BY HON. FEMI ADEBISI JP
Nigeria, a country grappling with economic challenges, is on the brink of a transformative breakthrough through the unlocking of dead capital, estimated to be worth more than $1 trillion. This vast financial resource holds the key to addressing Nigeria’s forex, energy, indebtedness, healthcare, poverty, and economic woes. With prudent allocation, Nigeria could revamp crucial sectors and secure economic independence.
Dead capital is an economic term related to underutilized or dormant assets or property that is informally held, not legally recognised, and cannot be exchanged for financial capital.
The uncertainty of ownership decreases the value of the asset and/or the ability to lend or borrow against it. These lost forms of value are dead capital.
According to the Daily Independent Newspapers of 20th November, 2023, the honourable Minister of Finance and Coordinating Minister of the Economy, Wale Edun, said the country will consider unlocking over $1 trillion dead capital that are locked in Nigeria’s financial institutions to generate fund locally, as the nation cannot rely on borrowing to fund the 2024 national budget just as he said the nation must make necessary sacrifices to generate adequate revenues to reduce its current high deficit budget financing.
Edun may have been referring to unlocking the dead capital as suggested in a document prepared by a team of experts in an advisory council that was put in place by President Bola Tinubu during electioneering campaign before the last general election.
In the document, it was recommended that one of the things to do was the sale of assets to settle Nigeria’s debt obligations and that the government should move to a well-functioning, market-oriented power sector.
The advisory council put together by President Bola Ahmed Tinubu to support the delivery of sustainable and inclusive economic growth consists of Tokunbo Abiru (chair), Yemi Cardoso, Sumaila Zubairu and Doris Anite, with KPMG listed as the consultant.
The council called on Tinubu’s administration to set a policy directive that all proceeds from the sale of assets must be used to settle the existing Federal Government’s debt obligations.
The council also recommends privatising, concessioning, or selling down the Federal Government’s stakes in corporate assets to partners and other investors (possibly with a buyback option) to generate liquidity in the short to medium term, with a focus on sub-optimal assets such as NNPCL refineries.
It also recommended that the government move to a well-functioning, market-oriented power sector; and conduct a forensic review of the outstanding balances and utilisation of federation funds, e.g. stabilisation, natural resources development fund, ECA (Excess Crude Account), etc.
The significance of this unlocked capital cannot be overstated, as it has the potential to liberate Nigeria from the economic dominance of foreign creditors. With a staggering $43,159.19 billion available by the end of June 2023, Nigeria has the means to pay off its debts and break free from the shackles of foreign control. This newfound financial freedom would allow the government to dictate its economic policies and prioritize the welfare of its citizens.
One critical area that stands to benefit immensely from this capital infusion is the power sector. The chronic power deficit in Nigeria has been a major hindrance to economic growth. By allocating a substantial portion of the unlocked capital, the government can embark on a comprehensive plan to address this issue. The resulting increase in power generation and distribution would not only boost the local economy but also enhance the surplus balance of payments. With a more reliable and abundant power supply, Nigeria can reduce its reliance on imported energy and redirect precious foreign exchange towards productive sectors of the economy.
According to a power transformative plan rolled out by the current minister of power, Chief Bayo Adelabu, about $20 billion will be needed to soars the current 3000 megawatts to 20,000 megawatts by year 2026, another $30 Billion to upgrade to 60,000 megawatts by 2030.
Furthermore, the allocation of funds to revamp and upgrade Nigeria’s four refineries, at an estimated cost of $76 billion ($19 billion per refinery), would have a profound impact on the forex situation. By enhancing the nation’s refining capacity, Nigeria could significantly reduce its reliance on costly fuel imports, thereby conserving foreign exchange reserves and stabilizing the local currency.
Unlocking of dead capital also presents an excellent opportunity to address healthcare challenges. By allocating adequate funds, the government can invest in the National Health Insurance Scheme, ensuring that a significant proportion of Nigerians have access to quality healthcare services as against the current less than 5% Nigerians captured in the national health insurance scheme. This investment in public health would improve the overall well-being of the population, enhance productivity, and contribute to poverty reduction.
