The Governing Council of the Lagos Chamber of Commerce and Industry (LCCI) on Wednesday rose from its meeting with three-point fiscal recommendations on practical steps that can be taken by the three tiers of government to boost their revenue generation and foreign exchange inflows.
The oganised private sector (OPS) group expressed serious concern about Nigeria’s fiscal and financial challenges, particularly governments increasing borrowing spree to finance recurrent and capital obligations in the face of dwindling revenue, pointing out that the option remains unhealthy for the nation’s sustainable development.
Specifically, the Chamber, in a post Council meeting statement by its Director General, Dr. Chinyere Almona, rued the country’s debt situation as the country’s debt service to revenue ratio in the first five months of the fiscal year stood at about 98% up from 83% recorded in 2020.
Noting that though Nigeria is an asset-rich nation owning hundreds of large state-owned companies, valuable parcels of land, and built structures in prime commercial locations, the LCCI lamented these assets had remained grossly underutilized and contributed too little to the country’s fiscal and financial situation because their market values are currently not known.
To turn the assets into a major revenue earning source, the OPS group canvassed the need for government to take urgent steps to establish the market values of the assets, securitize the corporate assets and commercialize the real estate assets to raise revenue for the government and foreign exchange inflows for the country.
In addition, it also advocated the need to replace existing debt stocks with asset-linked debt to ease the debt servicing burden; attract greenfield FDI into publicly-listed state-owned companies; generate new revenue streams from commercialized real estate portfolios.
Given the challenges as it highlighted, the Chamber proposed a three-step approach to the three tiers of government to improve the nation’s revenue generation, foreign exchange earnings and by implication, sustainable development of the country.
First, it called on the governments to officially identify existing public assets in terms of types, location, purpose, and usage contained in a national asset register which provides detailed information about Nigeria’s assets at national, state, and local government levels. It listed the types as including, Corporate assets; Physical assets; intangible assets, and human capital.
Secondly, the LCCI also recommended the actual determination of the worth of the assets. Citing the example of Saudi Aramco’s IPO of 2019 where $25.6 billion was raised after the oil firm sold a 1.5% stake to private investors, thereby establishing the value of Aramco to be over $2 trillion, the Chamber advised that Nigeria’s corporate assets should be securitized via public share issuance to raise equities.
On the physical assets, the OPS group advised that physical assets such as idle or under-utilized properties could be re-purposed and re-developed for commercialization to generate revenue. It also cited the example of what the United Kingdom did with its inner-city prisons as well as the United States’ conversion of military bases into great commercial places through the Base Realignment and Closure Commission (BRAC) to justify its point on the need for commercialization of the idle or under-utilized physical assets.
The LCCI further clarified: “Intangible assets such as breaking government monopoly in the infrastructure sector (railway, pipelines, power transmission) should be liberalized for investors to commit equity funds into these sectors. A typical example was the liberalization of the telecoms sector that incentivized investors to purchase GSM licenses.
“Human Capital: Massive investment in skill and talent development to increase the pool of the country’s human capital. The financialization of Nigeria’s human assets will boost net foreign income and remittance inflows into the economy. A typical example is how the Philippines is training its doctors, nurses, technicians, to enable them to export their services to foreign countries.
“From a valuation standpoint, assets can be broadly classified into (a) financial and (b) non-financial assets. Financial assets have established market values while non-financial assets refer to those assets with unknown market values.
“However, most of Nigeria’s assets fall in the non-financial category because the market values of its assets are unknown. As such, they cannot be securitized to raise debt/equities or commercialized to generate revenue”, the OPS group added.
Thirdly, the Chamber further stated that in order to harness the benefits of the assets by deal origination and consummation protocol, government should create a dynamic online digital platform where the financialized and commercialized assets can be offered for investment.
According to the OPS group, the online digital platform will avail private investors of relevant investment opportunities in those assets. It listed the Brazilian Partnership for Private Investment (PPI) and the Invest India websites as typical examples in this deal origination and consummation protocol option.
The Chamber clarified that the recommendations above do not connote the sale of national assets but a mechanism to generate more revenue from the assets without their outright sales, stressing that the fiscal option is a more sustainable way of improving revenue generation and boosting foreign exchange inflows for Nigeria.