Why FGs Planned Assets Sale cannot Boost Revenue
- Professionals want assets valued before sale, concession
- Not adhering to procurement law is illegal, says Wike
- "It is against fiscal responsibility to sell capital assets for recurrent purposes"
Hopes of the Federal Government raising tangible earnings from the sale of some national assets towards financing the N13.5 trillion 2021 budget may be far from reality, going by the value of the assets, already described as liabilities and dead.
With a deficit of N6.1 trillion in the 2020 budget and possibilities of a higher value beyond the estimated N5.2 trillion by the end of 2021, if earnings do not improve, getting assets sold or concessioned without valuation may further weaken prospects of better earnings from such assets.
Apart from its plan to engage in domestic and foreign borrowings for the budget, the Federal Government recently confirmed that it would sell some government-owned properties to serve as additional source of finance for the 2021 budget of N13.5 trillion.
While government is undecided about which of its assets to sell, some concerned professional are asking for an orderly and transparent process in the disposal of its assets.
PricewaterhouseCoopers (PwC) had recently estimated that Nigeria holds at least $300 billion or as much as $900 billion worth of dead capital in residential real estate and agricultural land alone, even as the Lagos Chamber of Commerce and Industry argued for fiscal restructuring, especially spending on non-essential projects.
Specifically, assets like refineries have remained a drain on the country’s purse while competition from the private sector on other assets like Integrated Power Plants in Geregu, Omotosho, and Calabar, National Arts Theatre, Tafawa Balewa Square, and the River Basin Development Authorities, the National Stadium in Lagos, and the Moshood Abiola Stadium, Abuja, constrains uptake of such assets.
Finance minister, Zainab Ahmed had confirmed the plan in a recent televised interview, saying the sale of the public assets will benefit Nigerians and boost the economy.
According to her, there are some government assets that are dead that can be sold to the private sector to be reactivated and put to use for the benefit of Nigerians.
"So we are looking at different – and I am a member of the National Council on Privatisation - we are looking at different categories of assets that government has not been able to manage, that are lying down and in some cases even completely rundown, to cede them off to the private sector," she added.
Already, the Nigerian Estate Surveyors and Valuers (NIESV) has mandated the Federal Government to ensure proper valuation of the assets before going ahead to sell them.
They said involving professionals like members of NIESV, who are trained valuers by law would ensure transparency and openness in the process.
NIESV President, Sir Emma Wike said there is nothing wrong about selling the assets, if due process is followed.
He said there should be proper valuation of those properties by professionals who are expected to carry out enumeration, and assessment of the properties.
"Let us have transparency and openness if the government is to go ahead. They should have included it right from the preparation stage of the budget, determine how much would be realised and of course, there would have been proper valuation according to the Procurement Act so that people could know how much revenue is expected from the sale before the President assented to the budget bill. Anything done after the appropriation bill could become illegal."
Wike explained that what the government plans to do is to divest in some of those assets through concession, and allow the private sector to run the businesses.
“We had concession of assets during Obasanjo's regime. If the government has properties that are lying low without being used, the government should be able to sell and use the money realised to fund the budget, it means that it was not in the budget bill and so it is not proper.”
Wike added: "It has been long since the office of the Attorney General set up a committee to look at all government’s properties. That committee, I don’t think has submitted their final report. We need to know the numbers of such properties and the value. If they want to follow the rule, they should consult estate surveyors and valuers, to carry out proper valuation before the properties are sold."
Also, Chairman, Lagos branch, NIESV, Dotun Bamigbola said it’s appropriate that due diligence is done on these properties for sale and/or concession using registered Estate Surveyors and Valuers in determining their values to ensure optimum worth.
According to him, “If there is no value for the assets, it is important that estate surveyors and valuers are commissioned to carry out the valuation.
"It is more so because of the economic effect of the COVID-19 on property values now. A more recent opinion of value from appropriate professionals is required," he said.
