The CEO of Nigeria’s Ministry of Finance Incorporated (MOFI), Dr. Taikang Armstrong, has called for urgent reforms in the corporate governance of state-owned enterprises (SOEs), stressing that their poor management is stalling the country’s economic progress.
Speaking at the 2024 Annual Corporate Governance Conference, Dr. Armstrong emphasized the need for accountability and strategic investments to revive these critical entities, highlighting that Nigeria’s wealth is being wasted rather than invested in long-term growth.
Dr. Armstrong pointed out key examples of underperforming state-owned enterprises, such as the Nigerian National Petroleum Corporation (NNPC), Bank of Agriculture, and the Federal Mortgage Bank.
“These enterprises were created to drive key sectors like energy, housing, and agriculture, unfortunately, their poor performance, driven by weak governance, has stunted Nigeria’s development.” he said.
He drew attention to the energy sector, particularly the NNPC, saying, “For every barrel of oil we take from the ground and spend the money, if we do not invest it in appreciating assets, we are depreciating our common wealth. The revenues from oil have not been reinvested in long-term projects, and that explains why, despite our oil wealth, we are poorer.”
The mismanagement of resources
Dr. Armstrong was particularly critical of how resources from Nigeria’s oil industry have been managed, warning that much of it has been spent on consumption rather than productive investment.
He explained, “In Singapore, for instance, there was legislation that stipulated you don’t borrow for consumption; you borrow for investment. Unfortunately, Nigeria has not adopted this mindset. Our oil wealth is being spent on expenditure that doesn’t generate returns.”
He further emphasized, “If we took out all the money that we had and built infrastructure like the steel companies, NITEL, Nigerian Shipping Lines, NEPA, and none of those created value, we have been impoverishing ourselves for decades. That explains why we are where we are. Despite the oil wealth, we have grown poorer because the revenues were not reinvested in appreciating assets.”
Call for reinvestment and legislative reforms
Dr. Armstrong stressed the importance of legislative action to reverse these trends. “We have a collective responsibility to ask questions and ensure that whatever input we can make in the legislative process, things like that are legislated,” he said.
He called for laws that would ensure that a portion of the country’s revenues from assets like oil are reinvested in projects that generate long-term returns. “There is no law that says for every asset you sell, a certain percentage must be reinvested. I hope you know that,” he remarked, calling attention to the current lack of accountability.
He also urged stakeholders to critically evaluate Nigeria’s budget, particularly distinguishing between capital and investment expenditures. “The fact that a line item in the budget says ‘capital expenditure’ doesn’t mean it will deliver returns in the long term. Capital expenditure should mean investment, something that appreciates in value. Otherwise, we’re just depreciating our common wealth,” Armstrong explained.
Corporate governance must be prioritized
Armstrong stressed that poor governance across state-owned enterprises has been a critical barrier to Nigeria’s development. “Without significant reforms in governance, these enterprises will continue to drag our economy down,” he said. He also pushed for better accountability and transparency, warning that if action is not taken, “Nigeria’s development dreams will remain just that—dreams.”
He suggested that Nigeria could learn from the governance models of other nations. “Look at China’s state-owned enterprises; they are government-run but extremely successful at driving industrialization and economic growth. Nigeria can learn from these models,” he stated.
He also promoted the idea of state-driven capitalism, where the government can actively invest in critical sectors without sacrificing efficiency. “We need a model that works for Nigeria, one where the state takes the lead in key industries but with strict oversight and governance,” he added.
Dr. Armstrong called for more stringent oversight of state-run enterprises, especially in their debt management. “We’ve seen many of these enterprises take on debt without generating the revenue to repay it. This cannot continue,” he emphasized.
He also issued a stern warning on the repercussions of continued mismanagement: “If we do not hold these enterprises accountable, Nigeria’s future prosperity will be at risk.”
He concluded by highlighting the urgency of reforming Nigeria’s state-owned enterprises. “The success of these firms is essential to Nigeria’s economic future. Poor governance is keeping us from realizing our potential, but with the right reforms, we can turn the tide,” he said.
