Emir Sanusi tells FG to sell refineries, oil assets

The Emir of Kano, Mohammed Sanusi II, on Wednesday joined several prominent Nigerians and industrialists calling on the Federal Government to sell out some national assets to enable the country wriggle out of recession.
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The Emir of Kano, Mohammed Sanusi II, on Wednesday joined several prominent Nigerians and industrialists calling on the Federal Government to sell out some national assets to enable the country wriggle out of recession.

Speaking in Lagos, at the launch of the 2016 Banking Sector Report published by the Afrinvest West Africa Limited, Sanusi said one of the options available to government is to sell down some oil assets and the refineries to private sector operators that will pump dollar into the economy, so as to strengthen the Naira.

He said: “One option is to sell down some assets, sell down some refineries in a manner that does not hurt your strategic interest. Sell down some oil assets, sell down some refineries, in a transparent manner that gives you value. You can also have options to buy them back later”.

According to him, such steps would lead to increase in foreign exchange inflows into the economy, which is what the economy needs right now.

He also urged government to create level playing field for both the Nigerian and foreign investors.
“And do what I said which what are the kind of policies that will attract foreign investors. We have to get to a point when we welcome investors of all nationalities, who are willing to set up production plants here to turn our own raw materials into finished goods. Rwanda, Ethiopia have all done that very well. There is nothing we are saying that haven’t been done by other African countries. We need to go into investment-driven model. China has grown into investment-driven model. Nigeria needs to move into in to investment-driven model,” he said.

Speaking further, he said: “Any model that tries to chase away foreigners will not create jobs for the youth. We need to be an economy that creates opportunity for the youths. It also includes the independence of the Central Bank of Nigeria (CBN). I love the finance minister, but when the CBN said we are not reducing interest rate, I said, yes”. This, he explained was that the CBN should continue to protect its independence.

Sanusi said Nigeria’s growth have over the years, been driven by rising commodity prices, and the rising domestic debt that went into consumption.

“So, real wages basically kept increasing. In 2011, with oil prices at $110 per barrel, we were spending 80 per cent of government revenues on personnel cost. It was not sustainable, it was a problem I identified but no body listened. That model has reached the limit of its capacity. How much can you tax people to make up? There is a limit to what you can borrow. Now, we are spending 35 to 40 per cent of your revenues on debt services,” he said.

“I think it is a positive thing, when the fiscal authorities and the many people in the private sector said they wanted a lower rate of interest rate. I was concerned that the CBN will succumb to pressure. And the fact that the CBN did not succumb to the pressure is a fact that it is beginning to claim its independence which is a very positive thing. And these are economic questions, you make choices. I can see why the CBN does not want to lower interest rate at this time”.

“If you lower Monetary Policy Rate (MPR) at 100 or 200 basis points today, it is not going to lead to rapid increase in credit growth. Its not. You will not see an increase in credit growth that will reverse downward trend in output by lowering MPR by 100 or 200 per cent. You would, however, further fuel inflation, and you will reduce the yield in fixed income at a time you are trying to attract foreign exchange,” he said.

He said the CBN got the decision right, adopting a flexible exchange rate, and secondly, tightening monetary policy.

He urged the CBN to fully allow the flexible exchange rate to work without interruption.

“And these things really require courage, because some of the decisions you will take, will seem to fly in your face in the first week or two. But look at the fundamentals. The naira today is undervalued. The fixed income is suffering high yields. The Lagos Stock market, if you look at the assets prices picking ratios, you got a gross undervaluation. If you allow people to come in and sell their dollars at market prices, people see they are going to make profits in the equities market and fixed income and also currency appreciation,” he said.

“So, long as you do not allow that, you will not have the float you want. Now, it is the inflow of the dollars into the economy that will take the naira towards its fair value and take it to where you want it to be not by fiat. The market does not accept orders. It will never happen, it has never happened,” he said.

“We need the CBN to take that risk, and courage to implement the flexible foreign exchange policy. Let the market work in the next two or three weeks and see, as people know they can come in, sell their dollars, buy stocks, sell their dollars, fixed income, make a profit in currency and capital acquisition, you are going to have gradually narrowing of the gap between the interbank and the parallel rate and have more liquidity in the market,” he said.
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