A report by the Economic Intelligence Unit said that the proposal by Nigeria’s privatization agency, the Bureau of Public Enterprises, to privatize 36 state assets is likely to fail in its goal of generating revenue for the government. government.
He said that despite the good goal of reducing operational inefficiencies and improving productivity, BPE’s poor track record in implementing its privatization program would not bring any improvement.
He referred to a claim by the CEO of the BPE, Alex Okoh, who noted that since its inception in 1999, the office has generated more than N1trn ($ 2.4 billion) from the sale, marketing and concession of 234 public assets, but pointed out that such transactions took place in the early years of Nigeria’s privatization program, as only some progress had been made in the past decade.
He noted, however, that the money generated by privatization would not compensate for the low taxation suffered by the government or an excessive dependence on oil revenues.
The EIU therefore suggested that future budgets include new taxes or increases to existing taxes, in particular value added tax (VAT).
The report said in part: âNigeria’s privatization agency, the Bureau of Public Enterprises (BPE), plans to privatize 36 state-owned assets in 2021. The agency aims to raise 493.4 billion naira ( $ 1.2 billion) by selling or licensing assets, which include power plants and free zones.
âThe objectives of privatization are to generate liquidity for the government and in doing so reduce operational inefficiencies and improve productivity through private investment. Such a large wave of privatizations reflects large oil and non-oil revenue deficits.
âIn the first five months of 2021, tax revenue was 44.6% below official budget forecast and infrastructure spending was well below target. However, the BPE has a poor track record in implementing its privatization program. BPE chief executive Alex Okoh said that since its inception in 1999, the office has generated more than 1 trillion naira ($ 2.4 billion) through the sale, marketing and concession of 234 assets. public.
âBut many of the deals took place in the early years of Nigeria’s privatization program. Little progress has been made over the past decade. For the three years leading up to 2020, the Federal Ministry of Finance did not declare any privatization proceeds, although revenue from sales was expected each year. Policymakers, who in 2019 announced a plan to reduce government equity in existing joint ventures with multinational oil companies to 40% from an average of 57.5%, no doubt want the benefits of the privatization.
âBut the authorities have been hampered by various obstacles to relinquishing ownership and control of public property. It is doubtful that the BPE will meet its 2021 target. Not only has half the year already passed, but an erratic regulatory environment for private sector participation in public services (eg due to price controls) , questionable valuations of assets, significant liabilities held by companies, tangles of litigation and public opposition to sales of strategic state assets are equally dissuasive.
âWhile there may be a new trend to divest from loss-making state-owned enterprises as a way to alleviate fiscal pressures, the proceeds from privatization will not compensate for extremely low taxation or over-reliance on oil revenues. .
âFor this reason, we continue to expect future budgets to include new taxes or increases in existing taxes, in particular value added tax (VAT). We continue to anticipate a VAT hike to 15%, a revenue measure that seems inevitable given persistent budget deficits.
“However, we continue to expect budget deficits in 2021-25, averaging 2.9% of GDP per year.”