Oil producing nations currently have $2.62 trillion held in Sovereign Wealth Funds (SWFs), BusinessDay investigations have shown.
This revlealation comes on the heels of moves by state governors to ensure that the SWF is not established in Nigeria, despite an existing law to that effect.
The governors, under the auspices of the Nigeria Governors Forum, are challenging the establishment of the SWF, a special statutory account into which the three tiers of government are reqiured to save excess accruals from oil sales above the budget benchmark, for future spending. Currently, the excess earnings are shared and spent by the three tiers of government, with nothing saved for the future.
A ranking of SWFs assets, under management by the Sovereign Wealth Fund Institute, which tracks SWF activities around the world, shows that the Abu Dhabi Investment Authority, a SWF set up in 1976 to save part of the nation’s wealth, currently has $627 billion in assets under management, the highest by any SWF, according to Businessday investigation.
The Government pension fund set up by Norway in 1990 to save and invest part of the nation’s oil earnings, ranks second with $572 billion in current assets. SAMA foreign holdings, a SWF set up by Saudi Arabia, currently has $472 billion in assets in its SWF.
The Kuwait Investment Authority set by the Kuwaiti Government in 1953, five years before Nigeria hit its first oil in commercial quantity in Oloibiri, Rivers State , currently has $296 billion in asset under management. Russia has a National Welfare Fund, set up to save and invest its oil earnings. The fund which was set up in 2008 currently has $143 billion in assets under management.
Also the Qatar government set up the Qatar Investment Authority (QIA) in 2005, to save and invest its oil earnings. The QIA has been able to build up $85 billion in assets under management in six years.
Among African oil producing countries, Libya under Ghadafi, has been able to build up the biggest SWF under management on the continent. Named the Libyan Investment Authority (LIA) set up in 2006, the LIA currently has about $70 billion in assets under management, the highest by any oil producing nation in Africa . Algeria ranks second in Africa with its Revenue Regulation Fund set up in 2000 which currently has $57 billion under management.
Nigeria ranks along with Angola and Ghana as countries that have no funds in their SWF. While Angola and Ghana are relatively new comers in oil production and are in the process of establishing their own SWFs, 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.
Nigeria is estimated to have earned about $400 billion from crude oil sales since the 1970s, according to the Revenuewatch Institute. Nigeria currently has no savings from its oil earnings.
The country’s only attempt to save part of its oil earnings happened in 2003 when the Obasanjo government set up the Excess Crude Account (ECA). By 2007, the ECA had more than $20 billion in savings. However the oil price slump in 2008 and pressure from state governments to share the money has seen the total depletion of the ECA. The ECA has been replaced with the SWF which has also come under pressure from state governments to be scrapped.
The governors, who are doing everything possible to mortgage the future of born and unborn Nigerians, are said to be assemblying the best of legal minds to challenge the SWF Act with a view to truncating it.
Total assets under management by about 40 countries with SWFs, is $4.74 trillion. Countries which set up SWFs to manage their oil and gas earnings have $2.62 trillion of SWF assets, while countries that have SWF to save non oil related earnings have $2.12 trillion.
SWFs are currently one of the biggest sources of investment capital in the world, according to the SWF Institute. A recent report by the institute, on where SWFs are invested, shows that they have 47 percent of their funds invested in listed equities. The SWFs also have about $490 billion, representing about 14 percent of their assets, invested in the real estate sector, especially in Europe and America.
A good number of SWFs, especially from the Middle East, are taking advantage of dropping property prices in Europe and America , to increase their holdings of real estate assets.
The SWF Institute also revealed that SWFs have about $1.6 trillion invested in global stock exchanges, controlling about 3.4 percent of global stock market value, which stood at $46.5 trillion at the end of December 2010.
The report also shows that SWFs hold another $2.5 trillion in unlisted equities which make about 20 percent of their total assets under management.