Should FG Sell National Oil Assets? | Punch
I am not in support of the call for the sale of the nation’s oil assets. I don’t see any wisdom in selling the assets because of recession. That would amount to a desperate move to weather the storm.
What are we going to use the money for if the assets are sold? It would be spent to fund recurrent expenditure.
If we must sell the assets, it must be in line with the existing privatisation policy of the country. The Nigeria Liquefied Natural Gas Limited is one of the assets those who are canvassing the sale listed. And that is the most viable oil asset we have.
So, I don’t think they should be sold as the money would be spent on things that may not have serious impact on the economy.- • Dr. Biodun Adedipe (Chief Consultant, B. Adedipe Associates Limited)
During difficult moments like this when the economy is down, when we are going through recession, this is not the right time for us to think of selling assets such as oil assets. Once you lose 51 per cent of the shares of an asset, then the controlling powers are off your hands. The worst thing we can do about the economy at this time is to think of liberalisation. And if we must do something because Nigeria is broke, why can’t we think of a situation where we can turn our oil production into collateral? We can arrange terms with some richer countries and give them our crude oil, but not to sell national assets. Within one democratic cycle, we have experienced what has happened because we removed fuel subsidy. It is among the reasons many banks, factories and hospitals are sacking people, and our Gross Domestic Product is down. We also tried another experiment when some people called for the devaluation of the naira, knowing that we are an import-dependent country. We have seen the effects of that. Now, we want to go ahead and try the experiment of selling our national assets; then what would be there for the future generations? If our past leaders had sold all the legacies that they worked for, what would have been available for this generation? So, we need to think through. One of the worst things any country can do is to sell national assets in difficult moments like recession. - • Bala Zakka (Energy expert and Technical Director, Drilling Services, Template Design Limited)
I think it is a ridiculous proposition without proper evaluation. I think we should not panic to sell our assets. It is a different thing if we have a gradual divestment of government’s shares; that is different from selling assets. In the Nigeria LNG Limited, for example, the government has 49 per cent share. The government cannot sell the NLNG because it doesn’t own 100 per cent of the shares there. But at this low oil price regime, what value will you get for it? It is not something you can just rush to do. But I support a gradual divestment, not a complete sale of the assets. But the issue is: what are they going to use the money for? Are they going to invest it in infrastructure or some people will siphon it?
It is better for you to go and take a loan than divesting your equity because equity is more expensive than borrowing money. The other assets the government has are joint venture assets and they create the bulk of what federal account money is. What did we get out of selling the Nigeria Airways? What did we get out of selling the Power Holding Company of Nigeria? What did we use the money from the sales to do?
I don’t think it makes economic sense for the government to just let go of its shares in the NLNG or joint ventures. And I hope they are not calling for the sale of the Nigerian National Petroleum Corporation. The NNPC can still remain and people can go and issue Initial Public Offer to sell the shares of NNPC, we should not sell it outright.- • Prof. Wumi Iledare (Director of Emerald Energy Institute, University of Port Harcourt)
I am not against the sale of some of our national oil assets or reducing our shares in them. The reason is that we cannot even fund the 2016 budget. The government even has challenges funding its recurrent expenditure. The economy is contracting. So, I am not against any move to sell some of the assets in order to get foreign exchange to fund key projects and make the government functional.
But the question is – which of the assets do we sell? I think selling the country’s refineries holds some traction now. First, that would bring the private sector into the oil sector. This would help us to get out of the crisis in the downstream sector.
Also, we could reduce our shares in the other assets that are currently doing well. An example is the Nigeria Liquefied Natural Gas Limited. But there are concerns. How do we ensure that we get a fair deal? I think valuation is very important. That would ensure that we get a good value. It would also ensure that the future of the assets is not compromised.
Another concern is of what use would the money be put into? Natural idle assets could be converted to active assets such as infrastructure. For instance, we can use the money raised to build bridges that would be more useful to the economy.
We also need to identify the areas of the economy that have the strongest impact on the people. The proceeds of the sale should be channelled to those areas. This should not be an emotional thing. Other countries have similarly sold non-performing assets during recessions to boost their economies. But we must ensure that the money is put into critical sectors of the economy.- • Prof. Adeola Adenikinju (Director, Centre for Petroleum Economics, University of Ibadan)
I do not support the sale. The reason is simple: oil and gas assets, generally, are strategic for countries that are rich in them. The oil and gas sector has huge consequences for the national security of any country.
If you go through the history of the United States, you would notice that oil and gas politics plays a dominant role. For national security and strategic reasons, it would be a mistake for Nigeria to sell its oil and gas assets because of an economic recession. Obviously, the recession would be over.
Since Nigeria started producing crude, we have experienced a burst five times. So, burst and boom are normal in the oil and gas market. The only difference is that this seems to be the longest lull we would experience. And it is unfortunate that oil prices may not rebound till the middle of 2017, except there is a major issue that affects production in the Middle East.
Yet, that is not a reason Nigeria should sell its oil assets. So, I do not support the sale. It would not help the country’s position in the oil and gas politics.- • Dr. Daudu Garba (Programme Coordinator, Natural Resource Governance Institute, Nigeria)
If the government wants to sell asset like buildings that are not being used, it is okay. But if they start selling refineries and other oil assets, I think we have to be a little bit careful. There are certain assets that are strategic and there are some assets that are a waste for the government to hold. For instance, if the government is using a land and the private sector can use the land to produce goods and services, they should sell it. But if it is a strategic asset that would threaten national security, that is something that they should think very carefully about. The low-income housing estates that the government has developed is not a good investment. I think the private sector can manage that better. Some of those houses are a waste; nobody is living in them.- • Leo Ukpong (A Professor of Financial Economics at the University of Uyo, Akwa Ibom)
(Compiled by Geoff Iyatse and ’Femi Asu)