We Need to Change Strategy, Mindset on Managing Public Assets
Dr. Armstrong Takang is the Managing Director of the Ministry of Finance Incorporated (MOFI), the federal government’s investment vehicle. He believes in removing bottlenecks to private sector engagement with the government, a change of mindset and strategy in managing national assets. For him, the country can optimise and leverage its vast assets for national development. In this interview, he proffers the way forward as the company begins to woo private sector investments. Ndubuisi Francis provides the excerpts:
Ithink for us, we’re very excited. It is a very important assignment. And the fact that the President and the Minister of Finance have deemed us worthy to be a part of this very great team, for us is a unique, humbling experience and it’s a privilege to serve our nation. And we believe that the calibre of the board members makes it easier for us to not only engage in this assignment, but to diligently, successfully ensure that we meet expectations of the president as well as Nigerians.
But we also know that we have the support of the administration, to go ahead to deliver on this mandate. And we are committed to doing so for the benefit of Nigeria and Nigerians.
What MOFI owns/owes
So remember that the assignment in terms of establishing what the assets are, is a process that has just begun. And for us, it would be premature to say what assets we have under management because the whole idea of establishing MOFI is so that we establish what Nigeria truly owns. At the moment, we can tell you what we owe, but we can’t tell you what we own. And it is precisely one of the reasons why MOFI was restructured to engage in the process to establish what Nigeria or the federal government actually owns. And so this is an ongoing exercise that has just started. Clearly, we have quite some distance to go. But we’re very confident that this will be running into tens of trillions of naira as we continue the process of establishing what we own.
Well, I believe that as you know, there is an agency that has a statutory responsibility to not only track what we owe, but to manage what we own, and that is the Debt Management Office. I think that is their remit. They can give you all the details of what we owe and who we owe and all the repayments and conditions of repayment. For us at MOFI, our mandate is around what government owns, especially investment assets, and that’s our focus--establish precisely on what we own and how much it is worth, how we can optimise it, how we can monetise it, and ensure that we’re using it to support the government’s programme to revitalise and reposition our economy.
The Agenda
Well, you know, we have a three-point agenda. Agenda number one is to work on our corporate assets to make sure that those corporate as- sets deliver sustainable risk-adjusted returns. And how do we measure that? So, for every share we own in any entity, we have to make sure that there is capital appreciation; that those shares are improving the environment.
Secondly, we want to make sure that each of those entities delivers dividends to give us liquidity. So that’s our first agenda item in terms of corporate assets. The second agenda item is to establish what the federal government owns, especially in our investment assets and that involves us first of all, identifying enumerating, valuing, cataloguing, managing, optimising and monetising our assets, and those are in different asset classes. Some of those clearly are the corporate assets. These are shares we own in entities, whether we own them 100 per cent or we own them partially. These include real estate assets. These are assets that are either in Nigeria or offshore. As you know, we have a large portfolio of real estate assets offshore. We will be enumerating these, valuing and making a decision as to how to rationalise and optimise those to ensure that we’re getting the most value. The third category is around our oil and gas assets. As you know, this is the country that is heavily
endowed with oil and gas assets. And for the last seven decades, we’ve made a lot of foreign earnings from oil and gas assets with huge room for improvement in terms of how we use the oil and gas assets.
So that clearly is a third category of assets that we will be tracking and ensuring that we find ways to do better. There are solid mineral assets as well. So that’s the fourth category. The fifth category is around our infrastructure assets, especially the ones that have concessions on them. We’re interested in knowing where they are, to what extent are they being used, how can we improve them? How can we optimise them, and how do we make sure that we’re maximising the revenues that are gotten from them?
