There’s too much profuse discussion on burning issues in Nigeria where the large proportion of discussants do not have the facts, or do not understand the details of the issues and are just guided by sentiments.
In the end the general public may be goaded by the one shouting the loudest than those with the most detailed analysis.
So what are the critical issues in the discourse about asset sales?
It is generally accepted by everyone today that the sharp drop in foreign exchange earnings occasioned by drop in oil price and reduction in production volume have led to a very strong supply/demand imbalance for foreign exchange. The result has been that over the past six months our naira exchange rate has gone into a tail spin. The real problem is not so much exchange rate but the volatility: the instability over a terribly short period of time. If the US dollar to Naira exchange were 500 and remains within a five percent band over a long period of time, it is better for busineses and economic planning than to have a 200 Naira to a dollar exchange rate today which plunges to 350 to a dollar in the next week owing to demand pressure.
It is also agreed that we have chewed up what should have been a huge external account deposit over the last five years, especially in the period of high oil prices and now that we earn far less income, we need a critical injection of a fairly large dose of foreign exchange to stabilise the economy and arrest the drift of the Naira. The economic management team has put out the figure of between 10 and 15Billion US dollars as the minimum cash injection required. Even if we’re borrowing from IMF we’d be getting between 1-2Billion US dollars. So, borrowing does not cut it at all.
The quick question is: How can you possibly generate that kind of volume of forex over the next six to 12 months?
My easy answer is: Are there national assets that today meet Three Broad Criteria:
- Assets that are currently a drain on the economy
- Assets whose sale will make them operationally more efficient
- Assets whose sale will generate foreign exchange
Put simply, if this nation loses nothing by selling a particular asset, but in the process generates much needed foreign exchange and the asset becomes better performing, why would anyone argue against the sale of such asset?
So let’s look at a few.
NNPC’s own financial reports in the last 10 years show that about 80% of the losses they have been reporting come from operations of two major segments of their business: Refineries and the PPMC (Petroleum Product Marketing Company). So what does the country honestly lose today by selling the refineries? They have been a drain on the national purse. They have operated at less than 40% average capacity over the last 10 years. Their sale will not only generate critically needed forex but actually stop the drain on the national purse and make them more efficient in performance.
Petroleum Product Depots/Storage Tanks
This country has a network of nineteen depots and interconnected pipelines. Apart from, occasionally, the Mosimi depot (in Southwest Nigeria), none of them have functioned in the past five years. Some of them (like the Enugu depot in the east of the country) are a disgraceful sight as the tanks have all rusted. Because this distribution grid does not naturally function, all petroleum product tankers in the country have to find their way to Lagos, Port Harcourt (in the east) and Warri (in the western Niger Delta), where they are either loading imported products or the small volumes produced by the largely malfunctioning local refineries. This is why the Apapa (the port of Lagos) and Ogere in the north of Lagos, have become a gridlock of Petroleum tankers in the last three years.
So why wouldn’t these depot/pipeline network be sold to people who can properly maintain and run them, and in the process, stop the menace of petroleum tankers all over the city, but also generate the needed forex in the short term? Read more