A restructuring of the Ministry of Finance Incorporated (MOFI), the federal government’s investment entity, has been authorized by President Muhammadu Buhari as part of broader efforts to resuscitate almost N30 trillion in non-performing assets and increase government income.
Galaxy Backbone, Bank of Industry (BoI), Development Bank of Nigeria (DBN), and Bank of Agriculture are a few examples of the assets.
To do this, the federal government must fully establish MOFI as a top-tier investment firm with a new management team and board, relocating it from its current position as a division of the Office of the Accountant General of the Federation and staffing it with core professionals with expertise in portfolio management.
The government’s assets total more than N30 trillion, according to Mrs Zainab Ahmed, Minister of Finance, Budget, and National Planning, who made the admission at the public presentation of the 2023 budget plans in Abuja.
She said that the process of re-engineering the assets to eliminate their bureaucratic tendencies and make them operate successfully as going companies had begun.
She said, “We started the process of re-engineering the MOFI, saddled with the responsibility of managing government assets.
“MOFI has been existing for 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 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 the 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 focused and specialised in portfolio management and driving investments to run better.”
Ahmed further stated that attempts were being made to change the financial records in order to increase equity and allow both Nigerians and foreigners to engage in the assets.
She also revealed that the securitization of the federal government’s borrowings from the Central Bank of Nigeria (CBN) under the Ways & Means Advances has been authorized by President Muhammadu Buhari.
The securitization window was set at 40 years at a nine per cent interest rate by the minister who valued the debt at N20 trillion.
She said, “The total Ways and Means today is N20 trillion and we have the approval to securitise, then the securitisation will be over a 40-year period with an interest rate of nine per cent.
“But over the years we have been paying the interest component at the 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 was 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 the repayment windows were long-tenured
“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 of August this year, the 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 revealed that the N470 billion Special Fund for university revitalization and salary increases for academics was included in the 2023 budget by the federal government.
Ahmed stated that N300 billion will be used to revitalize universities and N170 billion would be used to raise the wages of university instructors.
She stated that N2.05 trillion had been set aside for education, N1.58 trillion for health, N2.74 trillion for defence and security, and N998.9 billion had been set aside for infrastructure, among other vital areas.
