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Saving The Nigeria Sovereign Wealth Fund Initiative By Shafii Ndanusa, FCCA
Background
For keen observers of recent trends in the Nigerian economy as it relates to the management of Nigeria’s crude oil revenues, these are indeed troubling times. Troubling in the sense that one major economic vehicle (the Nigeria Sovereign Wealth Fund) that was designed to rescue the country from the resource curse syndrome appears to be heading for a crash well ahead of taking-off. It will be recalled that the Nigeria Sovereign Investment Authority (NSIA) Bill was signed into law on 27th May 2011. To date, the NSIA is yet to be operational because there is a challenge to its legality from the State Governors of Nigeria.
The implication of the above is that almost a year after this very important organization was granted Presidential Assent, Nigeria is yet to record one single tangible benefit from this noble initiative. The opposition coming from Nigeria’s State Governors is the major challenge to its set-up. As a matter of fact, even the $1 Billion (One Billion US Dollars) seed capital approved for the Nigeria Sovereign Wealth Fund (NSIA) has become a matter of dispute for adjudication. When by implication and beginning from the 27th day of May, 2011 all oil revenues in excess of the national assembly approved budgetary benchmark ought to have been set aside and channeled to the Nigeria Sovereign Wealth Fund.
In the event of a new global economic crisis (which is looming), Nigeria will certainly be at the receiving end of the global economic spectrum. The country’s reserve buffers are quite low compared to its position during the 2007/2008 global economic crisis. Oil price shocks could spell doom for the Nigerian economy with consequential impact on revenues accruing to all tiers of government (Federal, State and Local). The Excess Crude Account has been seriously depleted while sovereign savings and investments are virtually absent owing to failure to effectively establish the Nigeria Sovereign Wealth Fund.
As Nigerians and the world begin to express their disappointment with this situation, the blame game is sure to point in different directions. A major concern has to do with the global perception about Nigeria’s economic management trajectory. It will be recalled that the global economic and financial community welcomed the idea of establishing the Nigeria Sovereign Wealth Fund. Very soon, a consensus will have to be reached amongst key stakeholders on whether to consider Nigeria as one of the countries with a sovereign wealth fund or not. For the moment, it appears the sovereign wealth fund exists only on paper, as it is yet to be given the force of life. What the Federal Government Must Do
As the initiator and key driver of the sovereign wealth fund initiative, the Federal Government of Nigeria:
ü Must continue to argue in favor of establishing the Nigeria Sovereign Wealth Fund ü Must continue to push for and indeed make operational the Nigeria Sovereign Wealth Fund ü Must continue to dialogue with state governors on all issues incidental to the sovereign wealth fund ü Must be prepared to review its own positions and also make compromises in the interest of peace, justice and fair play ü Must understand that while the Federal Government has a long term focus on this issue, the State Governments appear to be short term focused ü Must understand that it might be necessary to make concessions in the process of implementing the operations of the Nigeria Sovereign Wealth Fund ü Must be prepared and open to carry out a holistic review of the Nigeria Sovereign Investment Act in the interest of justice and long term sustainability of the initiative
The Strategy Used to Stall the Initiative
Essentially, the approach used by those in opposition to the initiative is to use whatever means available to continue to delay the effective implementation/take-off of the Nigeria Sovereign Wealth Fund. This approach will ensure that the status quo is maintained with consequent attrition on the excess oil revenues. This approach appears to be dependent on two strategies:
1. The threat of litigation or actual litigation at the Supreme Court 2. Long drawn out/unending dialogue sessions with no tangible outcomes, resolutions or collective agreements
While the above strategies are being implemented, the status quo has to be maintained as time passes. At the end of the day, financial resources (excess oil revenues) that ought to have been channeled to the Nigeria Sovereign Wealth Fund for prudent management would have been shared amongst different tiers of government. Because this approach delivers the ultimately desired outcome for the State Governments, it could be applied for the next fifty (50) years unless the Federal Government insists on moving forward with the implementation of the Nigeria Sovereign Wealth Fund. Having come this far, Nigeria must prove to the world that it is really serious about the prudent management of its economic resources as this could impact greatly on the foreign direct investment that the country is able to attract. The Way Forward
In resolving the impasse between the Federal Government and the State Governments over the issues of the Nigeria Sovereign Wealth Fund, I do not see how a mutually beneficial outcome could be achieved for all parties without the following:
Ø The immediate, phased and sustained implementation of the Nigerian Sovereign Wealth Fund Initiative Ø A holistic review of the Nigeria Sovereign Investment Authority Act with a view to safeguarding the future sustainability of the scheme Ø Holding open, sincere and results-oriented dialogue sessions with all parties with a view to reaching common understandings and resolving areas of dispute
I am totally convinced that only a win-win approach will prove useful to both parties in this scenario.
Mr. Shafii Ndanusa, FCCA , author of Bankruptcy and Survival in Times of Economic Uncertainty, published by Xlibris Corporation, United Kingdom. |