Funding federal government budget deficits has posed recurring challenges to successive governments in the country with regard to appropriate funding strategy to adopt. Over the years, there has been greater inclination to borrowing to meet the shortfall in revenue generation to finance the annual fiscal plan, especially the capital expenditure component. However, in recent times, concerns over returning to the era of the debt trap have prompted caution about going on a borrowing spree with attention drawn to privatisation of loss making public enterprises as a budget funding source.
Making a case for further privatisation of some government-owned enterprises, Minister of Information and Culture, Lai Mohammed, had pointed out that successive governments in the country have found it necessary to introduce economic reforms and privatisation ‘’to address the abysmal failure of public enterprises and to halt their unsustainable drain on the treasury’’. The minister, who is chairman of the Stakeholders Engagement Committee of the National Council on Privatisation (NCP) argued : ‘’They (public enterprises) consumed large proportion of resources without providing commensurate services…they failed to allocate their resources efficiently, even as they consumed USD 3 bilion annually by way of grants, subsidies, import duty waivers and tax exemptions’’.
We consider this latter argument of the minister a self indictment of the government for its supervisory incompetence over the loss making enterprises. This endemic laxity in public governance is the bane of failure of many public projects with a huge attendant drain on the public treasury. It even raises the poser as to how efficiently the money to be realised from the sale of assets will be deployed in funding capital projects in the 2018 budget.
Finance minister, Zainab Ahmed, in justifying the proposed sale of some public enterprises to fund the 2018 fiscal plan, explained that it was to mitigate the huge cost of servicing new loans in a situation of poor revenue generation. Minister of Budget and National Planning, Sen. Udoma Udo Udoma, said the mix of borrowings and assets’ sale being embarked upon by the federal government was a strategic action in the nation’s overall interest.
Several stakeholder groups have expressed concern over the nation’s rising debt profile. We share this concern, given the exponential increase in the debt stock. For instance, while the Muhammadu Buhari presidency inherited a debt of $10.32 billion as at June 2015, this increased minimally to $11.2 billion in June 2016, jumped to $15.05 billion by June 2017 and ballooned to $22.08 billion as at June this year, an increase of nearly 50 percent over a one year period and about 125 percent increase over the $10.32 billion in June 2015. We believe that a further borrowing, particularly at this rather frenetic pace, is a sure road to debt entrapment. Although the Senate eventually approved President Buhari’s request for a $2.8 billion Eurobond loan, it nevertheless called for putting the brakes on borrowings as such ultimately undermine economic development, arising from debt servicing costs.
The Bureau of Public Enterprises, which is in the vanguard of the push for assets’ sale is optimistic that N350 billion could be realised from assets being sold to part finance nearly N2 trillion for infrastructure projects captured in the 2018 budget, according to its director-general, Alex Okoh. Some of the assets slated for privatisation, commercialisation or concessioning include the Ajaokuta Steel Complex, Nicon Insurance Limited, Afam Power Plant, Bank of Agriculture and six River Basin Development Authorities.
The World Bank, the International Monetary Fund (IMF) and Moody’s, an international credit rating agency, have severally stressed the need for developing countries, including Nigeria, to rely less on borrowing and focus more on generating internal revenue. Apparently taking this advice, the federal government has revved up its revenue generation drive. In this regard, it is notable that the Federal Internal Revenue Service (FIRS) generated N2.529 trillion in the six months period January 2018 to June 2018, representing 75 percent of its total target for the year and a 42 percent increase over the N1.783 trillion for the corresponding period in 2017.
But the federal government has been unable to adequately exploit this resource, in spite of the increase highlighted above, hence the resort to the easy take of assets’ sale.
However, we consider a rushed, wholesale unloading of key assets just to fund one budget and less than six months to a general election as both blackmail and an attempt to unfairly allocate national patrimony to a select few. In the haste to complete the process within such a short time, the exercise cannot stand the test of transparency and rigour. Government should pay more attention to cutting the fat in inflated contracts which has been the bane of project execution in the country. We, therefore, urge the federal government to put the assets’ sale on hold, while the capital projects are prioritised with the most urgent being implemented with available mix of loans and internally generated revenue.
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