Revenue, forex inflows: Chamber of Commerce harps on assets valuation

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Expresses concern over Nigeria’s increasing debts
As debt service to revenue ratio hits 98%

(Report by Udeme Clement):

The Lagos Chamber of Commerce & Industry (LCCI), has advised the Federal Government to take practical steps in boosting revenue and foreign exchange inflows, in order to stimulate growth of non-oil export sectors of the economy.

The Director-General of LCCI, Dr. Chinyere Almona, made this known at the Council Meeting of LCCI, where participants deliberated on steps that can be taken by the Federal Government to boost revenue and foreign exchange inflows.

According to LCCI DG; “Nigeria’s fiscal and financial challenges have been of concern to several stakeholders including the LCCI. The Government has increasingly resorted to debt, to finance recurrent and capital obligations in the face of dwindling revenue.

“The country’s debt situation has become worrisome with debt servicing consuming a significant share of the revenue. The debt service to revenue ratio for the period of January to May 2021 stood at about 98% up from 83% recorded in 2020 according to the budget implementation report.

“Nigeria is an asset-rich nation owning hundreds of large state-owned companies, valuable parcels of land, and built structures in prime commercial locations. These assets are grossly under-utilised and contribute too little to the country’s fiscal and financial situation because their market values are currently not known.

“There is need for government to take urgent steps to establish the market values of the assets, securitise corporate assets and commercialise the real estate assets, to raise revenue for government and foreign exchange inflows for the country.”

Dr Almona, pointed out;
“There is a need to replace existing debt stocks with asset-linked debt to ease the debt servicing burden; attract greenfield Foreign Direct Investments (,FDI), into publicly-listed state-owned companies; generate new revenue streams from commercialised real estate portfolios.

“Given the challenges highlighted above, the Chamber wishes to propose to the Government at both federal and state levels; the following recommendations: Identify public assets. Nigeria needs to do an official identification of its assets in terms of location, purpose and usage contained in a national asset register.”

The LCCI DG explained; “There are four types of assets namely: corporate assets – such as refineries, state-owned enterprises.
Physical assets- such as government land and built structures.
Intangible assets – such as the GSM licensing and pension funds.
Human capital – a national pool of high-return skills.

“An asset register that provides detailed information about Nigeria’s assets at national, state, and local government levels must be created.

“Determine the worth of these assets.
Corporate assets should be securitised via public share issuance to raise equities. A typical example is 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.

“Physical assets such as idle or under-utilised properties could be repurposed and redeveloped for commercialisation, to generate revenue. Typical examples are what the United Kingdom has done 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) and created a separate agency to manage its thousands of real estate portfolios.

“Intangible assets such as breaking government monopoly in the infrastructure sector (railway, pipelines, power transmission) should be liberalised for investors to commit equity funds into these sectors. A typical example was the liberalisation of the telecoms sector that incentivised investors to purchase GSM licenses”.