Nigeria is considering the sale of a significant chunk of its stake in 20 state run firms to strategic investors in a bid to improve corporate governance and to raise funds.
Bloomberg is reporting that Armstrong Takang, the CEO of the Ministry of Finance Incorporated (MOFI), revealed this information in an interview.
MOFI is the state asset management agency that manages the Nigerian state holdings in over 130 firms cutting across financial services, energy, infrastructure and industrial sectors.
The Nigerian National Petroleum Corporation (NNPC), the state oil company would be one of the firms to be sold once the plans are finalized. NNPC is notorious for graft and transparency issues.
MOFI is considering options for disposal including sales to strategic investors or Initial Public Offerings (IPO) with sale plans to be concluded within the next 18 months.
Takang said the aim of the sales were to improve corporate governance and create value.
He is quoted as saying:
“It is better for us to own 49% of a high performing entity than 90% of an entity that is under-performing.”
The NNPC is definitely one of the most under-performing firms under the control of the Nigerian state. For a company holding stakes in Joint Venture operations with International Oil Companies (IOC’s), NNPC has remained unprofitable with obvious leakages and very poor corporate governance.
Nigeria is currently facing serious economic headwinds after the removal of fuel subsidies announced by the new administration of President Bola Tinubu.
This move and the merging of multiple currency exchange rates, have had serious economic implications on the West African nation.
Inflation is now at record levels of over 24% while the exchange rate of the Naira to the US Dollar has also reached record lows, with reports of one dollar exchanging for N950 in the last couple of days.
Nigeria has successfully sold stakes in state owned firms to investors in the past. The transactions have not always been transparent and sometimes the results have been mixed. For instance, the selling of stakes in power generating and distribution companies have not addressed the serious power problems in the country.
Now, the country is seriously in debt with record borrowings carried out by the past administration of Muhammadu Buhari. With a burgeoning youth population and unemployment numbers ranging in the high end of 30%, Nigeria seriously needs to clean up its act. Maybe, the new asset sales plan would reduce some of the traditional avenues noted for revenue leakages like the NNPC.