The Federal Government is considering selling some of its stakes in oil joint ventures to raise about $3 billion (about N1 trillion) in order to reduce the deficit for 2018 budget. The proposed 2018 Appropriation Bills of N8.6trillion has about N3.3trillion deficit, according to the details of the 2018-2020 Medium Term Expenditure Framework (MTEF) and the Fiscal Strategy Paper (FSP).
The asset sales proposal is contained in the FG’s Economic Recovery and Growth Plan, released by the Ministry of Budget and National Planning. Though not a recent development being canvassed by Nigerians in government and the private sector. In this report, OYENIRAN APATA, JUSTUS ADEJUMOH, MOHAMMED SHOSANYA, NKASIOBI OKUIKPE and ANDREW UTULU, present arguments for and against the proposal. Excerpts;
The proposal whether to sell or not to sell national assets came up again as the Director General of Budget Office, Ben Akabueze explained that the proposed sale is to generate sufficient revenue to finance the country’s annual budgets for the next three years (2018-2020).
He stated that the Federal Government’s non-core assets from the mines and steel sector like houses and estates are part of items slated for sale, saying that some items for the 2018 budget would be financed from the revenue garnered from sales of the key government assets as well as national parks.
He said proceeds from the privatisation of the assets would be used to finance the budget deficit of N2.005 trillion, much of which will be financed through domestic and foreign borrowings.
He said that had been factored into the 2018 budget. Though not a recent development, various reasons have been advanced over the fear of national assets sales and privatisation.
The consequences of the rejection have manifested in many ways which include fear of job loss and strikes.
However, the proponents that principally constituted the government of the day consider privatisation as an aspect of economic reform, and an instrument for efficient resource management for rapid economic development and poverty reduction.
According to a school though, when the public asset is privatised or sold, it reduces the burden of the enterprise on government.
The government will not spend many resources on the enterprise because the asset can stand on its own as a profit-oriented venture which will in some ways make returns to the government.
Benefits of Assets Sale
Undoubtedly, fear on whether to sell or not is heightened by lack of due diligence in the process, coupled with corrupt practices that may in the rubbish the process and rationale for the idea.
There are, however, some economic benefits that are connected to the process of effecting sale and privatisation of national assets.
One of the benefits is that it will reduce the size of the existing governance costs. The unnecessary layers of bureaucracy are near absent.
On the other hand, the private sector responds to incentives in the market, while the public sector often has non-economic goals.
The public sector is not highly motivated to maximise production and allocate resources effectively, this causes the government to run high-cost, low-income enterprises.
Government’s Position
Last month, President Muhammadu Buhari submitted proposals to a joint session of the National Assembly indicating that the Federal Government will generate N311 billion from the privatisation of public properties and the sale of national assets next year to partly finance the 2018 budget.
During a public presentation of the 2018 budget proposals at the same period, Minister of Budget and National Planning, Udo Udoma, stated that the sum of N306 billion was being expected from privatisation proceeds, while the balance of N5 billion would come from the sale of government assets.
According to Udoma, the expected amount was part of the financing items of N6.6tn that would be used to fund the 2018 budget of N8.6 trillion.
He gave a breakdown of the expected sources of revenue. He said that crude oil would contribute 37 per cent of the total revenue for the budget, adding that Companies Income Tax, Value Added Tax and customs duties would account for 12 per cent, 3.1 per cent and 4.9 per cent, respectively of the projected revenue for the 2018 fiscal year.
According to Udo Udoma, “Our journey out of recession has helped us rest our priorities and to focus on more reforms and activities that have both short and long-term bearings on sustainable economic growth.
Already, diversification efforts are yielding positive results with significant growth in the non-oil sector.
“The goal of the 2018 budget is to consolidate the gains recorded so far by this administration and ensure that all Nigerians benefit from economic progress.”
He also noted that the Federal Government’s non-core assets from the mines and steel sector like houses and estates are part of items slated for sale.
According to him, some items for the 2018 budget would be financed from the revenue garnered from sales of the key government assets as well as national parks.
He said proceeds from the privatisation of the assets would be used to finance the budget deficit of N2.005 trillion, much of which will be financed through domestic and foreign borrowings. He said that had been factored into the 2018 budget.
The Federal government’s recent moves to sell some national assets and privatise others to fund the 2018 budget which is targeted to raise about N306 billion, again, has been received with mixed feelings by a good number of Nigerians.
Critics of the idea argued that many assets sold in the past have yielded little or no benefits to the average man on the streets.
On the contrary, those who are in support are of the opinion that some of these assets no longer yield the desired revenue as anticipated due to corruption and mismanagement by those who are placed with the responsibility.
To the proponents of the idea for the poor economic state of the nation the best option open to the country is to sell off identified assets that are no longer yielding the expected revenue to the government amongst others.
Independent.ng