A strategic allocation of the unlocked capital to support agriculture, small businesses, and education would foster economic diversification and human capital development. By providing single-digit loans to farmers and small businesses, Nigeria can empower individuals and communities, creating employment opportunities and driving economic growth. Subsidizing education would enable more Nigerians, especially those from disadvantaged backgrounds, to acquire the skills needed to compete in the global economy. This investment in human capital would fuel long-term economic growth and promote social development.
Moreover, the liberation of Nigeria from economic dependency on foreign creditors would create a more favorable environment for economic policies that prioritize local industries and reduce import reliance. By developing domestic industries, Nigeria can foster job creation, boost local production, and generate surplus in its balance of payments. This shift towards economic independence would strengthen Nigeria’s position on the global stage and enhance its resilience in the face of external economic shocks.
While the unlocking of dead capital presents a promising opportunity, it is crucial for the government to exercise caution and ensure that funds are channeled towards productive sectors. Transparent financial management mechanisms should be implemented to prevent misappropriation and ensure accountability.
Conclusively, our history of monumental corruption, wastefulness and squandering opportunities may put this greatest opportunity at risk.
We already find ourselves standing at the precipice of an extraordinary opportunity. The unlocking of over 1 trillion dollar in dead capital presents a chance to address the nation’s most pressing issues, ranging from forex challenges to energy deficits, healthcare gaps, poverty, and economic woes. However, as we embark on this transformative journey, we must remain acutely aware of the peril that lies in mismanaging this golden chance.
History has taught us harsh lessons about the consequences of squandered opportunities. Nigeria, a nation blessed with abundant resources and potential, has oftentimes fallen short of translating these advantages into tangible progress. Mismanagement, corruption, and a lack of foresight have hindered the nation’s growth and perpetuated the cycle of underdevelopment.
Now, with the unlocking of this substantial capital, we must not repeat the mistakes of the past. It is imperative that we exercise prudence, accountability, and transparency in the allocation and utilization of these funds. The consequences of mismanagement are far-reaching and could result in irreversible damage to our economy, exacerbating the very problems we seek to solve.
First and foremost, we must guard against the temptation to channel these funds towards unproductive sectors or personal gain. The lure of short-term gains and personal enrichment has plagued our nation for far too long. Instead, we must prioritize investment in sectors that will yield long-term benefits, such as infrastructure development, education, healthcare, and job creation.
Moreover, a comprehensive strategy must be devised to ensure that the unlocked capital is deployed with maximum efficiency and effectiveness. Rigorous planning, expert consultation, and oversight mechanisms should be put in place to monitor the allocation of funds and evaluate their impact. This will help to prevent wasteful spending, corruption, and the diversion of resources away from their intended purposes.
Furthermore, as we address the challenges of forex, energy, healthcare, poverty, and economic woes, we must adopt a holistic approach that considers the interdependencies between these issues. Simply throwing money at individual problems without a coherent and integrated plan will yield limited results. A comprehensive roadmap that addresses the root causes of these challenges and identifies synergistic solutions is crucial to ensure sustainable progress.
Let us not forget the power of collaboration and inclusivity. The government, private sector, civil society, and citizens must work together to chart a shared vision for our nation’s future. Meaningful engagement and participation from all stakeholders will foster a sense of ownership and collective responsibility, ensuring that the unlocked capital is utilized in a manner that benefits all Nigerians.
The danger of missing this opportunity is not one to be taken lightly. Failure to seize this moment could perpetuate a cycle of economic stagnation, social inequality, and missed potential. We owe it to ourselves and future generations to rise above the challenges that have plagued us and forge a brighter future.
Nigeria stands at a crossroads, armed with the means to address its most pressing problems. Let us learn from the past, exercise wisdom, and embrace the responsibility that comes with this opportunity. By managing this capital wisely, with integrity and a focus on long-term sustainability, we can overcome the dangers of mismanagement and set our nation on a path of inclusive growth, prosperity, and shared success.
By Hon. Femi Adebisi JPadebisiolufemi72@gmail.com