Should Nigeria Sell Assets?

I maintain that it’s evidence of bad governance when every economic decision is beaten to death on the streets, news, social media and everywhere before it is taken. It’s a sign that a government either has no clue what the right decision is or they care too much about their popularity.

The thing is, when times are good, not many people would be demanding a sale of national assets. But the times are not good. The times are fucking terrible. An already poor country is in the grips of a recession and the government needs money to drive the economy up. So the question is, should the government sell assets or borrow the money?

The question is one that pretends to an either/or answer. There isn’t one. The government should sell assets if selling assets is a better deal, and borrow if borrowing is. But for a number of reasons, I lean toward selling. Here’s why:

Privatization

I prefer a government that dramatically reduces it’s footprint in the real economy. Business should be a private thing. If the government dominates all the key resources of the country, how will private capital ever deepen and grow in Nigeria? All the government does with the supposed cash cows is squander the money pointlessly anyway. Forget the NLNG that everyone is so focused on. The government owns 22 airports in Nigeria. How many of them are efficiently run? How many are well maintained? How many are profitable? We don’t know. Sell as many of them as you can and let them be run by private companies while the government regulates and collects taxes. That allows resources to be efficiently used, and government efficiently run.

FDI/FPI and the Investing Public

Selling assets could also definitely be a good way to draw in much needed foreign investments. Or increase the attractiveness of our capital markets. For instance, since NLNG is already 51% private (which is the only reason it seems to be performing well in my books), the government can just offer half of its 49% stake in a public tender, open to the investing public both in Nigeria and abroad. You need money, you need some enthusiasm in your capital markets: two birds,one stone. The Saudis are selling part of Aramco, so it’s not like this is that crazy.

Government Efficiency/Accountability

A government that has cash cows is a government that can waste the people’s money and ignore the people’s wishes. A government that has no cash cows and has to rely on businesses to employ its people, and taxes to run its government will more readily amend regulations and make better use of taxes in order to maintain it’s revenues. It gives the government incentives to listen when the people and businesses speak.

There are a few other reasons to prefer asset sales including the fact that getting foreign exchange denominated loans in this time of currency collapse might not be the best thing we need.

That said, I have one big reason to not entirely be for asset sales at the moment: valuations. With the current state of the economy, many of our assets especially the oil and gas ones will not be priced attractively. Plus, our reserves are low which makes us the weaker party in any negotiation, by default. Buyers would know that and low ball us. The same dynamic is present in any loan agreement we enter into, of course and will show up in the willingness creditors will show and the rates they demand but ultimately, we could find a creditor that has the money and would play nice (as we seem to have found with African Dev Bank). If there’s anything i’ve learned in my years investing,it’s that you want to sell your assets when they can fetch a high price.

But at least, sell them. Or get the loan. Don’t sit on them until you can’t or until your hands are forced. But Nigeria being what it is, we will be here to watch things go down.

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