Sovereign Wealth Fund as basis for economic stabilisation
There is no doubt that Nigeria is making progress in the various sectors of the economy. Nigerians are full of expectations that the recent inauguration of the board of the Sovereign Wealth Fund (SWF) has increased the hope and aspirations of the citizens that is on the way of institutionalising long-term savings culture.
In fact, with the country’s infrastructure deficit estimate at $200 billion or $20 billion a year, for the next 10 years, according to the Urban Development Bank of Nigeria, there is nothing as auspicious as the Fund that with objectives of building a savings base, enhancing the development of Nigerian infrastructure and providing stabilisation support in times of economic stress.
Considering the overwhelming support, the Uche Orji-led management cannot afford to fail. At least, the felt need areas within the economy have been identified, so also the objectives of the Fund expected to start next month with a cash hoard of $1 billion.
Specifically, the analysts, believe that there is the need for the chief executive and his team to douse the skepticisms that have dogged the fund since its creation which should guide their decisions, including the fate of the Excess Crude Account, with the possibility of merging the two accounts. This is the only way the avowed government’s commitment to fiscal consolidation and prudence could be meaningful.
Ngozi Okonjo-Iweala, Finance minister and coordinating minister for the economy, could not hide her emotions when, at the inauguration, she said: “It’s a great day for present and future generations of Nigerians. I think the sovereign wealth fund will make Nigeria more attractive for investors. With this development, the country is firmly on the path to reaping the benefits of this tried and tested strategy for achieving fiscal prudence and economic transformation.”
Ken Iwelumo, former senior vice president – Investments, Bank of America/Merrill Lynch, said: “You are aware of my intense passion for the Nigeria Sovereign Wealth Fund and its success. The Nigerian SWF will evolve and succeed. There will be a learning process; the Nigerian SWF will eventually evolve to be an entity that is geared towards the needs of Nigeria.
“They have a maximum of one year to make a positive impression and impact. A lot of things are riding on the decisions they will make in the coming weeks and months, including the fate of the ECA.
If they make the right decisions and the fund gets off to a good start, then longer term goals of increased funding for the fund and the merger with it and ECA can be realised. Also the SWF can then be the critical tool that will aid in the rapid development of the Nigerian.”
Apart from developing the economy, the operation of the fund will move Nigeria closer to joining most of its OPEC partners in steering oil revenues into longer-term investment.
Rzia Khan, analysts with Standard Chartered Bank, London, noted: “It is positive. It means that Nigeria is that much closer to making the SWF operational, and that much closer to institutionalising some form of long-term savings.”
Indeed, Nigeria is one of only three OPEC member states that do not have an SWF, making expectations from the new fund high, even as it is being keenly watched by global market watchers and investors.
