Following the rising debt profile of Nigeria as a nation, the Lagos Chamber of Commerce and Industry (LCCI) has recommended some practical steps to be taken by the federal and state governments to boost the revenue profile and foreign exchange inflows into the country.
Speaking on the outcome of the Council Meeting of the Lagos Chamber of Commerce and Industry in Lagos recently, the new Director General of LCCI, Dr. Chinyere Almona, in a statement said there were deliberations on what practical steps could be taken by the government to boost revenue and foreign exchange inflows.
Almona, while stating that Nigeria’s fiscal and financial challenges had been of concern to several stakeholders including the LCCI noted that the government had increasingly resorted to debt to finance recurrent and capital obligations in the face of dwindling revenue.
She pointed out that the country’s debt situation had become worrisome with debt servicing consuming a significant share of the revenue adding that the debt service to revenue ratio for the period of January to May 2021 stood at about 98% up from 83% recorded in 2020 according to the budget implementation report.
The LCCI Director General observed that Nigeria was an asset-rich nation owning hundreds of large state-owned companies, valuable parcels of land, and built structures in prime commercial locations while insisting that these assets were grossly underutilized and contribute too little to the country’s fiscal and financial situation because their market values were currently not known.
She maintained that there was, therefore, a need for government to take urgent steps to establish the market values of the assets, securitize the corporate assets and commercialize the real estate assets to raise revenue for the government and foreign exchange inflows for the country.
According to her, there was a need to replace existing debt stocks with asset-linked debt to ease the debt servicing burden; attract greenfield FDI into publicly-listed state-owned companies as well as generate new revenue streams from commercialized real estate portfolios.
She said, “Given the challenges highlighted above, the Chamber wishes to propose to the government at both federal and state levels the following recommendations: Identify public assets: Nigeria needs to do an official identification of its assets in terms of location, purpose, and usage contained in a national asset register. There are four types of assets namely: corporate assets – such as refineries, state-owned enterprises; physical assets- such as government land and built structures; intangible assets – such as the GSM licensing and pension funds; human capital – a national pool of high-return skills.
“An asset register that provides detailed information about Nigeria’s assets at national, state, and local government levels must be created.
“Determine the worth of these assets: Corporate assets should be securitized via public share issuance to raise equities. A typical example is Saudi Aramco’s IPO of 2019 where $25.6 billion was raised after the oil firm sold a 1.5% stake to private investors, thereby establishing the value of Aramco to be over $2 trillion.
“Physical assets such as idle or under-utilized properties could be repurposed and redeveloped for commercialization to generate revenue. Typical examples are what the United Kingdom has done with its inner-city prisons as well as the United States’ conversion of military bases into great commercial places through the Base Realignment and Closure Commission (BRAC) and has created a separate agency to manage its thousands of real estate portfolios.
“Intangible assets such as breaking government monopoly in the infrastructure sector (railway, pipelines, power transmission) should be liberalized for investors to commit equity funds into these sectors. A typical example was the liberalization of the telecoms sector that incentivized investors to purchase GSM licenses.
“Human Capital: Massive investment in skill and talent development to increase the pool of the country’s human capital. The financialization of Nigeria’s human assets will boost net foreign income and remittance inflows into the economy. A typical example is how the Philippines is training its doctors, nurses, technicians to enable them to export their services to foreign countries.”
She went on to remark that from a valuation standpoint, assets could be broadly classified into (a) financial and (b) non-financial assets explaining that financial assets had established market values while non-financial assets refer to those assets with unknown market values.
“However, most of Nigeria’s assets fall in the non-financial category because the market values of its assets are unknown. As such, they cannot be securitized to raise debt/equities or commercialized to generate revenue.
“Deal Origination & Consummation Protocol: Create a dynamic online digital platform where the financialized and commercialized assets can be offered for investment. This platform will avail private investors of relevant investment opportunities in those assets. Typical examples include Brazilian Partnership for Private Investment (PPI) and the Invest India websites.
“The Chamber hereby wishes to clarify that the recommendations above do not connote the sale of national assets but a mechanism to generate more revenue from the assets without their outright sales. This is a more sustainable way of revenue generation and boosting foreign exchange inflows. In the coming weeks, the Chamber will be engaging with all relevant stakeholders to discuss implementation mechanisms”, Dr. Almona submitted.
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