Senator Udoma Udo Udoma
Contrary to claims that the Federal Government has received the backing of governors to dispose of national assets to reflate the economy, the federal government has said that it is not selling off its key national assets as a means of getting out of recession.
The Minister of Budget and National Planning, Senator Udoma Udo Udoma, made the clarification in a statement signed by his Media Adviser, Mr. Akpandem James.
Similarly, Senate President, Dr. Bukola Saraki, has explained that contrary to insinuations that he was advocating for an outright sale of national assets as a means of getting out of the present economic stasis, he said what the Senate attempted to do last Thursday was make available policy options that could lead Nigeria out of recession. He said 12 options were out on the table and that possible sale of assets was just one of such options on the menu.
The minister said in the statement, “The primary objective of government’s fiscal stimulus plan is not to sell off all major critical national assets but to source immediate funds to reflate the economy and implement capital projects in the 2016 budget. Udoma is said to have given the explanation in Lagos at the weekend while briefing newsmen on the forthcoming Nigeria Nigerian Economic Summit coming up next month.
Udoma said: “The government needs to inject a large dose of funds into the system to get the economy back on track and to faithfully implement those provisions in the capital budget tailored at reflating the economy and aiding the diversification process.
“The country has lost almost half of its expected revenue and would need to urgently source the shortfall to enable the government to faithfully implement the budget. “This unfortunate scenario prompted the Economic Management Team to urgently work out a fiscal stimulus plan to generate immediate large injection of funds into the economy through asset sales, advance payment for license rounds, infrastructure concessioning, use of recovered funds, among others, to reduce the funding gap.
“The other option would have been to source for additional loans, beyond the level of borrowing already projected for in the 2016 Budget. This would not be a wise option as it would raise the level of debt service to an unsustainable level.
“But the government is exploring several angles in the asset sales proposal including repurchase options, which will make provision for buy-back of those assets when the situation improves. The Minister insisted that the country’s economy would not have gone into recession but for the drastic fall in oil production levels due to disruptions caused by militant activities.
He said, “At worst, it would have been a flat performance that would have sign-posted a new curve in the economy trajectory that would subsequently put it on the path to recovery and sustainable growth. The Minister said that the Government appreciated that the down-turn in the economy had brought hardship to the people, but assured that the administration government was committed to redressing the situation.
“Our goal is to unlock the economic potentials of the non-oil and high-employment sectors, so as to achieve a sustainable inclusive growth that will ensure that the majority of Nigerians become more productive, thereby reducing poverty.
“Thus, we are deliberately working towards diversifying the Nigerian economy by ensuring that the non-oil sector drives the economy because this is the sector that contributes the most to GDP; and, has more capacity to employ.” The basic strategy, he pointed out, is to reflate the economy through fiscal stimulus and strategic implementation of annual budgets. “What this means is that we are geared to strategically spend our way out of recession.
“Unfortunately, we have not met all our planned expenditures for 2016 due to low revenue out turns. However, we have ensured that the resources that we release are targeted at priorities that will stimulate activities in the economy.
Senator Udoma said bad as it is, the current situation provides the country with an opportunity to revamp the economy and put it on the path to sustainable growth; but in doing so, Nigerians must reduce their demand for foreign products, focus attention on refining petroleum products locally, return to agriculture, develop the solid minerals’ sector and stay the course even if the price of oil goes up again.
According to him, getting back the economy on the path of sustainable growth would require the contribution of every sector in their respective core mandate areas, and collaboration with organs like the Nigeria Economic Summit Group (NESG) provides a veritable avenue for forging consensus on issues of national development whilst evolving a common strategy and policy framework for addressing issues constraining development.
This year’s edition of the Economic Summit, which holds between October 10 and 12, is designed to encourage more production and consumption of Made in Nigeria goods and services. It is believed that “with more patronage, Nigerian producers will be encouraged to improve the quality of their products. As the quality of Nigerian-made goods and services improve, international demand for them will increase.
Saraki’s suggestion While speaking to a select group of editors in Lagos last Friday, Saraki argued that borrowing as an option could only help to execute projects but cannot boost the country’s reserve to stimulate the economy. According to him, “It is like a company, you go round to banks to say, can you borrow me money? And you cannot get money, but you have 100 shares with with a firm, which you are keeping for your children.
To raise fund, you can decide to sell 20 shares.” He maintained that his position on the sale of national assets was not one influenced by the need to sell to Nigerians because some people already owned some of them, insisting that there was nothing wrong in the government reducing its stake in some of the national assets.
“That is the concept I have. It is not selling to Nigerians with naira because with that I do not see value added. “We are in a situation where the forex inflow into the country, which comes from different sources; government, sales of crude oil; export proceeds; foreigners and Nigerians investing in companies in Nigeria; hedge fund and Nigerians that have money abroad bring it in. “Out of these five, only one is functioning today – which is government source, the others have dried out. So the forex inflow has gone down, reserve is low but demand is still high.
There is no confidence in the economy that will encourage these four sectors to bring in money for obvious reasons, either they believe that the naira has not yet found its bottom, ‘so if I bring in my forex, I am going to loose straight away’.
And as long as that continues, we are not going to see inflow. And then you have the Niger Delta problem on top of that.” He said the nation lost its opportunity when it made so much money from crude sales but did not save, adding that the nation could have withstood the crash of crude price.
Nigeria, he counseled, needed a very strong reserve base. Saraki shed more light on the linkage between a strong reserve base and the imperative of exploring viable options of getting out of the recession thus: “If you decide to defend your currency, you have the capacity to do it, which will likely stimulate the economy and people will be saying lets go to Nigeria.
“Everybody is putting their hands off Nigeria and that is why we did not get value when we devalued, as people still believe that naira is still going to go further down, you have the capacity to say naira is going to stay at N400, you have the capacity to do that. So I can project as hedge fund manager that I am going to invest in Nigeria, the interest rate is good.”
On the continuing slide of the Naira, Saraki maintained that the resultant consequence of a lack of confidence in the Nigerian economy is the continued slump of the Naira, expounding that the Central Bank of Nigeria was caught between the devil and the deep sea in the area of fighting inflation by keep interest rates or taking the plunge by reducing the interest rates and contending with a run away inflation.
