national assets, stating that “these are clear avenues where such instances have been used to undermine our commonwealth and also s few people have actually taken over those very strategic assets”.

“We are therefore restating our position that we are opposed to the sale of those strategic assets in whatever guise in order to try to address the challenges in the economy.
“We say this very patriotically, and we say this with the best of intentions. I think the consequences would be more dangerous if we don’t take the necessary steps now to protect those important national assets.

“It would also not serve any public good if those assets found themselves in the hands of a few.
“The point has also been made that a lot of people have stolen more than enough and they are stocking these resources elsewhere, so they want a situation where these ill-gotten wealth can be repatriated back. And they would pay our common patrimony and therefore use the same funds to get ownership of these critical resources.

“I think as citizens we have a responsibility to protect these assets for our generation and even for generations yet unborn. This is our position, and therefore we are going to engage this issue on three fronts.

“One, through the work of this important committee of the NLC, the second one, is also the labour way, both on the streets canvassing that this policy should not be allowed to stand.
“Where possible also, we are going to engage our very progressive lawyers who between last week and today, more than twenty of them have reached out to us to say that there is also a legal angle to the argument that they would be ready make,” he disclosed.

Wabba urged Nigerians to brace up to this challenge and ensure that their national heritage is not auctioned to a few connected individuals. “All of us must stand up to try to make sure those issues are not allowed to go the way very few are canvassing for.

“It should be for the benefit of all of us. We are not only saying no, we have also canvassed for some options that we think if they are followed logically, it is going to help us.
“We can learn one or two things from this. Because, clearly, the major problem in Nigeria is that only the poor and the working class are paying the correct taxes. People evade tax and I think clearly the Panama Papers leaks have shown us what has been happening.

“In fact, Nigeria is a tax haven. And I think that has been collaborated further by the Thabo Mbeki report or the AU report on illicit financial flowd out of Africa.

“That report said conservatively about $50 billion is taken out of Africa annually through tax dodging, tax evasion, and deliberately by people given waivers.

“And we know those who are benefiting from the waivers that have put us in this situation. So it must be situated within our argument that we have a lot of options that can be addressed and situated within this argument,” he said.

The NLC president also called on the government to address the missteps in “fiscal and monetary policies”, adding that these policies need to be aligned because at the end of the day, the new forex policy has made some people millionaires, “so these policies have not worked effectively”.

He added: “Critically, there is the need to use available resources to drive the process of development, especially looted funds; we must put them into the manufacturing sector and other critical sectors of the economy where economic activities can pick up instead of using them to buy expensive cars or using them to sponsor exorbitant trips abroad.”

NLC Secretary General, Dr Peter Ozo-Eson, also said that the NLC committee which would serve as a think-tank for the labour unions, will be charged with not only addressing the wrong-headed attempt to sell national assets, but to advice organised labour on the economic policies of the administration and how to tackle them.

Members of the committee include former ASUU President, Dr. Dipo Fashina, Prof. Toye Olorode, Dr. Aminu Muhammed Aliyu, Dr, Muttaka Usman, Dr. Isaac Nwaogwugww, Dr. Yemisi Bamgose, Mr. Isa Aremu, Mr. Sonny Atumah, Dr. Peter Ozo-Eson and Ms. Hauwa Mustapha.

AfDB Announces $2bn Support

However, as Nigeria tinkers with measures to boost its foreign exchange reserves, the African Development Bank, (AfDB) yesterday announced its $2 billon development support for Nigeria, assuring the country that assistance was on the way.

The bank’s president, Dr. Akinwunmi Adesina announced the Bank’s facility to the country at a reception for him at the State House, Abuja by President Buhari, who told him that in spite the prevailing odds, Nigeria was capable of surmounting its debilitating economic challenges.

According to Adesina, AfDB’s package included $1 billion as a budget support facility, $300 million to create jobs for 185,000 youths, $250 million towards the North-east’s rehabilitation, $1 million grant to deal with the challenges of internally displaced persons (IDPs), $300 million for infrastructure development around Abuja, and $200 million for the Transmission Company of Nigeria (TCN), among others.

Expressing delight with what he called “President Buhari’s push agains corruption and his stance on governance”, he said building institutions was critical.

To achieve that, he said ADB would give a total of $4.8 million as grant for institutional support, with the Economic and Financial Crimes Commission (EFCC) getting $2 million, and $1 million to Independent Corrupt Practices and Other Related Offences Commission (ICPC).
“You can always count on my support and that of the ADB,” he concluded.

Welcoming the AfDB president, the president said Nigeria had the people and the resources to surmount her economic challenges, explaining that what was required was hard work by the policy makers and the generality of Nigerians.

“God has given us people and resources. It will take hard work on our part, but we will make it. We will get out of our problems. We are determined to produce what we eat, and stop importation. We will also chase those who stole, and get them to refund,” he said.

Buhari conveyed the gratitude of Nigerians to AfDB, assuring the Nigerian-born Adesina, who was the immediate past Minister of Agriculture that the country would rebound and not let him down.
The AfDB also used the opportunity to express his gratitude to Buhari for the support the country gave him when he ran for Bank’s presidency over a year ago, making him the first Nigerian to occupy the position since the Bank was established in 1964.

He also lauded the president for the successes recorded in securing the country, particularly the North East, adding that “there can be no development without adequate security”.
Adesina described recent economic decisions taken in the country as “bold, tough, uncomfortable, but right”, expressing confidence that Nigeria would reap the dividends in the short and long run.

“You can count on the AfDB as a true friend of Nigeria. You should support massive investment in infrastructure, and we are here to also support you. Closing the infrastructure deficit will enable growth, and create employment. Nigeria is too big to fail,” he said.