The government, he noted, has its procurement process for engaging professionals, particularly Estate Surveyors and Valuers but on Ministries, Departments and Agencies (MDAs) basis. Estate Surveyors and Valuers, he said, can be engaged in a decentralized process.
He stressed that the purposes of the valuation for each property should be well defined, whether it is for sale or for concession, to guide the approach of the valuer.
However, former Chairman, Estate Surveyors and Valuers Registration Board of Nigeria, (ESVARBON), William Oruka Odudu said selling national properties is unwise because it would be difficult to replicate such edifice in the future.
According to him, the government has in the past sold a lot of properties cheaply and now they cannot replicate them, nor rebuild them.
"They have borrowed enough money in the past, which is unnecessary and now they want to sell the nation's assets to finance the budget, it is not a welcome thing at all. I won’t encourage it because to replace them would almost become impossible.
“The National Theater in Lagos, for example, if sold, how would you replace such a monument. That is something that posterity would love to admire. If it’s sold, it may be given out cheaply to private individuals or political cronies and so it is not wise.
"Buyers could make so much money at the expense of the government. If the National Arts Theater is sold at a well-valued price, the government could make a lot of money from it. However, it may not be valued before the government sells and to replace a monument like that will run into trillions of naira," Odudu said.
Contributing, the former Chairman, NIESV Faculty of Valuation, Kehinde Ogunsanya said there shouldn’t be an issue about government concession or selling assets as far as the due process is followed.
According to him, due process must come in the form of the government first identifying the assets they are selling, carrying out the valuation of the assets to determine the worth, and throwing it open to the market for the people to bid.
“It should be an open transaction because if it is closed, somebody could just bring money and buy. It should be well advertised and must be given to the best bidder. No matter how bad a property is, it still commands value no matter how low,” he said.
To a procurement expert, Mohammed Bougei Attah, the intention to borrow from external sources, dispose of public assets as well as borrow from the so-called unclaimed dividends, amounts to too much of borrowing.
He said it is strange that with the level of resources generated from agencies such as Nigerian Ports Authority (NPA), Customs, Federal Inland Revenue Service (FIRS), and others government is still looking to sell assets.
Attah, who is the National Coordinator, Procurement Observation And Advocacy Initiative (PRADIN), said government should concentrate on Internally Generated Revenue (IGR).
He said: “I have watched the FG through the office of the Minister for Justice and Attorney General initiate the process of disposing of public assets using executive fiat. Forfeited assets or recovered loots in whatever forms are public resources that should be disposed of according to extant laws of the country.
“There are laws that address the issue of disposal of assets; the Public Enterprise and Privatization Enterprise Act of 2000, the AMCON Act 2004 and most recently section 55 of the Public Procurement Act (PPA) 2007 are very clear on this disposal. Professionalism is key here, and the recent Executive Order 5 also clearly addressed this.”
Section 55 of the PPA 2007 recommends that disposal of public properties or assets should be done in a most transparent way, taking into consideration that as public resources, the best professionals in the areas of auctioning and procurement process (disposal) should apply in all cases.
According to him, one can say there is value for the assets to be sold, but not in the manner in which they are proposed to be disposed.
He added: "The law should be applied to give value to the assets when they are disposed of. I have not read the details of this plan to sell these properties. In any case, the law of sale or disposal of public properties should apply sine-qua -non."
The Lead Director, Centre for Social Justice (CSJ), Eze Onyekpere emphasised the strict observance of the privatisation process as advanced by the National Council on Privatisation, and the Bureau of Public Procurement, which should make sure the process is competitive, and that everyone interested comes in, and then, government should pick the best value for the items that are for sale.
Specifically, he said if government must sell its assets, it should be to re-invest in other assets.
"Ideally, government shouldn’t sell capital assets to use the money for recurrent purposes because it’s against the rules and principles of fiscal responsibility. Government should rather cut down the cost of running government, instead of borrowing and selling assets to meet the over- bloated expenditures, which do not add much value to the economy," Onyekpere said.
Culled from The Guardian Newspaper, January 2021