MOFI: Nigeria’s Strategic Vision for a Sustainable Economic Recovery

BY UDO BASSEY

At a critical time when Nigeria has its back against the wall, the impending revitalization of the Ministry of Finance Incorporated (MOFI) is being held up as the brightest illumination and a rare glimpse of hope for a sustainable recovery.

Last week, the Federal Government established MOFI’s inaugural board of directors and executive management team, more than 64 years after its establishment.

MOFI was incorporated pursuant to the provisions of Sections 2 and 3 of the Ministry of Finance (MOFI) Incorporation Act 1959 as an asset holding company under the Federal Ministry of Finance.

Its tenure as sole administrator of all federal government investment interests, properties, easements and rights has positioned it as a strategic institution to support the federal government’s effort to address its myriad of economic challenges and stimulate economic renewal.

Over the decades of its existence, MOFI, under the provisions of its Enabling Law, should be in charge of managing a significant portfolio of Federal Government investments, covering a wide range of around 130 asset classifications, including Government-Owned Entities (GOE) and Government Linked Companies (GLC), in which it controls a majority stake in more than half of them.

Unfortunately, most of these assets in his portfolio are currently classified as underperforming or moribund, reflecting the ugly side of the current sorry state of the country’s economy, with revenues and cash flow falling at an alarming rate below The expectations.

Although the country’s economy is reputed to be the largest in Africa, accounting for around $440 billion, or 17 percent of the continent’s annual gross domestic product (GDP), it remains almost perpetually vulnerable to the impacts of booms. and explosions of the world oil industry. politics.

The country’s general reliance on crude oil exports as its main source of income and economic livelihood has continued to be a source of growing existential concern for the government.

Minister of Finance, Budget and National Planning Zainab Ahmed recently said during the presentation of the details of the 2023 Budget in Abuja that the government was exploring ways to continue to diversify the economic base of the country and generate more revenue to support the implementation of the budget. .

The move to revitalize MOFI is one of the Minister’s initiatives to continue pushing reforms in the economy as part of her Strategic Revenue Growth Initiative (SRGI) focused on finding new ways to diversify and increase government revenue.

Permanent Secretary for Finance Aliyu Ahmed, who is the Chairman of the Technical Committee for the restructuring of MOFI, also shares the vision of the new investment vehicle for the government.

Amid significant growing challenges in the oil and gas sector, resulting from relentless sabotage and vandalism of oil facilities and massive theft of crude oil, oil production plunged another 11.8 percent in the second quarter of 2022, after falling about 26 percent in the previous quarter.

Even though oil and gas make up a paltry six percent of the country’s value-added goods and services, more than 76 percent of the revenues on which the government depends to finance the provision of critical socioeconomic services in the economy come from this sector.

With declining revenues and spiraling double-digit inflation in recent years, the government has consistently struggled to stay afloat, managing to cope with the pressures of debilitating macroeconomic and fiscal challenges.

These challenges are underscored by huge deficits in annual budgets and rapidly growing domestic and external debt portfolios, which according to the Debt Management Office (DMO) are currently around N75 trillion. As of 2021, the country’s trade balance was in deficit of about N1.98 trillion. This is projected to grow significantly to around N 9.51 trillion by 2025.

With poverty assuming a multidimensional status, with the recent report from the National Bureau of Statistics (NBS) saying that more than 133 million of the country’s estimated 206 million people are affected, the government is definitely racing against time to explore special alternatives that generate income. purpose vehicles to drive recovery and sustainability.

One of those vehicles appears to be the MOFI. A recent study revealed that the limited and below-average performance of most government-owned assets was the result of MOFI’s operating structure as a passive custodian, rather than an active manager and investor in these assets in its portfolio. . This passive stance, the report said, made it difficult to create value and track performance.

The recent constitution of MOFI’s Board and management suggests that the government is now ready to reinvent the agency into a more active vehicle of economic transformation, to significantly improve the performance of these dying GOEs and GLCs, drive value creation across all their investments, catalyze growth in priority sectors and, ultimately, generate additional income for the nation.

The study has linked MOFI’s vision with the drive to become a world-class active investment vehicle capable of creating wealth for generations, contributing to the overall development and growth of the Nigerian economy.

The document, outlining the strategic plan to revitalize MOFI, defined the path forward over the next ten years, to increase the value of assets under its management portfolio to a minimum of N100 trillion by 2032, and achieve minimum average returns in its share capital of 25 per cent per annum.

The projection of the study is that an active MOFI, living up to its mandate and vision, could play an important role in mobilizing resources to finance more than 10 percent of Nigeria’s annual budget, increase GDP by a minimum of $30 billion and provide funding to catalyze growth in priority sectors in line with the Government’s National Development Plan 2021-2025.

With Chairman Muhammadu Buhari set to inaugurate MOFI’s inaugural board and management, its new CEO Armstrong Takang is optimistic about many opportunities to seize, to support the growth of the economy and its diversification away from crude oil. .

“There are a number of foreign investors around the world willing and ready to come to Nigeria to invest and do business, considering the huge potential of the different sectors of the country’s economy, if only they could see a credible institution they can turn to. Trust your investment. ideas, dreams and aspirations.

“An institution is needed whose mandate, governance structures, processes and capacity are considered credible enough to partner with the public and private sectors to mobilize, structure and deploy investment capital in priority sectors of the economy on behalf of the Federal Government.

“That is where MOFI comes in. Our governance structure, organizational capacity and management principles align with globally accepted standards and principles, particularly in terms of ethics of transparency and accountability,” Takang said.

He said that the impending reinvention of MOFI as a credible investment vehicle for the government is primarily aimed at creating a credible platform to attract these potential investors as true allies and partners towards the transformation of the economy.

The new MOFI, the CEO said, will play an important role in supporting the government in building a new path of growth, ensuring that it gets optimal value from its investments in different sectors of the economy and contributing to building a more economical macroeconomic environment. stable. less dependent on earnings from crude oil exports.

Part of the strategy, he said, will be for MOFI to restructure, reorganize and reposition its priorities as the government’s investment management arm.

These priorities will include the professionalization of state agencies under its management portfolio; catalyze growth in priority sectors of the economy; mobilize capital for the growth of the economy; search for potential investment opportunities for GOE and GLC, and pursue other socio-economic development objectives.

To create the enabling environment capable of attracting foreign direct investment to the country, he said the new MOFI Board, in line with its mandate and its aspirations to increase assets under management (AVM) to N100trillion, will vigorously pursue the agenda towards professionalizing property government in state entities, and invest strategically to create value in the country’s economy.

He said MOFI will achieve this by fostering a culture of performance and preserving the socioeconomic value of government-owned assets, as well as working to promote growth in priority sectors of the economy to diversify its asset base.

The main focus of MOFI’s new management, he said, will be how to manage its existing portfolio to generate risk-adjusted returns for its shareholders and income and support government programs.

To protect the government from exposure to liabilities incurred by loans purchased to provide socio-economic infrastructure, MOFI, as an investment vehicle, could take on these liabilities, not only helping to raise and mobilize capital, but also more closely managing the performance of these companies. government-owned businesses.

“By taking a more active role in managing government investments, MOFI will create more value from those investments and reduce pressure on government revenues,” he said.