Vice President Yemi Osinbajo has said that the federal government has not given up on its plans of selling down part of its stake in its joint venture with oil companies.
“We have not given up on it, a lot of consultations are ongoing” Osinbajo said in a response to a question from BusinessDay at the ongoing FT Summit in Eko Hotel Lagos. However, Osinbajo did not explain further on how far the process has gone.
In November 2017, Nigeria first muted the idea of funding the 2018 budget from restructuring the nation’s shareholdings in joint venture (JV) companies and sale of non-oil assets. But since then, the process has not moved forward as no financial advisers have been announced or any update given on how the process will proceed.
A top source in government had disclosed to BusinessDay last year that in considering to sell down its stakes in the Joint Ventures, the Federal Government was looking at replicating the successful NLNG model where the FG stake is fixed at just 49 percent. The government earns billions yearly from NLNG in dividends despite being a minority shareholder. This is compared to the losses declared yearly by the Nigerian National Petroleum Corporation (NNPC), which is owned 100 percent by the government. The federal government currently owns an average of 55 percent to 60 percent in the joint ventures with oil majors including; Mobil, Chevron, Total, Agip, Elf and Panocean.
In the initial plan put by the government to sell down its stakes in the JVs, captured in the Economic Growth and Recovery Plan (EGRP) it had projected to earn as much as N710 billion from restructuring of government’s equity in the Joint Ventures and N306 billion from sale of non-oil assets which together is projected to raise over N1 trillion in 2018. The proceeds from the sales was supposed to help the government fund the deficit in the 2018 budget.
The government is yet to give any update on these plans with many analysts fearing that planned sales may have been abandoned now that oil prices are on the upward trend again.
Oil prices are forecast to stay above US$70 per barrel this year. This means that the government’s oil revenues, which in good times fund as much as 70 percent of the budget is looking good and therefore the incentive to sell down its stakes in the oil majors will not be strong, analysts say.
But Osinbajo said at the FT Summit that the government is still committed to the sale process and the privatisation exercise and that potential companies that will be privatised are still being listed.
“We have already listed four airports to concession,” Osinbajo said. The vice president also explained why President Muhammadu Buhari declined to sign the African Continental Free Trade Agreement (AFCTA) despite the fact that the country was in the forefront of drafting it.
“We felt that sufficient consultation has not been done. The Manufacturers Association of Nigeria (MAN) wanted to be get more details. The president felt it would be wrong to go ahead to sign without first considering their views.”
He said that Nigeria will still sign the AFCTA but will first look at how it would affect the private sector. “We are currently looking at the nitty and gritty of the framework that was signed.”
Nigeria has 180 days to decide whether it will be part of the imminent African Continental Free Trade Area (AfCFTA) or not, as Chiedu Osakwe-led team concludes its sensitisation programme across the six geopolitical zones in the country.
The private sector, notably the Lagos Chamber of Commerce and Industry (LCCI), has surprisingly backed the deal, stating that if smaller African countries are not afraid of it, Nigeria with 198 million people and humongous $430 billion GDP has no business shying away from inking the deal.
“I don’t see anything to be afraid of,” Babatunde Paul Ruwase, president of LCCI, said in Lagos.
“If smaller countries are not afraid of it, we should have no fear to be there,” Ruwase said, adding that it was wrong for the federal government to have gone on this ‘beautiful project’ alone at the outset only to return to the private sector when it was time to sign.
Ruwase pointed out, however, that the opposition from other private sector players were legitimate as the poor state of infrastructure made manufacturers uncompetitive, stressing the need for the government to make the business environment more competitive for investors.
The AfCFTA is easily the largest trade agreement since the World Trade Organisation (WTO) in 1994. It is targeted at creating a single market for Africa’s 1.2 billion people and exposing each country to a $3.4 trillion opportunity.
The AfCFTA expects that the deal will raise Africa’s nominal GDP to $6.7 trillion by 2030 if all African countries sign up.
The treaty will liberalise 90 percent of products produced in the continent. This means that a country that is bound by the AfCFTA can only protect 10 percent of its local industries.
It is expected to establish a single customs union across the continent and allow free movement of goods and persons. Nigeria has 180 days to sign the deal or risk starting afresh to negotiate all over, a move analysts say could hurt the economy, robbing the country of free trade benefits and worsening smuggling.
Data shows that African countries have an average tariff of 6.1 percent. Forty-four African countries met in Kigali in March to pen the deal, but South Africa and a few other countries chose to temporarily opt out of it pending when local consultations were ended.
“Even though we have concerns as a nation, if we choose not to go ahead, Africa will move on,” said Bamidele Ayemibo, lead consultant at 3T Impex Trade Academy and chairman of LCCI Export Group.
“We should be the major beneficiary. Most of the issues like rules of origin have been taken care of, and we still have 10 percent to negotiate,” Ayemibo added.
BusinessDay had earlier reported that there were forces in the Nigerian Presidency who would not want the country to be part of the African Continental Free Trade Area (AfCFTA) due to their morbid fear that the deal will deal a big blow on the business interests of certain sections of the country.
But analysts say these fears are myopic as the gains of free trade will benefit all of Nigeria which has one of the biggest trading and industrial sectors in Africa.
Chiedu Osakwe and his team have gone to Kano (North-West), Maiduguri (North-East), Makurdi (NorthCentral), Owerri (South-East) and Lagos (South-West) for deliberations and consultations with various private sector groups, including manufacturers, farmers, chambers of commerce and labour unions. There are expectations that a decision will be taken by President Muhammadu Buhari soon.
“This is Nigeria’s idea,” said Osakwe said in Lagos.
“There is low trade capacity in Africa, if we take away South Africa, Kenya and Egypt. We need to have a constitution and this constitution is the agreement establishing AfCFTA. It establishes rights and obligations,” he added.