Let me state right away that I am not in favour of the establishment of the so-called Sovereign Wealth Fund (SWF). Yet, I believe in planning and saving for the future.
My opposition to the SWF idea is based on certain worrisome issues surrounding the enactment of the law itself and the manner the fund is likely to be operated on our behalf by its foreign custodians. Whatever be the much-vaunted economic benefits, I think there are geo-political and international power-play issues which our economic strategists appear to be over-looking.
But let’s begin from the home front. The Federal Government has been trying hard to make state governors buy into the idea of a sovereign wealth fund which would be sourced from the Federation Account. The governors are largely opposed to this. But their opposition is mounted somewhat belatedly since the law establishing the fund, the Nigeria Sovereign Investment Authority (NSIA) Act, has already been passed. The governors’ reservations could have been expressed much earlier had the bill for the fund been adequately debated. It was one bill that became law before a lot of people even knew it was being seriously considered at the National Assembly.
According to Mr Olusegun Aganga, the former minister of finance and current minister of trade and investment, the SWF bill was one of the fastest to be enacted. He said it was done in five months. However, it is not only the speed but also the circumstances of the enactment that should raise eye brows and question the motives behind the enactment. The SWF law was enacted when nearly everyone was looking the other way. The bill was passed in May, 2011. The five months preceding that date was the period of the general elections when the legislators, the governors and the presidency and other stakeholders were all preoccupied and concerned with their electoral fate.
The attention of the nation was still on the elections when the outgoing National Assembly hurriedly returned in May and surreptitiously passed the Bill, which was immediately signed into law by the President. Note that the Petroleum Industry Bill (PIB), which appears far more important, has remained in the cooler for several months for no apparent reason. If any bill needed to have been hurriedly passed, apart from the Electoral Act, it should have been the petroleum bill, not the SWF bill! The PIB which was painstakingly crafted over a decade by a team led by the renowned Dr. Rilwanu Lukman is fundamentally designed to revolutionize the oil industry in the country and make Nigeria to derive maximum benefits. And so the SWF bill was passed when most stake-holders were not attentive enough to debate its full implications, thereby pushing the governors to mount their current belated rearguard action.
Three major reasons have been given to support the establishment of the SWF: it is to save for future generations; to provide for infrastructure; and to save for the rainy day. The objectives are unassailable. Nigerians have been assured that credible persons will be appointed to supervise the fund. But I have genuine fears that the SWF would serve us no better than other foreign-recommended “remedies” which we had implemented to our own detriment in the past or are being pushed to implement today. I am referring to the Structural Adjustment Programme (SAP), which devalued the Naira and downsized it to its present pitiful state; the Privatisation Programme, which had stripped the country of some valuable public enterprises and placed them in those same private hands which could not run them well on behalf of the public; and the current feverish move to remove the oil subsidy.
They are all part of the grand scheme designed by the World Bank and the International Monetary Fund (IMF) to create a buffer fund to serve principally outside interests. External creditors delight in shaping a country in a manner that aids the recovery of their money, not minding the adverse impact on the citizenry. The case of Greece, which is currently pitched against the European Union and IMF over debt burden, tells the story.
It is not long ago that Nigeria managed to free itself from the handicaps of sovereign debt burden. For the period of the debt overhang, Nigeria’s freedom of action was circumscribed by the dictates of the creditors. It will not be different if Nigeria establishes the SWF. Only that Nigeria will now be the creditor and still have its freedom circumscribed for a number of reasons. Answers to these and several other questions may suggest the booby traps in the offing for Nigeria: In what form will SWF be kept? Where will the fund be kept? Would Nigeria be assured of un- encumbered access to the fund when the need arises? Does it make sense for a country like Nigeria with its poor infrastructure to really allow further deterioration while it puts away the much-needed fund and struggles to maintain its value? Has the Excess Crude Account (ECA), said to have been set up on the advice of the World Bank really served its purpose? Is SWF not ECA by another name?
The current position is that $1bn has been taken from ECA as an initial amount to establish the SWF. The remaining $4bn in ECA will similarly be transferred to the SWF if agreement is struck with the governors. It appears the governors have given in. As part of the arguments to persuade Nigerians to accept the SWF, examples have been given of several OPEC members, Russia, China and some small countries in Africa and other parts of the world, which have established such funds. The truth is that the money theoretically belonged to those countries but many can’t access it when the need arises.
My contention is that Russia and China can confidently take care of themselves whenever, wherever and in whatever form their funds are kept. The smaller countries are of no consequence in international politics. The real targets are OPEC members of which Nigeria is one and every effort is being made by outside interests to bring it into the fold. Therefore, the outlined objectives, as attractive as they may seem, may have some hidden traps. Libya is among the countries taunted as having a huge SWF fund. Yet, Libya could not access it when it badly needed it. The powers that be peremptorily froze it. Threats of their funds and assets being frozen hang over other countries unless they remain in the good books of the West and contrary to their national interest. There is no guarantee that Nigeria will not be similarly denied access to its SWF in the future if it runs foul of formidable Western interests. In fact, even now, Nigeria lacks the freedom to price its oil in any currency and recent attempt to consider other currencies as main reserve for the country is facing stiff resistance.
I strongly hold the view that although Nigeria may have credible individuals, as is being proposed, to supervise the SWF, they will be in no position to stop the fund from being literally pounced upon when Nigeria is challenged by some powerful interests in the arena of international politics. The SWF will be a serious handicap if Nigeria wants to maintain some degree of self respect. SWF is no more than asset, insurance and deposit for Nigeria’s trading and development partners and it is not only risky but also superfluous to maintain amounts more than the normal safe margin required in support of import bills.
The SWF is already established with the token $1bn amount. However, if the fund can’t be scrapped, no substantial amount should be added. Nigeria should commit wisely its funds to uplift its much-needed infrastructure now. Such act in itself will serve the country better
instead of keeping “idle” funds in custody of those over whom it has no ultimate control, thereby unwisely mortgaging its assets and freedom of action. There is wisdom in the words of Brian Browne who says: ’’Placing one’s hand in the tiger’s gullet is an easy task. The difficulty comes in the extraction of the thing.’’
Bukar Usman, a former permanent secretary, wrote from Abuja.