Nigeria’s next financing reform must be about ownership

Detailed summary

Within one week, Nigeria revised a major external-borrowing proposal, NNPC outlined a possible minority flotation, and the Dangote refinery transaction ...

Within one week, Nigeria revised a major external-borrowing proposal, NNPC outlined a possible minority flotation, and the Dangote refinery transaction exposed the barriers preventing Africans from investing easily across their own continent. Together, these developments suggest that the next phase of reform must concern not only how Nigeria raises money, but who owns its productive assets and under what rules.

These are important questions. But they do not exhaust the financing debate. An equally consequential question is: who should own the productive assets through which Nigeria’s future value will be created? Three developments during the past week make that question unavoidable.

First, President Bola Tinubu replaced an earlier $20.52 billion external-borrowing proposal with a more specific request for approximately $7.7 billion.

Second, NNPC’s chief executive outlined a possible model under which the state oil company would initially float between 5% and 10% of its equity, principally in Nigeria, with a secondary listing in London or New York potentially following.

Third, the head of the BRVM disclosed that African stock exchanges had discussed ways of broadening access to the Dangote refinery offer, including through depositary receipts, but had been constrained by fragmented regulation.

These developments are not part of a coordinated policy. Yet they point towards the same strategic choice. Nigeria can continue financing development predominantly through debt and foreign ownership. Or it can build institutions that allow Nigerians, Africans and long-term international partners to share responsibly in productive ownership.

Borrowing has a legitimate place in national development. A government cannot finance every road, power network, port, hospital, and school from current revenue. Long-lived assets can reasonably be financed over long periods, particularly when they expand the economy’s productive capacity.

But debt and equity distribute risk differently.

Nigeria…

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