At last, a wealth fund for Nigeria
The passing of the Nigerian Sovereign Investment Authority Bill into law by the Senate opens a new vista in the country’s quest to achieve transparency in revenue management. After several years of pillaging of the country’s resources and with little to show for the huge accruals over the years, the passage of the Bill gives a flicker of hope.
Indeed, Nigeria is behind in the setting up of the fund as the list of 36 countries with wealth funds will show. Kuwait, an OPEC member like Nigeria set up its own fund in 1953. Nigeria and Angola are the only OPEC member countries that do not have a thriving fund. As Africa’ topmost oil producer and the seventh largest in the world, this is inexcusable.
Given the contention that has followed the operation of the Excess Crude Account (ECA), setting up the Sovereign Wealth Fund may be a more creative way to tackle the profligacy and indiscipline that has trailed the management of the Nigerian economy since independence. The ECA has been depleted and government continues to make withdrawals without accountability.
However, with the SWF, this may change as the Bill provides for how the revenue is generated, and how the funds so generated are allocated to the three main investment options namely the Future Generation Funds, the Infrastructure Fund and the Stabilisation Fund.
The Future Generation Fund is the portion kept aside for the unborn generation so that something is left for their future use, while the primary function of the Infrastructure Fund is investing in critical sectors of the economy. This should also attract investment from other sovereign wealth funds. The purpose of the Stabilisation Fund is to provide a buffer during lean years.
While we await the president’s assent to the Bill, a number of key issues have to be considered in appointing the fund’s management team. For one, given the critical state of the country, a sensitive institution such as this should not be seen as an avenue for political patronage. Investment decisions should be devoid of those sentiments that detract from the national interest and so management of the fund should be by individuals and professionals with proven record of competence and integrity.
While care may be taken to reflect the geo-political mix of the country, this consideration should however not override competence. The search for capable Nigerians should be expanded to the Diaspora.
It is also important that the country subscribe to the highest global standard in the management of the fund.
Transparency is key. The country must adopt the Santiago Principles, which form the global benchmark for sovereign wealth funds. The principle monitors three important areas – legal framework, institutional framework and governance framework, and investment policies and risk management.
No aspect of the fund’s investment should be shrouded in secrecy so that Nigerians can follow-up on how its processes work. Compliance with the regulatory and disclosure requirements, as well as risk management of the funds so invested will save the country embarrassment that has dogged other public agencies and intervention efforts in the past.
One way to do this may be to give periodic state-of-the-fund briefings, detailing investment destinations and on what instruments. This would minimise abuse.
Some Nigerians may be justified in viewing this new effort with skepticism. What will make the difference and win the cynics over will be the sincerity and openness with which this fund is run.
Nigerians are watching.