Africa’s largest economy wants to increase returns on state assets
Africa’s largest economy plans to increase its assets by more than 5 times in 10 years. Such a development plan was presented by the Ministry of Finance of Nigeria. According to the plan, the size of the sovereign wealth fund should reach $217 billion.
It should be noted that the local Ministry of Finance, or MOFI, was established in Nigeria in 1959, but until now its activity has been practically ineffective. According to the original plan, the main purpose of the body was to be able to invest through it in companies from different market sectors. However, the effectiveness of the ministry was extremely low, so the government decided to transform the body.
President Muhammadu Buhari presented a new plan for MOFI, according to which the ministry will have the right to enter into commercial transactions of any orientation, acting as the representative of the state in them. Thus, MOFI will assume the responsibilities of a clearing house under which public investments will be managed. It will guarantee that investments will generate income for the local economy and that all transactions with assets will be carried out taking into account global and domestic risks.One of the government’s first tasks for MOFI was to create a registry of all state-owned assets that have the potential for the local economy. In the future, it is planned that the identified assets will be transformed to make them more effective in terms of a revenue-generating tool.
It should be noted that it is crucial for Nigeria to find new sources of budget replenishment, as the country has failed to meet its commitments on the level of the annual revenue of the economy since 2015. In 2022, debt payments alone took up about 80% of the country’s total revenue. The government is trying to find new solutions to improve the situation because, in addition to domestic problems, the local economy is also affected by global factors. For example, a decline in oil production and the weakening of the dollar have had a negative impact on the country’s foreign exchange reserves. Fuel shortages and higher gasoline prices have exacerbated the situation. A number of local airlines have increased the cost of their services by 50-80%.
Another test for Africa’s largest economy was a cash shortage. The shortage was caused by a currency reform that redesigned the national currency, the naira. As a result, people began lining up outside branches, banks, and ATMs to get their new notes. There are not enough notes to go around, and the government has imposed a limit on withdrawals.
The authorities, for their part, promise to resolve the cash shortage as soon as possible and blame local financial institutions for creating the situation.