The Chief Executive Officer of Economic Associates, Dr Ayo Teriba, alongside other economists, has advocated for the securitisation of Nigeria’s N41 trillion assets as a means to boost financial resources for the Federal Government.
Securitisation involves pooling assets and converting them into interest-bearing securities, which are sold to investors, thereby generating funds for the government.
This proposal was highlighted at the 13th Annual Conference of the Institute of Capital Market Registrars in Lagos, on Saturday where the theme focused on “Enhancing Financial Stability in the Nigerian Economy: Strategic Role of the Capital Market in Wealth Creation.”
The call for securitisation comes at a time when the Central Bank of Nigeria’s Q2 2024 statistical bulletin reveals a worsening fiscal deficit for the Federal Government, which increased to N4.3 trillion, up from N4.2 trillion in Q1 2024 and a significant rise from N2.6 trillion in Q2 2023.
The fiscal deficit refers to the gap between government spending and revenue generation, indicating that the government is spending more than it earns.
For the first half of 2024 (H1 2024), Nigeria’s fiscal deficit reached N8.4 trillion, up from N6.9 trillion for the entire fiscal year of 2023 (FY 2023).
This represents a 4.8% overshoot compared to the pro-rata target of N7.7 trillion for the period. The 2024 budget, which includes supplementary allocations, anticipates total expenditure of N35 trillion, estimated revenue of N19.6 trillion, and a projected deficit of N15.4 trillion.
As of last year, the Managing Director/ Chief Executive Officer of the Ministry of Finance Incorporated, Dr Armstrong Takang, revealed that Nigeria’s assets were worth N18tn with a target of achieving a N100tn assets base in the next 10 years.
Speaking on the topic, “Balancing Innovation and Regulation for Financial Stability in an Era of Market Transformation,” Teriba highlighted that the securitisation of Nigeria’s national assets, now valued at N41 trillion, could significantly strengthen the country’s fiscal position.
He argued that this innovative financial strategy would help bridge the growing fiscal deficit by unlocking the value of state-owned assets, such as infrastructure, natural resources, and land, and converting them into tradable securities that could be sold to investors.
Teriba referenced global examples where similar approaches have been successfully implemented to raise capital and support fiscal stability.
By securitising assets, governments can access much-needed liquidity without increasing debt or relying solely on tax revenues.
He said, “said, “The trouble with debt issue or income securitisation is that in periods of windfalls where your income is growing, it is good, but in a period of shortfalls as we have been for the past decade, it becomes a debt trap because debt security is a promissory note not attached to any asset but against expected income. When the income disappoints, then the debt burden rises, then you begin to struggle, and even say that the available revenue is not enough to pay interest. We have had that repeatedly in the fiscal conversation of the Federal Government.
“The way out is to look for assets that you can securitise and for one decade, the FG has yet to securitise any asset. It is a puzzle. Since 2016, I have been engaged with the then Vice President, with the president. Ultimately, the things we told them led to the reconstitution of MOFI. So, it wasn’t as if they didn’t buy the idea. It led to the creation of a national asset register and MOFI now has a list.
“The last time I met the MD of MOFI at a governance conference, he said the assets were worth N41tn. When is the first one of those going to be securitised? The biggest assets in Nigeria are collectively owned. The parallel example is that since 2015 and 2016, Saudi Arabia, Brazil, and India have bullishly gone to enact laws that enable them to refocus their national financial strategy on asset securitisation. Each of them has a digital portal where they have listed assets. The minimum assets listed by Saudi Arabia is 200 projects including Aramco which is now worth $2tn. Before 2016, I don’t think the Saudi government had any assets listed, it was this income shortfall that pushed them.”
Teriba noted that Aramco was not securitised abroad but in Saudi, stressing that “ours doesn’t have to be so big as to be mind-boggling. Even the Nigerian LNG project is not listed in any market. The aspect of it that FG has been trying to securitise is the dividend; the income statement. The Nigerian government can be financially comfortable like Saudi, Brazil, and India if we did just a fraction of what those countries have done over the past eight years that has attracted over $500bn in FDI between 2015 and now.
“India listed 15,000 assets on its India investment creed and Brazil lists more than 10,000 assets on its partnership for private investment. India was celebrating recently when the stock market hit a milestone. It is similar to the way MOFI has started but they (India, S’Arabia, Brazil) are consummating the deals.”
Meanwhile, the Director-General of Securities and Exchange Commission, Dr Emomotimi Agama, stated that “Securitisation of assets frees debt capital. Once you can raise money from the assets that you have, then the assets come alive. It is a matter of using what we have to get what we want.”
Agama, who was the keynote speaker at the event added, “We are saying the Federal Government has a lot of assets, how do we use those assets to get money to do more things? For me, securitisation is perfect in dealing with the debt capital that we have in this country to increase the amount of money that is available for production and other infrastructure.”
Also supporting the argument, the Chief Executive Director of the Nigerian Exchange Limited, Jude Chiemeka, said, “I think the capital market has done very well in the last couple of years in the Nigerian economy. I couldn’t, but I agree with Dr Ayo Teriba that what the country needs to do now is to begin to securitise assets.
“We’ve been doing a lot of borrowing, and the argument has always been that the debt to GDP ratio is within the manageable essence, the servicing or the debt is well set out. But for us to really achieve that level of financial stability, we need a lot more collaboration with the international community. One of the easiest ways is the securitisation of assets.”
