How Legal Is National Assets Sale?
Is it lawful for the Federal Government to meet the short-term gap in its finances by selling national assets? What does the 1999 Constitution say? ROBERT EGBE examines the law and the argument of lawyers on the debate which won’t go away, despite the government’s denial of the plan to sell the national patrimony.
WheN Africa’s richest man Aliko Dangote suggested the sale of national assets to exit recession, many saw him as flying a kite. When the National Economic Council (NEC) chaired by Vice President Yemi Osinbajo bought the suggestion, the fears were confirmed. The 36 governors are members of the NEC, whose position stirred the hornet’s nest. Politicians, economists, lawyers and others condemned the proposal, warning that national assets might end up in the hands of friends and cronies of government officials.
The plan, some lawyers said, could breach the 1999 Constitution which prohibits the concentration of the economy in a few hands.
The case for sale
According to Finance Minister Kemi Adeosun, Nigeria is in its worst economic recession in 29 years, and is facing challenges plugging its budget deficit.
The country has also been finding it difficult to secure low-interest foreign loans due to its poor credit ratings, which has made assets sale an attractive option.
In an interview in Lagos on September 20, the Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, said he was favourably disposed to assets sale and had considered the option since April, last year.
He said: “In the short run, we can sell assets. You will recall that as at April 2015, I had an interview with Financial Times of London, during which even before the government came on board, I had opined that there was need for the government to scale down or sell off some of its investments in oil and gas, particularly in the Nigerian National Petroleum Corporation (NNPC) and Nigeria Liquefied Natural Gas (NLNG) Limited, as at that time when the price of oil was around $50-$55 per barrel.
“We actually commissioned some consultants that conducted the study and at the end of that study, we were told that if we sold 10 per cent to 15 per cent of our holding in the oil and gas sector, we could realise up to $40billion.
“Unfortunately, the markets have become soft. Now, if we choose to do that, we could still get $10 to $15b or maybe $20b.”
Emefiele said the sale should be done with a “buy-back” clause, so that the government could recover the assets in future.
Billionaire businessman Aliko Dangote, Emir of Kano and former CBN Governor Muhammadu Sanusi II, and Senate President Bukola Saraki, among others, have also backed the idea.
Last Thursday, the National Economic Council (NEC), comprising governors, approved the sale of some of the assets. A statement from the office of Vice President Yemi Osinbajo, same day, said the step was aimed at “tackling the current economic recession in the country”.
Nigeria Liquefied Natural Gas (NLNG) Limited was incorporated as a limited liability company on May 17, 1989, to harness the vast natural gas resources and produce Liquefied Natural Gas (LNG) and Natural Gas Liquids (NGLs) for export. The establishment of NLNG is backed by the NLNG Act.
The company is owned by four shareholders: the Federal Government of Nigeria, represented by the Nigerian National Petroleum Corporation (49 per cent); Shell (25.6 per cent); Total LNG Nigeria Ltd (15 per cent) and Eni (10.4 per cent).
It has wholly–owned subsidiaries: Bonny Gas Transport (BGT) Limited and NLNG Ship Management Limited (NSML).
According to the Acting Chairman, Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), Shettima Abba Gana, the NLNG remitted a dividend of $1.289 billion to the Nigerian National Petroleum Corporation (NNPC) in 2013, indicating that the asset was highly productive.
The NNPC is the oil company through which the government regulates and participates in the petroleum industry.
Established on April 1, 1977, by law, NNPC manages the joint venture between the government and a number of foreign multinational firms, which include Royal Dutch Shell, Agip, ExxonMobil, Chevron, and Texaco (now merged with Chevron).
Under the 1999 Constitution, all mineral resources are the property of the Federal Government, thus oil firms in Nigeria appropriate portions of their revenue to the government, which account for nearly 60 per cent of the revenue generated by the oil industry.
According to an article, “Reforming the oil industry” in The Economist, revenue from NNPC accounts for 76 per cent of the Federal Government income and 40 per cent of Nigeria’s GDP.
The Presidential Air Fleet (PAF) has 10 aircraft, none of which was bought by the Buhari administration.
On November 17, Senior Special Assistant to the President (Media and Publicity), Garba Shehu, said the government spent a little above N2 billion on maintenance of PAF in six months. The Goodluck Jonathan administration reportedly spent N9.08bn annually on maintaining PAF.
Other assets include refineries, airports and the East-West Rail lines
What does the Constitution say?
Section 16 governs the management of resources, including government assets, and it falls under the fundamental objectives and directive principles of state policy in Chapter II.
All sections under the chapter are not justiciable, meaning that the government cannot be successfully sued if it fails to abide by them.
Another relevant provision is Section 16 (1). It states: “The State shall, within the context of the ideals and objectives for which provisions are made in this Constitution; (a) harness the resources of the nation and promote national prosperity and an efficient, dynamic and self-reliant economy; (b) control the national economy in such manner as to secure the maximum welfare, freedom and happiness of every citizen on the basis of social justice and equality of status and opportunity; (c) without prejudice to its right to operate or participate in areas of the economy, other than the major sectors of the economy, manage and operate the major sectors of the economy; (d) without prejudice to the right of any person to participate in areas of the economy within the major sector of the economy, protect the right of every citizen to engage in any economic activities outside the major sectors of the economy.
