₦airaland Forum

In my previous capacity as the Chairman of the
Technical Committee of the National Council on
Privatisation up until May 2015, I canvassed for
the privatisation of the power sector, sale of Nitel
and pushed for the sale of the refineries and the
passage of the transport reform bills before time
ran out on the last administration.
The Nigerian economy has since taken a turn for
the worse. We are now confronted by the twin
evils of economic stagnation (2.06 percent
contraction of real GDP in the second quarter of
2016) and a high inflation rate (above 17
percent.) Stagnation + Inflation = Stagflation.
Those calling for a drop in interest rates, at a time
of ravaging inflation and uncontained exchange
rate pressures, are guilty of carrying out a partial/
jaundiced analysis. Their prescription would
further destabilise the macroeconomy.
These same people never seem to conclude their
prescription. They should equally prescribe how
to allocate scarce foreign exchange and attract
forex inflows? If they would go all the way and
recommend that we should allocate the available
CBN dollars via a lottery, conducted on live
television, where the winners pay N320/$1 and
the losers head for the parallel market at N440/$
1, then we can take them seriously. At least such
a lottery would be “scientific”, transparent and
corruption free.
Ideally, the economy would benefit from a dose of
stimulus, but only the type that simultaneously
helps to ease Nigeria’s forex scarcity problem,
rather than simply heating up the forex market
further.
I am an economist, an investment banker and an
entrepreneur too and so I know that, if you offer
investors negative real interest rates and
phenomenal forex arbitrage opportunities, then
few will bother to invest in anything real. They
would rather borrow naira at low interest rates to
chase Central Bank of Nigeria (CBN) dollars at
N320/$1 with the aim of importing goods to sell
to consumers at an effective rate of N440/$1. In
effect, round-tripping will become the only
worthwhile investment game in town. The time to
bring down interest rates is when we have
contained the inflationary pressures or are well on
the road to doing so.
What we need is a combination of well thought
out, calibrated and properly sequenced fiscal and
monetary policies supported by the right mix of
macro-prudential tools. Thankfully, the Monetary
Policy Committee (MPC) of the CBN recently
brushed aside some ill-advised public pleas for a
drop in interest rates in the face of stagflation.
Monetary and exchange rate policy, based on a
sound theoretical underpinning such as the
Mundell-Fleming Trilemma, is clearly not
everyone’s forte.
There are two broad avenues for
quickly increasing the availability of forex
and these are: (1) external borrowing; or
(2) asset sales. Let me quickly add that I
am nervous about the former because we
have weak institutions, a bloated and
inefficient public service and a
challenged economic team.
The elections are over at the Federal level and I
belong to the school of thought that believes that
all hands must be on deck to fight Stagflation.
The last administration did not save for the rainy
day during an oil boom and the current
administration was in denial for close to twelve
months until the acute forex and petrol scarcities,
occasioned by the continued pursuit of clearly
unaffordable subsidies, forced a policy rethink.
The CBN has half-embraced market determined
exchange rates, but then it retains so many
impediments to the smooth functioning of the
market that we are now stuck with confusing
multiple exchange rates which have spooked
investors. Business confidence is exceedingly low
on account of unguarded utterances by several
government functionaries, regulators
overreaching themselves and overzealous anti-
corruption agencies who take turns to harass
private sector businesses. Investors see that the
risk/return equation has altered dramatically –
risks are up and returns are down.
Stagflation is one of the most difficult
macroeconomic conditions to break out of and
the Nigerian elite owe it to the teeming masses to
jettison our differences, end the blame game and
instead work together to initiate a credible path
towards both lowering the inflation rate and
restoring economic growth. If we do not act now,
we may face four to eight years of zero per capita
income growth. Italy has just completed a decade
of no growth and Japan has attained that same
state for close to two decades. Brazil has been in
recession for three years and the economies of
Zimbabwe and Venezuela are in free fall. With our
large youthful population, that is unprotected by
adequate safety nets, Nigeria cannot afford to
emulate any of these countries.
Some of the longer term structural changes that
we need to institute to salvage our economy will
require a bipartisan handshake because they call
for constitutional changes. Those who are calling
for some form of political restructuring are right
to put that on the table because it is unclear how
unviable state governments that cannot pay
salaries, can become serious economic actors
over the course of the next decade.
Our economy could do with some fiscal stimulus,
but the Federal Government of Nigeria (FGN) has
no net savings to draw upon and our external
reserves have fallen dangerously low (below $25
billion). Instead, FGN faces a rising local debt
burden which can only become progressively
burdensome on account of high nominal naira
interest rates which are still necessary to contain
inflation and help douse exchange rate pressures.
The harsh reality is that the foreign exchange
scarcity will continue to bite for a while because
business confidence is exceedingly low and
investors (local and foreign) have lost faith and
now prefer to delay forex inflows.
There are two broad avenues for quickly
increasing the availability of forex and these are:
(1) external borrowing; or (2) asset sales. Let me
quickly add that I am nervous about the former
because we have weak institutions, a bloated and
inefficient public service and a challenged
economic team. The recent bad decision to sell
subsidised forex to pilgrims after a sharp naira
devaluation for everyone else speaks volumes.
If we have the discipline to
transparently execute selective and
strategic asset sales, that pass my 3-way
test, then we can significantly reduce the
extent of our recourse to worrisome
external debt. Working together, we can
tame this stagflation monster.
That brings me to asset sales. If these are done
strategically, they can constitute a triple boost to
a flagging economy. They can: (1) bring in forex;
(2) improve efficiency; and (3) reduce the drain
on existing resources which some FGN assets/
investments presently constitute. Call this my
three-way test.
I would not advocate for the sale of a “cash cow”
like the FGN stake in Nigeria LNG (NLNG) at this
time because it does not pass the second and
third pillars of my three-way test. Conversely, I
would advocate for the replication of the very
successful NLNG model, where the FGN stake is
capped below 50 percent across the oil producing
Joint Ventures (JV). The biggest obstacle to
incorporating the existing JVs between FGN and
the oil majors is attributable to the fact that no
right-thinking business house will want to be
“trapped” in an Incorporated JV (IJV) in which the
FGN has majority control. What happens when
FGN dissolves the Board and fails to appoint new
directors, thereby leaving the IJV short of a
quorum? NLNG works because FGN is not in
control there.
This is an excellent time to form separate IJVs
with Shell, ExxonMobil, Chevron, Total etc. but for
this arrangement to takeoff properly and quickly,
FGN must sell down its stake from the 55-60
percent that it presently holds to no more than
40 percent in each of the IJVs.
Anybody in his right mind will gladly pay a
premium to attain 51 percent and move away
from the present clumsy and unwieldy structure
where they are junior partners in a Joint Venture
with a historically meddlesome and value-
destructive Nigerian National Petroleum
Corporation (NNPC).
Adopting the NLNG model also frees the FGN from
the debilitating cash calls that have become
increasingly burdensome on the annual FGN
budget because the IJVs will be able to borrow
internationally to finance their investment
programmes. I would also favour the listing of the
IJVs on The Nigerian Stock Exchange by placing
the balance of the nine percent shareholding in
each of the IJVs with the investing public. This will
provide added public scrutiny (possibly better
than what FGN alone can provide through board
representation.) The refineries should also be sold
outright because NNPC has never been able to
run them and their outright sale also passes my
3-way test above.
If we have the discipline to transparently execute
selective and strategic asset sales, that pass my
3-way test, then we can significantly reduce the
extent of our recourse to worrisome external
debt. Working together, we can tame this
stagflation monster.