There are also intangible assets. If you look at our spectrum (telecommunications spectrum), right away, even the name Nigeria has value, the name Abuja has value, copyrights that have come from the work that we have done over decades; these are all assets. The next category we classify those as our green assets--green economy assets, carbon credits. Given what is going on around the world today, there is huge opportunity for us to monetise our carbon credits from our forest and even from our blue economy, in terms of our aquatic resources in the sea. Those are all resources that we can really leverage, that we need to have a structured way of identifying where they are, enumerating them, valuing them, and having a policy and even legislation in terms of how these are managed, so that they are not mismanaged or stolen, because this is really the commonwealth. And we have a responsibility to make sure that we safeguard the commonwealth of Nigeria so that it is the second pillar in terms of assets register. The third is around mobilising investment, to invest in priority sectors of the economy, and even mobilising investments for our portfolio companies. A lot of them need to be recapitalised. Many of them need working capital, and the DFIs which is development financial institutions need capital for onlending. We need to be able to mobilise that from different sources for domestic as well as overseas to give to them and then even for the assets that we are going to be cataloguing. We need investments in those assets so that we can derive the most value. And we see the national assets register as a way to create a database of bankable projects, projects that can attract investments not only from local investors, but also from foreign investments and that will be a major part of our efforts in terms of mobilising investment capital to bring into Nigeria to help unlock liquidity to provide investment to the key and priority areas of our economy, and to ensure that we’re creating jobs, we’re making a difference and supporting government. So, those are the key areas of our focus within the next few years.
Distinction from BPE
I think it is important that we go back to the legislative powers for each of these entities. MOFI has been around since 1959. It was established precisely to hold shares on behalf of the Federal Government of Nigeria. It was on the basis of that that all the shares for commercial entities the federal government had an interest in were held by MOFI; that has not changed. That legislation is still relevant today as it was in 1959. It is on the basis of that that even when BPE needed to carry out transactions against each of those assets that they privatised, it required a power of attorney to act as attorney on those transactions. So, that clearly recognises the fact that MOFI is the owner of those assets on behalf of the Federal Government of Nigeria and that has not changed. As early as 2021 when the PIA (Petroleum Industry Act) was passed, the shares of the Federal Government of Nigeria in the NSIA, were in the name of MOFI, the federal government shares in Bank of Industry and indeed, the commercial entities where federal government had shares is in MOFI’s name. So, there is no doubt as to the one that ought to hold those shares on behalf of the federal government. BPE’s mandate is very clear. BPE is a transaction agency--privatisation and commercialisation. So, let me break it down.
When you do privatisation, you will take an entity. If it’s a partial privatisation which means that there will be residual shares left, the shares that belong to the private sector will
be transferred to them and the residual shares that belong to the federal government ought to be transferred back to MOFI or whoever owns it. The fact that, that did not happen before is an anomaly and an aberration and needs to be corrected, given that MOFI is now a fully operational entity. So, in our view, there is really no basis to think about anyone encroaching into anybody’s territory. Our rules and our responsibilities are clear. We are the custodian, the shareholder on behalf of the federal government and we have a responsibility that while we hold the shares of the federal government, we must take steps to manage those assets. Well, to optimise them, to safeguard them and to look for ways to create value for those assets while we hold them. But however, if we make a decision that those assets need to be privatised or commercialised; they will get BPE involved in the privatisation and the commercialisation.
And once they have completed the privatisation or the commercialisation exercise the shares that go to private sector will be transferred to private sector and the residual shares that belong to federal government ought to be transferred back to MOFI for safekeeping, for management, optimisation, monetisation and to ensure that government interest is safeguarded going forward. So, for us, that distinction is very clear, the current legislation is also very clear for both entities.
Wooing capital market operators
I’m glad you brought that up. You know that was an outing that we felt was quite remarkable. I think it moves the needle, because I remember. MOFI has been around since 1959. For a long time, many people didn’t understand what it stood for, what its mandates are and what it plans to do. And so for us, the purpose of that visit was to inform our key stakeholders which the capital market operators represent with the view to educating them about the new MOFI, and our mandate and also to begin to discuss with them and see how we can work together because we strongly believe that our success is partly based on the extent to which you can engage private sector to mobilise private capital to leverage on the expertise, to see how we can manage our investments better.
So that visit was useful in informing them. And today we have a lot of interest from that same community in terms of how we can partner together. Many of them are expressing interest in some of the assets that we own. Many of them have reached out to see how they can work with us to raise capital to invest in different sectors of the economy. So, there’s a whole lot of interest that has come out of them. And our view is that the level of engagement we’re having with them now is at a higher and better quality than it was before as a result of these engagements. And in the next coming months, we will see some transactions that will be coming through the partnership that we have with them or which we believe came from some of the discussions that we will have.
