MOFI: Nigeria’s strategic vision for sustainable economic recovery

BY BASSEY UDO

At a critical juncture when Nigeria’s back is against the wall, the impending reinvigoration of the Ministry of Finance Incorporated (MOFI) comes as the brightest illumination and a rare vista of hope for sustainable recovery.

Last week, the inaugural board of directors and executive management team for the MOFI was constituted by the Federal Government, more than 64 years since its incorporation.

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

Its mandate as the sole manager of all federal government investment interests, estates, easement and rights positioned it as a strategic institution to support the Federal Government effort to address its myriad of economic challenges and spur a renewal of the economy.

Over the decades of its existence, MOFI, by virtue of the provisions of its enabling Act, should be in charge of the management of a significant portfolio of Federal Government investments, spanning a wide range of about 130 asset classifications, including Government Owned Entities (GOEs) and Government Linked Companies (GLCs), in which it controls a majority stake in more than half of them.

Sadly, the majority of these assets under its portfolio are currently categorized as underperforming or moribund, reflecting the ugly face of the current parlous state of the country’s economy, with revenue and cash flow declining at an alarming rate below expectations.

Although the country’s economy is reputed to be the largest in Africa, accounting for about $440 billion, or 17 percent of the continent’s annual gross domestic products (GDP), it remains almost perpetually vulnerable to the shocks from the booms and bursts of the global oil politics.

The country’s overarching dependence on crude oil exports as its major source of income and economic sustenance has continued to be a source of a growing existential worry for the government.

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

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

The Permanent, Secretary of 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 the growing significant challenges in the oil and gas sector, as a result of incessant sabotage and vandalism of oil facilities and massive crude oil theft, oil production nosedived by another 11.8 percent in the second quarter of 2022, after dropping by about 26 percent in the previous quarter.

Despite the fact that oil and gas constitute a paltry six percent of the country’s aggregate value of goods and services, more than 76 percent of the revenue the government relies on to fund the provision of critical socio-economic services in the economy, comes from this sector.

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

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

With poverty assuming a multi-dimensional status, with the recent National Bureau of Statistics (NBS) report saying more than 133 million of the country’s estimated 206 million population, are affected, the government is definitely racing against time to explore alternative revenue-generating special purpose vehicles to drive recovery and sustainability.

One of such vehicle appears to be the MOFI. A recent study revealed that the limited and below-par performance of most government-owned assets was a result of MOFI’s operational structure as a passive custodian, rather than an active manager and investor in these assets under its portfolio. This passive stance, the report said, made value creation and performance tracking difficult.

The recent constitution of the Board and management of MOFI suggests the government is now ready to reinvent the agency into a more active vehicle of economic transformation, to significantly improve the performances of these moribund GOEs and GLCs, drive value creation from all its investments, catalyze growth in priority sectors, and ultimately, generate additional revenue for the nation.

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

The document, which highlights the strategic blueprint for reinvigorating MOFI, defined the highway to travel over the next ten years, to grow the value of the assets under its management portfolio to a minimum of N100 trillion by 2032, and realize minimum average returns on its equity of 25 percent per annum.

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

As President Muhammadu Buhari is set to inaugurate the constituted inaugural Board and Management of MOFI, its newly appointed Chief Executive Officer, Armstrong Takang, is optimistic a lot of opportunities beckon for it to take advantage of, to support the growth of the economy and its diversification away from crude oil.

“There are several foreign investors around the world out there willing and ready to come to Nigeria to invest and do business, considering the huge potentials in different sectors of the country’s economy, if only they can see a credible institution they can entrust with their investment ideas, dreams and aspirations.

“There is a need for an institution whose mandate, governance structures, processes and capacity are considered credible enough to partner with the public and private sectors to mobilise, 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 the ethics of transparency and accountability,” Takang said

He said 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 veritable allies and partners towards the transformation of the economy.

The new MOFI, the CEO said, will play a significant role in supporting the government in building a new growth path, by ensuring it derived the optimal value from its investments in different sectors of the economy, and contributing to building a more stable macroeconomic environment 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 investment management arm of the government.

These priorities will include professionalization of government-owned agencies under its management portfolio; catalyzing growth in priority sectors of the economy; mobilising capital for the economy’s growth; sourcing for potential investment opportunities for GOEs and GLCs, and pursuing other socio-economic development objectives.

To create the enabling environment capable of attracting foreign direct investments into the country, he said the new Board of MOFI will, in line with its mandate and its aspirations to grow the assets under management (AVM) to N100trillion, vigorously pursue the agenda towards professionalizing government ownership in state-owned entities, and investing strategically for value creation in the country’s economy.

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

The primary target for the new management of MOFI, he pointed out, will be how to manage its existing portfolio to generate risk-adjusted returns for its shareholders and revenues and support government programmes.

To shield the government from exposure to liabilities incurred from loans procured to provide socio-economic infrastructure, MOFI, as the investment vehicle, could take on these liabilities, by not only helping in sourcing and mobilizing capital, but managing more closely the performances of these government-owned commercial enterprises.

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