President Bola Tinubu faces heightened expectations as he endeavors to generate substantial revenue through the privatization of dormant government assets, a feat perceived as challenging in the preceding administration. With aspirations to amass up to N298.4 billion from national asset privatization in 2024, as per Budget Office data, Tinubu aims to alleviate the financial strain on the government’s budget.
However, an in-depth analysis reveals that Nigeria, the largest economy in Africa, recorded zero proceeds from asset sales during the initial nine months of 2023 against a budget of N154.6 billion. Similarly, in 2022 and 2021, the country saw no financial gains from asset sales against budgets of N90.7 billion and N205.2 billion, respectively. Johnson Chukwu, CEO of Cowry Asset Management Limited, expresses skepticism about the government’s commitment to reversing this trend, emphasizing the need for identified assets, financial advisors, and advertisements to facilitate successful privatization.
A failure to generate revenue from privatization would exacerbate the federal government’s budget deficit, potentially leading to increased borrowing or reduced planned capital expenditure. Professor Adeola Adenikinju, President of the Nigerian Economic Society, suggests that the new administration’s pursuit of revenue may prompt a shift in strategy, with a focus on exploring privatization as a pro-market approach, particularly for assets better managed by the private sector.
Tinubu’s 2024 spending plans, totaling N27.5 trillion, aim to achieve revenue of N18.3 trillion to fund the budget. Notably, 30 percent (N8.25 trillion) will be allocated to debt servicing, highlighting the urgency to diversify revenue sources and reduce reliance on unsustainable debt. Wale Edun, Minister of Finance, emphasizes the macroeconomic growth potential and investor participation that privatization can bring, aiming to create a stable economic environment.
Global investment bank JP Morgan reports Nigeria’s pursuit of unlocking $17 billion from asset sales, focusing on potential divestment from joint-venture oil and gas assets. The national asset register identifies over 70 entities, part of Nigeria’s strategy to unlock the N180 trillion trapped in dormant government assets amid concerns over a high debt service-to-revenue ratio.
Damilare Asimiyu, head of investment research at Afrinvest West Africa Limited, underscores the political will as the determining factor for the success of asset sales, acknowledging Nigeria’s substantial but underutilized assets. PwC estimates reveal that Nigeria holds between $300 billion and $900 billion worth of dead capital, particularly in residential real estate and agricultural land, emphasizing the untapped potential awaiting effective privatization.
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Reporting by David Okoroafor, News Writer in Lagos, Nigeria.
