The establishment of the Sovereign Wealth Fund (SWF), though coming more than two years after the idea was first mooted, will give the country a legal underpinning for saving for the future. It is an indication of the collective will of Nigerians to actualise their dream of a better future.
Our first attempt at a national savings scheme started in 2003 with the establishment of the Excess Crude Account. One of the biggest challenges of the ECA, which is still affecting it, is that it was never backed by law.
Nigeria is estimated to have earned over $400 billion from crude oil sales since the 1970s. In 2007, the ECA had more than $20 billion in savings. Now depleted, its effect on health, education and infrastructure are minimal, if any. Hence, it is expected that the SWF will enable Nigeria save money for future generations, fund infrastructure, and defend the economy against commodity price shocks, apart from making the country more attractive for investors.
Indeed, the goal of the SWF should be technology transfer, intensive job creation, wealth creation and the rise in living standards, as large industries tend to bring along with them their own unique infrastructure. There is no doubt that the SWF has proved to be a veritable form of investment for the future, especially for countries that depend largely on commodities and raw materials, such as oil and other mineral resources, as their main source of revenue.
SWF’s promoters insist that, until the latest foray, Nigeria remained one out of only three members of the Organisation of Petroleum Exporting Countries (OPEC) that do not operate an SWF. Although the Kuwaiti Investment Authority is credited with operating the first SWF from oil revenues in 1953, the Abu Dhabi Investment Authority operates the largest SWF with assets worth $875 billion. Nigeria has been producing crude oil since 1958, longer than all the SWFs except that of Kuwait, which has saved $292 billion since 1953 from its oil earnings.
It is against this background that we support calls by analysts, both within and outside the country, that the fund be run in line with international principles typified by transparent and sound governance structure that provides for adequate operational controls, risk management and accountability. The principles were proposed in 2008 through a joint effort between the International Monetary Fund (IMF) and the International Forum of Sovereign Wealth Funds (IFSWF) with over 25 nations signed onto the principles, with objective for monitoring three areas of legal framework, institutional and governance framework, and investment policies and risk management.
Oil producing nations currently have over $2.62 trillion held in SWFs. A ranking of SWFs assets by the Sovereign Wealth Fund Institute, which tracks SWF activities around the world, shows that among African oil producing countries, the Libyan Investment Authority (LIA), set up in 2006, currently has about $70 billion in assets, the biggest SWF under management on the continent.
For Nigeria, a wealth fund means preparing the future now. Everything possible should be done to make it succeed.