The federal government has confirmed that it will sell some government-owned properties to fund the 2021 budget. This was contained in a presentation made in Abuja by the finance minister, Zainab Ahmed, to stakeholders about the signed 2021 budget on Tuesday 12th January 2021.
President Muhammadu Buhari had on December 31, 2020, signed the N13.58 trillion budget for the 2021 fiscal year – about N505 billion higher than the budget proposed in October 2020.
In the approved budget, about N496.5 billion was approved for statutory transfers and N3.3 trillion was approved for debt services.
The recurrent expenditure was put at N5.6 trillion with capital expenditure at N4.1 trillion and fiscal deficit at N5.2 trillion (5,196,007,992,292). However, besides borrowings from the World Bank, the Islamic Development Bank and countries like Brazil to fund the budget, the government planned to sell a few national assets like the Integrated Power Plants in Geregu, Omotosho, and Calabar at N434 billion.
The reaction from Nigerians over this news as revealed on social media was unsupportive and suspicious of the move. The suspicion is on the threshold of the belief that FG selling assets is in reality selling assets to their cronies and even themselves using fronts. If this became the case, Nigerians wouldn’t get value for their national asset.
Keeping aside the suspicion that the sales would be corrupted, and assuming a fair situation where the assets are sold to their true value, would it serve the government’s cause? It will, but this is not the most important question; the question that government ought to address with criticality is simple: Is the sale of state assets to power the budget sustainable?
A literal answer to this is yes, it is sustainable. Government will always have assets. Government schools, hospitals, ministries, stadiums, the national assembly building, even Aso Rock are assets in the sense that they can be exchanged for money. If FG is caught in the web of extreme desperation, there are things to be sold.
But if the question takes into cognizance the economic repercussion of the sales, then the answer is complicated. We attempt to look at some of the most rippling effects of such sale.
1. The amount to be generated from the assets is rather insignificant
The 2021 Budget is worth N13.58 trillion naira. Using federal government projections, the sale of the Integrated Power Plants in Geregu, Omotosho, and Calabar at N434 billion is rather poor. This amount is less than 5% of the whole budget. If the amount could take care of up to 30% of the budget, it would carry more weight and the unflattering situation of selling assets to cater for the budget will be countered by tangible projects.
Since the assumption of democracy, no Nigerian budget has ever hit 100% performance. If this trend continues this fiscal year, then the amount derived from the sale of assets might fall under the percentage of the budgets that fail to perform.
2. The sales paint government as a bad investor
When the federal government decided to sell off some jets in the presidential fleet to fund the 2018 budget, many did not frown at the idea because selling jets not only bring money into the coffers but also saves the exorbitant cost of government pay on maintenance, an extravagance for a government struggling to pay N18,000 as minimum wage then. However, selling jets is not the same as selling power plants or concession the National Arts Theatre, Tafawa Balewa Square, and all the River Basin Development Authorities. When the government is always ready to sell assets, it is a signal that it is not a long-term investor at best but for a less generous critic, the government is outright poor at doing business.
3. Selling government assets prop uninspiring questions about government business capacity
Will the government ever get any business right?
Government has failed in its many attempts to run businesses. The Nigerian Railway Corporation, Nigeria Telecommunication (NITEL), numerous aspects of Nigerian Airways, NEPA etc. are some of the businesses government have run and ruined. Those which survive are sold to the private sector with varying degrees of efficiency.
If the government sells the power plants, the question will not only be if government can ever get any business right, it would be fair to explore why they never get any right.
4. Selling assets mask the bigger problems
One solid reason Nigeria has struggled to meet her financial obligations and resort to an undue dependence on oil is because of her inability to hold the citizens accountable to contribute their share of governance. The majority of Nigerians do not pay their taxes. According to the past Minister of Finance, Kemi Adeosun, of the over 70 million working Nigerians, only 14 million pay tax. A whopping 56 million working Nigerians do not pay tax while those that pay actually grossly underpay.
In the 2021 Budget, Companies Income Tax and Value Added Tax account for just over 15% of the budget. The US, for instance, generates about 40% of its fiscal income via taxation. A big difference from Nigeria but one that can be made up if the country taxed at least half of its taxable adults.
Again independent revenue from government agencies performs poorly. In 2020, government establishments return was poor, far from what was projected. With these shortfalls, government needs to fight to push them up. Selling assets doesn’t help this cause. The amount to be generated from these sales would be easily met if taxes and agencies lived up to their billing.
5. Selling FG assets leave a bad precedence
Selling assets will not just make government look unprepared, it would give every future government something to fall back to when projections fail to meet expectations. Governance is a continuum and bad examples are easily copied.
Selling assets are irreversible, the sold assets sometimes fail to serve the country even in the hands of its new owners, and they sometimes provide services that do not put the income capacity of the general public into consideration. Selling assets might look like an easy way out today, the poetry of those urging the sale might be good music but the reality is prosaic, crude, and, sometimes, the penalties are permanent.
Choice Arukwe
Lagos
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