President Muhammadu Buhari has approved the process of restructuring the Ministry of Finance Incorporated (MOFI), the federal government’s investment vehicle, as part of overall measures to revive over N30 trillion non-performing assets and boost government revenue.
Some of the assets are Galaxy Backbone, Bank of Industry
(BoI), Development Bank of Nigeria (DBN) and Bank of Agriculture, among others.
To achieve this, the federal government is to fully set up
MOFI as a world class investment company with a new management and board to
move from the civil service structure where it sits, as a unit under the Office
of the Accountant General of the Federation, with core professionals with
specialisation in portfolio management.
The Minister of Finance, Budget and National Planning, Mrs.
Zainab Ahmed who made the disclosure at the public presentation of the 2023
budget proposals in Abuja, stated that the government has over N30 trillion in
terms of assets size.
According to her, the process of re-engineering the assets
to strip them of bureaucratic tendencies and run effectively as going concerns
had commenced.
She said, “We started the process of re-engineering the
MOFI, saddled with the responsibility of managing government assets.
“MOFI has been existing since many years ago and has
gradually become quite inefficient. So, we have got the president’s approval to
start the process of re-engineering MOFI and we are now at the stage where we
hope in the next one month or six weeks, we will be able to relaunch MOFI.
“We’ve been able to take stock of the assets that are in the
books of MOFI and even without taking stock of the ones that are not in the
books of MOFI, we have about N30 trillion in terms of assets size. So, if we
are looking for a debt of N10 trillion, we already have assets of N30 trillion.
“We are going to open these assets for investments, so we
will issue different kinds of equities investments into these assets. The
government doesn’t have the kind of resources to recapitalise these assets.
“When I talk about assets, I am talking about our
investments like the Bank of Industry (BOI), the Development Bank of Nigeria
(DBN), Galaxy Backbone and several other agencies of government; companies that
government has set-up.
“A few of them are doing well and delivering the books but
our assessment is what they’re doing can still be better by incremental
adjustments.
“I give you an example; we have the railways in the books of
MOFI at something like N20 million as the asset size and we are conducting a
re-evaluation. By the time we finish the re-evaluation, the value of the
Nigerian Railway Corporation will run into trillions. Also, by the time we
finish the re-evaluation of our airports, it will run into trillions.
“There is a process that is ongoing, we’ll have MOFI fully set
up a world class investment company with a new management and a new board to
move from the civil service structure where it sits as a unit under the office
of the Accountant General of the Federation, and get core professionals that
are really focus and specialised in portfolio management and driving
investments to run better.”
Ahmed added that efforts were ongoing to amend the books to
raise equity in order open up investment for Nigerians and non-Nigerians to
invest in the assets.
She also disclosed that President Muhammadu Buhari has also
approved the securitisation of the federal government’s borrowings from the
Central Bank of Nigeria (CBN) under the Ways & Means Advances.
The minister who put the debt at N20 trillion, put the
securitisation window at 40 years at nine per cent interest rate.
She said, “The total Ways and Means today is N20 trillion
and we have approval to securitise, then the securitisation will be over a
40-year period with interest rate of nine per cent.
“But over the years we have been paying the interest
component at current rate that is charged on the Ways and Means.”
However, it is not clear how the government intends to go
ahead to securitise the debt owed to the CBN without an amendment of Section 38
of the CBN Act, 2007.
The Act allows the CBN to grant temporary advances to the
federal government in respect of temporary deficiency of budget revenue at such
rate of interest as the bank may determine.
The Act stresses that such advances shall not at any time
exceed five per cent of the previous year’s actual revenue of the federal
government, and that all advances made pursuant to the section shall be repaid
as soon as possible; and shall in any event be repayable by the end of the
federal government financial year in which they are granted.
The Act adds that, “should such advances remain unpaid at
the end of the year, the power of the bank to grant such further advances in
any subsequent year shall not be exercisable, unless the outstanding advances
have been repaid.”
Also at the budget presentation, the minister restated that
Nigeria has no intention of restructuring its debt with international
creditors, insisting that its public debt stock was within healthy limits.
Alloying years that the country might default on its debt
service obligations, the minister noted that the country’s debt maturity was
within the Debt Management Strategy (DMS) set up by the Debt Management Office
(DMO).
She stated that of the nation’s total debt stock of $102
billion, the foreign component was only 35 per cent while 65 per cent was
domestic.
She added that 47 per cent of the foreign debt were owed to
multilateral agencies, which are concessionary in nature, while 12 per cent are
bilateral loans from China and others, adding that 31 per cent are commercial
debts from Eurobonds and others.
Ahmed noted that the possibility of Nigeria defaulting in
meeting its debt obligations was very remote since such the repayment windows
were long-tenored.
“The exposure to refinancing risk remained stable as a
result of the strategy of issuance of long-dated securities in the domestic and
international markets in addition to accessing long term funds from
multilateral and bilateral lenders.
“The FGN’s contingent liabilities as a percentage of GDP was
2.64 per cent in 2021 compared to 2.75 per cent in 2020. It is projected to be
around this region by the end of 2022.
Nigeria is not planning on restructuring its debt as it remains
committed to meeting its domestic and external debt obligations.
“The federal government will continue to utilise appropriate
debt management tools to streamline the cost and risk profile in the debt
portfolio, including through concessional loans, spreading out of debt
maturities to avoid bunching, and re-profiling of the debt maturities by
refinancing short-term debt using long-term debt instruments,” she said.
She again restated that the challenge facing Nigeria was
revenue and not debt, disclosing that, as at August this year, debt service to
revenue ratio was 83 per cent.
“That is why I said what we have is on revenue and we have
to do everything we can to increase our revenue.
“Our policy target is to keep it at no more than 50% over
the medium-term period and ultimately reduce it down to 30 per cent but we are
currently over 50 per cent debt service to revenue,” she stressed.
The minister also disclosed that the law establishing the
National Youth Service Corps (NYSC) Scheme was on the verge of being reviewed
to make it more flexible and effective.
For instance, she said this would make it easy for Nigerians
in the Diaspora to serve at their convenience.
Ahmed said: “The initial adjustment we are trying to achieve
is for diasporas. Currently, the NYSC
Act has a provision that says you must serve within three years of graduation.
“So, we have people that are living in diaspora that go
beyond these three years. The immediate past Director General of the NYSC began
a process that was indicating that they have gone against the law and actually
wanted to take people up on that and our view is that, that is discouraging
diasporans from coming back home and bringing investment.”
She also disclosed that the federal government has provided
N470 billion Special Fund in the 2023 budget for university revitalisation and
upward adjustment of lecturers’ salaries.
Ahmed said N300 billion was for university revitalisation
and N170 billion for upward adjustments of the university lecturers’ salaries.
On the allocations for critical sectors, she said the sum of
N2.05 trillion was allocated to education; N1.58 trillion for health; N2.74
trillion allocated to defense and security, infrastructure got N998.9 billion,
among others.
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