The investment perspective
Let’s go back to the fundamentals. What is MOFI? We are the managers of federal government investment assets, which means investments they already have. Now, to continue to optimise those assets, you need to provide additional investments to them. And those investments can come from multiple sources; they can either come from the government, which means those funds will be appropriated and then invested in those entities or they can come from the private sector. We believe that we need to begin to engage private sector and crowd private sector investments, either in recapitalising existing entities, or providing additional investments for projects that are for governments or projects to be carried out by portfolio companies. And we believe that there is sufficient liquidity in the private sector.
And there is an opportunity for the private sector to get decent returns from this opportunity that the government is opening up there. And that is why we think we’ve been engaging the private sector in doing more. We also have government projects, capital projects that require massive amounts of capital; whether you’re talking about work projects, you’re talking about building new hospitals, you’re talking about new educational institutions, you’re talking about even exploration in the oil and gas sector or solid minerals. A lot of these projects that are on the platform of the government require massive capital that the government alone cannot provide until we need to engage the private sector, both domestic as well as foreign, to deal with crowding. The private sector is committed to getting this done. And that’s really the basis upon which we’re engaging the private sector to do that. And it is only when we’re able to convince the private sector that these opportunities are bankable and that they will make decent returns, then can we crowd in a larger amount of capital and even government can even provide that we can begin to get these projects going. We can create more jobs, grow the economy, increase the liquidity, and also even increase our export process. These are all things that the private sector is better positioned to do but we need to create an enabling environment. We need to capitalise. We need to make sure we take away the bottlenecks that prevent the private sector from engaging with the government and bringing in our capital.
Surpassung the N100 trillion target
I actually agree with you, without sounding immodest. I believe that figure will be much more than that. So let me give you an example. When we talk about that, we’re talking about assets under management. Today, just to give you a sense of NNPCL alone (based on current valuation in terms of the value of the assets) is $60 billion and we own 50 per cent of it. So do the math.
Already, our federal government shares in NLNG are not included in that. Do the numbers (you are finance correspondents). The value of our infrastructure assets, our airports, our seaports, our highways, our bridges are not included in that figure. By the time we incorporate those assets and monetise, you can begin to imagine what value we’re talking about. And even for those infrastructure assets, we have not talked about the concessions that are on each of those assets, and the monetary value that comes from those concession rights. Those are not included in the figures we’re talking about. So, you can begin to get an idea of... You know the president recently created the blue economy, the ministry of the blue economy, which talks about our marine infrastructure as well as the resources and endowments. Those are not included.
By the time we start looking at the monetary value of those assets in the blue economy, you begin to get an idea of what we’re talking about in the creative economy. The evaluation that we had initially when we started did not include any of the assets in the creative economy. You can begin to talk about that. Our solid mineral assets were not included in your return estimate we talked about. So by the time we begin to quantify our solid mineral assets we know nationwide and federal government’s interest in those, you can begin to get a sense of the MOFI that you’re talking about, our real estate assets, east to west, north to south of this country, whether they’re residential or commercial, or industrial, were not included. By the time we do an evaluation of those, you can begin to get a sense of what we’re talking about our real estate assets offshore. Almost every major city around the world that federal government assets were not included in, and in most cities around the world that we own assets, we own assets in prime locations where these assets are high value assets. So by the time you identify those, you enumerate them, you value them, you can begin to get a sense of what we’re talking about. So our view is that this country is too endowed to be poor. But we need to change our mindset, our strategy of how we manage our assets, how we rationalise our assets, how we monetise our assets, and the value we create from those assets. And that for us, is a clarion call, not only to move, but to all MDAs who are currently sitting on those assets and superintending on those assets and then we make one thing very clear: MOFI’s goal is not to take away those assets from anyone No. It is to make sure we have a single view, a single source of truth as to what federal government owns, because it is through that we can begin to take steps to optimise those assets. It is true that we can begin to know what is the best way to monetise those assets and get the most value from those assets to the benefit of Nigeria and Nigerians.
Impact of energy transition
I think it’s already happening. But you would be surprised to know that even NNPC itself is at the vanguard of that transition. So transition doesn’t happen overnight. There is the movement into non fossil fuel that doesn’t happen overnight. And that is why we have focused a lot on issues such as gas (CNG) as an example, because they transition and we’re really a gas nation. So, we’re leveraging on our gas endowment for clean energy. And until we see that, and that’s why steps have been taken to make sure we have that transition but also ensuring that we maximise the returns from our oil and gas assets today, so we can invest those in other sectors of the economy. We can invest those in clean energy projects that are already on the table.