FG Set to Open N30trn Govt Assets for Investment, Restructuring of MOFI

•Buhari approves securitisation of N20trn borrowings from CBN

•Provides N470bn for university revitalisation, upward adjustment of lecturers’ salaries

Ndubuisi Francis in Abuja

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.