States Mull Privatisation To Boost Revenue As Borrowing Capacities Shrink

State governments are considering shoring up their revenue generation through privatisation of enterprises in their respective states as major source of income, monthly allocations from the federation account, continue to dwindle.

WEEKEND ECONOMY’s investigation reveals that while most state governments are cutting costs to thrive as a result of the devastating impact of the COVID-19 pandemic, some state governments are mulling privatising some of their assets wasting away all over the country. Sources said these state governments now want to leverage on their assets to boost revenue to enable them fulfil financial obligations.

WEEKEND ECONOMY also gathered that idle assets, worth $900 billion, exist in real estate and agriculture in Nigeria. Economists say privatising these assets, which daily lose their real value through wear and tear, will generate worthwhile capital for the states.

Speaking at a webinar recently, the director-general, Securities and Exchange Commission (SEC), Lamido Yuguda, said “the ability of states to continue to borrow in a sustainable manner has been severely impacted in recent times. Given the huge infrastructure gap, decreased allocation from the federal purse owing to relatively low oil revenue, and the depressed level of internally-generated revenues, states are barely able to pay salaries after servicing their outstanding loan obligations.

He said, “Privatisation is an avenue for governments to unlock economic potentials inherent in government owned enterprises. The focus on Nigeria’s journey on privatisation has largely been on the federal government. There have been several phases of privatisation exercises in the past with emphasis on enterprises operating in different sectors of the economy, including oil and gas, hospitality, mining among others.

“Several enterprises are still owned and controlled by the government, both at the state and federal levels. A number of these entities have the capacity to generate cash flows and corporate profitability.

“However, owing to certain inefficiencies, these entities are underperforming, and in some cases subtracting from value. Perhaps this is the time for state governments to revisit the privatisation value proposition. There are several benefits to privatisation.”

He said privatisation has numerous benefits, as the proceeds from the sale of government’s interest in these enterprises would help augment budget shortfalls and can be applied towards funding critical infrastructure.

Also, an economist, Dr. Lanre Ojo, said that privatisation occupies a critical position in economic globalisation, and provides an avenue for raising the bar towards economic development.

The chairman, Nigerian Governors Forum (NGF), Dr. Kayode Fayemi, said the states have been constrained to increase spending in a bid to mitigate the effects of the pandemic.

He said, “Containment is fairly in place, but more needs to be done to ensure progress is not lost; and that is where privatisation comes in. If the private sector takes over in critical sectors, state governments can focus on education and health among others.”

An Abuja-based financial expert, Felix Odu, said “since most of these assets are depreciating by the day, government should sell them off, holding 30 percent of its equity in case of misuse, when it would be recovered and sold again.”

He said, ‘‘Perhaps, government should go into government-private partnership or concession of these assets wasting away. Rather than raising debt, we need to sell our assets. This is because debt sustainability undermines fiscal consolidation.”


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