Federal Government To Raise ₦1.07tn In Order To Fund Budget

Federal Government To Raise ₦1.07tn In Order To Fund Budgets
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The Federal Government is planning to raise about ₦1.07tn from the sale of property and businesses in the next three years to shore up dwindling revenues.

The money, according to investigations by News Agency will be used to fund the 2020, 2021 and 2022 budgets partly.

This is just as government battles overwhelming domestic and foreign debts as it seeks funds to implement its budgets.

The Federal Government disclosed the plan to sell the assets in the 2020-2022 Medium Term Expenditure Framework and Fiscal Strategy Paper being worked on by the Senate Committees on Appropriation and Finance.

According to the plan, the Federal Government plans to raise ₦252bn from privatisation proceeds in 2020.

By 2021, the proceeds expected from privatisation will go up to ₦296.35bn.

In 2022, the expected proceeds are put at ₦246.35bn.

The Federal Government also plans to raise ₦154bn and ₦120bn from the sale of unidentified property in 2021 and 2022.

Privatisation and sale of government properties are some of the options the government is exploring to shore up dwindling revenues in the face of increasing security challenges and infrastructural deficiency.

The Minister of Finance, Zainab Ahmed,  said recently the nation risked fiscal crisis if it did not raise additional revenues.

“As you know, our nation is facing a near fiscal crisis and it is up to us to make sure that it is arrested and ensure that we don’t slip into a crisis. We have to increase revenues; if not, our country will slip into fiscal crisis,” she had said.

Borrowing is another option the government has been exploring to shore up income.

Our correspondent reports that more than 50 per cent of the country’s ₦24.95tn debt has been borrowed in the past four years.

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The Minister of Works and Housing, Babatunde Fashola, recently descended on experts criticising government’s borrowings, describing them as “backyard economists”.

Investigations by our correspondent showed that 10 National Independent Power Projects plants were among the prime assets being targeted by the government to broaden its revenue base.

Already, plans have reached advanced stages to dispose of  Afam Power Plc and an electricity distribution firm – Yola Electricity Distribution Company.

“The money will be realised from the sale of NIPP plants and other assets that are premature to be mentioned,” a source at the Bureau of Public Enterprises told our correspondent.

It is not the first time the government will be targeting the sale of the electricity assets put together by the three tiers of government under the Olusegun Obasanjo administration.

The 10 power plants, some of which have gone live, are fired by gas.

They are expected to add 4,311 megawatts of electricity to the electricity supply industry.

The power plants are Geregu II 434 MW; Calabar (630MW); Egbema (378MW), and Ihovbor (504MW).

Others are Gbarain (252MW); Sapele (504MW); Omoku (252MW); Alaoji (107MW); Olorunsogo (750MW); and Omotosho (500MW).

After the financial bid opening in March 2014, core investors emerged for the 10 power plants, but the National Council of Privatisation approved the bids for seven of them while three were left pending until the resolution of legal issues.

It was learnt that without securing gas supply, the prospective core investors would not be able to muster the financial resources to pay for the power plants.

Without the gas supply, the plants are not bankable, it was learnt,  as banks are not willing to lend money to an investor that is not sure of gas supply for the next two years.

It is expected that when the core investors pay for the power plants, they should start producing and selling power but without gas supply, they cannot do this.

The National Economic Council in 2004 approved the funding of the NIPP projects from the Excess Crude Oil Accounts belonging to the three tiers of government.

The Niger Delta Power Holding Company Limited was also approved as the special purpose vehicle for the projects with the federal, states and local government areas having shares in the company.

The projects suffered a setback when the Revenue Mobilisation, Allocation and Fiscal Commission sued the Federal Government for the use of the ECA on the project. The matter was eventually settled out of court.

Therefore, the 10 plants are jointly owned by the three tiers of government – local, state and federal – with the Federal Government contributing 47 per cent equity stake and the local and state governments the remaining 53 per cent equity.

The implication of the joint ownership of the NIPP is that any proceeds from the plants would have to be shared by the three arms of government.

Other assets being considered by the Federal Government for sale are the Ajaokuta Steel Complex, the National Theatre Iganmu, and the Abuja Commodity Exchange.

The privatisation of Afam Power Plc and Yola Disco has reached advanced stages.

The  Technical Committee of the NCP had approved the N124.3bn bids for Afam Power Plc and Yola Electricity Distribution Company but the process could not proceed because of the delay in constituting the National Council on Privatisation.

At the financial bids opening for the two power companies in April, Transcorp Power Consortium emerged as the bid winner for 100 per cent equity in Afam Power Plc with an offer of ₦105.3bn.

Similarly, Quest Electricity won the bid for 60 per cent equity in Yola Electricity Distribution Plc with a bid of N19bn.

Both the management committee of the Bureau of Public Enterprises and the Technical Committee of NCP  reviewed and approved the transactions before the transaction were passed on to the NCP.

Our correspondent learnt that the privatisation agency had written to the NCP but had not been able to get any reply because the NCP could not sit before the cabinet was dissolved preparatory to the swearing-in of President Muhammadu  Buhari for a second term on May 29.

It is after the approval of NCP that BPE can invite the prospective core investors to sign the Share Purchase Agreement with them. Although NCP usually follows the advice of BPE, it also has the power to cancel any transaction.

At the bid opening in Abuja, Diamond Stripes Consortium was declared the reserve bidder for Afam Power Plc with a bid of ₦102.39bn while Unicorn Power Generation Consortium came third with a bid of ₦101.05bn.

The bidding for Afam closed at the second round. At the first round of bidding, Unicorn had emerged the highest bidder with a bid of ₦100.45bn; Transcorp submitted a bid of ₦89.37bn while Diamond put in a bid of ₦72.73bn.

It was when the potential investors were asked to reverse their bids for a second round that Transcorp Power Consortium which already operates the Ugheli Power Plant threw in the highest bid of ₦105.3bn.

On the other hand, Quest Electricity Nigeria Limited, which was the sole bidder for Yola Electricity Distribution Company submitted an initial bid of ₦17.67bn.

However, the company reversed its bid at the second round when it was told that its bid did not meet the reserve price set by the National Council on Privatisation.

The privatisation of Afam Electricity Generation Company could not be concluded during the first round of privatisation of electricity companies in 2013 due to issues stemming from gas supply to the plant.

For the YEDC, although it was successfully privatised and handed over to the core investor in 2013,  force majeure was declared in 2015 by the core investor,  citing insecurity in the North-East. Consequently, the company was repossessed by the Federal Government. (Punch)

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