(2) The state shall direct its policy towards ensuring: (a) the promotion of a planned and balanced economic development; (b) that the material resources of the nation are harnessed and distributed as best as possible to serve the common good; (c) that the economic system is not operated in such a manner as to permit the concentration of wealth or the means of production and exchange in the hands of few individuals or of a group; and (d) that suitable and adequate shelter, suitable and adequate food, reasonable national minimum living wage, old age care and pensions, and unemployment, sick benefits and welfare of the disabled are provided for all citizens.”
Section 44 (1) says: “No moveable property or any interest in an immovable property shall be taken possession of compulsorily and no right over or interest in any such property shall be acquired compulsorily in any part of Nigeria except in the manner and for the purposes prescribed by a law that, among other things – (a) requires the prompt payment of compensation therefore and (b) gives to any person claiming such compensation a right of access for the determination of his interest in the property and the amount of compensation to a court of law or tribunal or body having jurisdiction in that part of Nigeria.”
The case against sale
Lagos lawyer Femi Falana questioned the government’s proposal, saying it conflicts with Sections 16 (c) and 44.
He said: “It is pertinent to point out that the suggestion is in total conflict with Section 16 of the Constitution which has prohibited the concentration of the nation’s wealth in the hands of a few people or a group.
“Indeed, by Section 44 of the Constitution, the nation’s natural resources shall be held in trust for the Nigerian people by the Federal Government.
“One would have expected senators who swore to protect the Constitution to kick against the suggestion to sell the assets of the nation to a few people. But for selfish considerations a few legislators who may be queuing up to participate in the purchase of the nation’s assets are not prepared to defend the Constitution.”
National President of the Committee for the Defence of Human Rights (CDHR) Malachy Ugwummadu agreed.
He said according to Section 16, the “commanding height of our economy” could not be concentrated in a few hands.
Kunle Ogunba (SAN) urged the government to explore other means of generating capital rather than selling national assets.
He said: “What are the national assets? If there are national assets properly so-called, do you sell? It’s about sincerity of purpose. Are people clamouring for this so that they can corner it from the back within the context of our political experience? Some people will champion it and then get their cronies to buy. It might be another form of corruption to pillage the system.
“If there is sincerity of purpose, are we there yet? Instead of selling assets, the government could borrow; it could diversify the economy. You have spent your reserve, and you want to sell national assets. If you sell them, what of the people coming behind? And our system is not always pure.
“So, whatever it is, I don’t think I support it. I don’t know what national assets that are hidden somewhere that we do not know. I think it is diversionary.”
What should be done
Former Nigerian Bar Association (NBA) president Dr. Olisa Agbakoba (SAN) was reluctant to say whether the proposed sale was right or not.
In a statement, he advised the government to carefully consider the idea and suggested two things it must do if it decided to sell assets.
Agbakoba said: “I have followed with interest the debate on the propriety or otherwise of Federal Government’s proposed sale of national assets to deal with the recession. I will not make any comment on the propriety of the proposed sale.
“However, I am of the view that the Federal Government needs to do two things: First, an Inventory of Financial Requirements – How much money do we need? Second, an Inventory of Need – Where do we put the money? Findings from these inventories will provide a guide for government.
“I will also recommend President Obama’s approach to the American Recession. President Buhari should propose to the National Assembly a Reinvestment and Recovery Bill and an Emergency Economic Stabilisation Bill to stimulate the economy and bail out the ailing financial system.”
Chief Gani Adetola-Kaseem (SAN) urged the government to sell only non-economic assets.
Adetola-Kaseem said: “When you talk of sale of assets, there are two types of assets involved: economic and non-economic assets. Economic assets are investments that are yielding income to the country; they are commercial in nature, for instance our investment in Nigerian Natural Liquefied Gas (NNLG), or the refineries.
“To talk of selling that off in order to fund the economy, I think it’s myopic, because that is like selling the goose that lays the golden egg. It won’t make any sense to sell them off.
“I don’t think it is correct to sell off assets that are yielding income to the country, or projecting a good image of the country.”
Dr. Paul Ananaba (SAN) shared similar sentiments. He said: “I’m in support of sale of assets of the government, but not a blanket sale. The assets of the government should be appraised, those that are no longer necessary to be held by the government can be sold, balancing the need for government to play its role under the constitution, of securing life and property and the welfare of the citizens.
“In some of the assets, the government needs to divest considerably and must carry the people along as to the assets that’ll be sold, commercialised or that it wishes to divest from, in a transparent, patriotic manner that will be in the country’s best interest.
“Finally, we should ensure that it is not done as perceived before i.e. merely to transfer government assets into the private hands of friends of government officials and party loyalists and all that.”