Questions around “what can be done?” and investment advise around “best possible options” are now arising, following the Federal Government’s recent confirmation of its readiness to sell some of its assets in a move to raise cash to redirect the economy to growth.
While the Federal Government considers disposing some under-utilised state assets, such assets which will be up for sale are yet to be determined.
An informed source at the Nigerian bourse told BusinessDay that, “Many Nigerians are against selling off assets because of lack of transparency and distrust for the system.”
His words: “The imperative of selling some assets can be likened to a bankrupt man who owns landed properties, automobiles and stock assets. He can either offload some to liquidate indebtedness or continue to wallow in poverty and die.”
Responding to the question, “what can be done?”, he said government should consider asset sales through the Nigerian Stock Exchange, and cap a maximum of allocation that can go to each individual, –thereby democratising wealth creation.” This, he believes would ensure that government gets better value from the corporation(s).
“Pension funds can be invested in these new offerings to create superior value for retirees”, the NSE source added.
Before now, an inventory of Nigeria’s financial requirements is being canvassed by some analysts as a necessary first step for the planned disposal of national assets to generate revenue for the embattled economy.
Patrick Ilodianya, managing director, SFS Capital Nigeria, a Lagos-based Fund/Portfolio Manager said, “At least 5% of any sale must be offered to retail Nigerians and quoted on the Nigerian Stock Exchange for subsequent transparency and accountability”.
While Ilodianya recognizes that though business ventures are better and efficiently managed by the private sector than by government, he warns that Oil & Gas companies which are already managed by technically competent private sector partners should not come first in the asset sale programme.
“Independent Investment Houses should be used for each sale, for transparency and professionalism –a minimum of one international and one local investment house. The international investment house will ensure global reach for bids and the local investment house will gain from the knowledge transfer and facilitate subsequent listing on the Nigerian Stock Exchange and the overview of the Securities & Exchange Commission (SEC),” Ilodianya told BusinessDay.
“Sale should be made to consortia with deep technical and financial competences. The financial competence which should be emphasized, should go beyond the immediate payment of US$ to the FGN but how much US$ would be subsequently invested and how many jobs would be created within one year. The winning bid document and commitments should be disclosed to the general public”, the fund manager added.
“The sale of assets may take months, even years to go through the entire process – from deciding which asset to sell and preparing tender to evaluation and selection of successful bids. Where I think this move can help Nigeria’s current FX situation is in the signal it gives to the market – that beyond the traditional source (oil sales), there will be certain USD coming in down the line.
“However, it is not a long term fix for Nigeria’s currency problem. The country needs to quickly diversify FX earnings away from crude oil which currently accounts for over 90% and build a strong base of non-oil exports,” Pabina Yinkere, head, research division, Vetiva Capital Management Limited told BusinessDay in an emailed response.
“Although finer details on specific assets planned to be sold are not yet public, the rationale and merits of the proposed sale have been the subject of discussions most recently. Negotiating asset sales in a receding economy creates an automatic cap for valuation even if asset-specific upsides are substantial.
This is especially so for earning assets. The issue around transparency is even more contentious but largely addressable in our view. The Buhari-led administration has gained substantial credibility in anti-corruption drive, relative to previous administrations. In our view, if the bidding process is transparent, and proceeds are well managed, it should be of little concern who the eventual buyers are,” Kayode Tinuoye-led team of research analysts at Lagos-based United Capital plc said in their recent commentary “Should Nigeria sell its national assets?”
Iheanyi Nwachukwu