Atedo Peterside(CON) is the Uncle of Dakuku Peterside, the defeated APC candidate in the 2015 Rivers State Gubernatorial election.
http://opinion.premiumtimesng.com/2016/09/26/averting-economic-meltdown-via-right-type-asset-sales-atedo-n-peterside/

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mamabomboy:
Atedo Peterside(CON) is the Uncle of Dakuku Peterside, the defeated APC candidate in the 2015 Rivers State Gubernatorial election.
http://opinion.premiumtimesng.com/2016/09/26/averting-economic-meltdown-via-right-type-asset-sales-atedo-n-peterside/

Some food for thoughts. Some 85% sense in what peterside said. All will be well with the Nigerian economy in Jesus Name.

And some phoolish people will still support APC Rivers state and Judas Iscariot Amathief. It's obvious that this so called angels and saints want to bleed this country dry. Jonathan was the only thing standing between them and the nations treasury, but with him gone and senile, good for nothing General pretender in charge. We can kiss Nigeria goodbye. They will rape the country like a phoolish virgin female in an all male prison.

They shld sell d presidential aircraft, sell d four refineries, sell national assembly (legislators included), sell all federal secretariat, sell daura, sell half of aso rock, sell all fulani herdsmen infact sell dakuku peterside, sell all nairaland zombies n I ll support it. I wonder hw many ppl de for dis cabal dat wants to buy Nigeria.

What of all the funds recovered from corruption. If that's not enough, let them come down to former state governors and lg chairmen. Even civil servants and police officers. And I've not heard them auctioning recovered houses or are they lying to us? Please leave our NLNG alone. Sell Presidential jets instead. Besides I thought Buhari said the money recovered can fund the budget

It can only get clearer that the present admin is in cahoot with dangote to sell our assets..

Which kin mumu admin be this...

Very daft..

Selling our assets Coux of recession is like selling your house to repair your car..

This government is full of dullards

mamabomboy:
And some phoolish people will still support APC Rivers state and Judas Iscariot Amathief. It's obvious that this so called angels and saints want to bleed this country dry. Jonathan was the only thing standing between them and the nations treasury, but with him gone and senile, good for nothing General pretender in charge. We can kiss Nigeria goodbye. They will rape the country like a phoolish virgin female in an all male prison.

I understand ur plight. Wailing is a form of emotional breakdown. With the amount of money($) spent in last presidential polls and its result you and yours av the right to wail.

His reasons amount to trash..concessions seem to the better than out right sale..

APC are criminals

There is no excuse for trying to sell our wealth, where are all the so-called funds the government claims to have recovered from corruption? Lies lies lies

People should read this to see the real and intelligent thought processes of a sane Nigerian.
https://breaking.com.ng/nigeria/chukwuma-soludo-sale-of-nigerias-national-assets-as-dangerous-policy-myopia/

GoggleB:
Selling our assets Coux of recession is like selling your house to repair your car..

This government is full of dullards

Wise guy, did u read what we all read? or u just felt like talking

vengertime:
APC are criminals

Read and understand...READ READ READ