With the announcement of the appointment of the chairman of Board and management team of the Nigerian Sovereign Investment Authority (NSIA) by the finance minster and coordinating minister for the economy, Ngozi Okonjo-Iweala, on August 28, 2012, the long awaited, albeit controversial, Sovereign Wealth Fund (SWF) for Nigeria has finally come to be. There is no doubt that the pioneer team that will nurture, develop and grow this very vital, extraordinary and strategic institution must necessarily be extraordinary in the sense of knowing and understanding the kinds of jobs to be done for and on behalf of the present and future generations of Nigerians.
The team comprises tested and experienced people, men and women of exemplary character, decorum and transparent honesty. Given their top place in their various professional callings, spanning over many years in different highly respected organisations within and outside Nigeria, much is expected from them by Nigerians yearning to benefit from President Jonathan’s promise of national transformation dividends by 2013. In other words, the appointment of Mahey Rasheed as the chairman of the Board and Uche Orji as the managing director/CEO of the NSIA is a welcome development in the journey to actualisation of a tall dream. So far, other members of the team announced by Okonjo-Iweala include Arnold Ekpe, Jide Zeitlin, Bili Awosika, Bisi Soyebo, Hassan Usman, and Stella Ojekwe-Onyejeli, who has been designated as the chief risk officer.
The process of selecting the team, as the general public was informed by the finance minister, was thorough, meticulous and transparent, assisted by world-class head-hunting agency KPMG. No doubt, one of the first hurdles in laying a solid foundation for building the human resource base for the smooth institutional take-off of the NSIA has been successfully surmounted. As such, the next set of challenges may easily be sorted out and addressed with less stress by the government and the Board and Management of the authority.
But, besides these teething problems, there are a number of fundamental policy and operational issues regarding the authority that still need further clarification and/or fine-tuning by the government in order for the Nigerian public to fully understand, appreciate and support this “tried and tested strategy for achieving fiscal prudence and economic transformation”. For instance, some of the concerns raised by many Nigerians, including state governors, during the public debates and legislative deliberations leading to the passage of the NSIA Bill and its final assent by President Jonathan on May 27, 2011 are still not answered. I hope those concerns will not constitute barriers to the smooth take-off and running of the authority.
According to the literature, “SWFs merit analysis for several reasons. Some argue that these funds will help nations dependent on natural resources to diversify their economies, but others worry about abuses of power and urge greater transparency at SWFs.” Having said that, I would also like to initiate a discourse regarding the modus operandi of the authority, including continuous funding and investment strategies and focus of the NSIA.
One would observe that the NSIA is structured as a ‘three-in-one’ sort of organisation, a single authority split into three operational arms or components, according to the NSIA Bill. It is made up of (i) the Future Generations Fund; (ii) the Nigeria Infrastructure Fund; and (iii) the Stabilisation Fund. According to the finance minister, each of these seemingly autonomous Funds, which are unified under one single authority, governing council and management team, will receive 20 percent of the initial $1 billion earmarked for the take-off of the authority. What to do with the remaining 40 percent will be decided by Board of NSIA, taking into consideration the “macroeconomic conditions of the economy”.
My first main area of concern is the way the first tranche of the $1 billion take-off grant is to be shared amongst the three tiers of the authority as stated above. One would expect that the sharing formula should have accorded differential weight by giving more of the take-off allocation to the Nigeria Infrastructure Fund to start preparatory work to bailout the infrastructure deficit in the country. That is to say, the sharing formula should have been 45 percent to the Nigeria Infrastructure Fund, 20 percent to the Future Generations Fund, and 15 percent to the Stabilisation Fund, and the balance of 20 percent to be used as reserve to be apportioned by the Board based on the exigencies of the macroeconomic performance of the Nigerian economy.
The reason for advocating this sharing formula is not difficult to discern. Nigeria’s critical infrastructure deficit is mind-boggling, to say the least. Various estimates by a number of reputable organisations and agencies put continuous investment tag of over $20 billion annually over a period of 10 years to fix Nigeria’s critical infrastructure covering power, transport and refineries sectors, for example. Hence, there is the need to allocate higher percentage of financial resources to the Nigeria Infrastructure Fund of the NSIA at all times (the other two components of the Fund are geared towards foreign investments).
Finally, not attempting to pre-empt what kind of investment decision framework and model the Board and management of the NSIA will adopt, I would conclude this piece by recommending that they look into the possibility of adopting the model of operation and public project management used by the defunct Petroleum (Special) Trust Fund (PTF). I can see a lot of similarities between the two Funds: in principle, objective and mandate. Nevertheless, the most important concern of Nigerians is abuse of power and greater transparency in the operations and management of the SWF. The power sector reform and privatisation process are examples not to be emulated by the Board and management of the NSIA.
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