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Angola - Africa’s second largest oil producer launched a $5 billion sovereign wealth fund (SWF) this week. This raises questions as to why Nigeria’s political class is not in the forefront of advancing reforms in critical sectors to help unlock growth in the economy.

SWFs are oil savings deployed by countries in the development of infrastructure for the use of future generations when the oil runs dry, and for budget stabilisation . They also provide a buffer against volatility in oil prices.

“Nigerian politicians really do not wish to reform this country,” Opeyemi Agbaje, CEO of Resources and Trust company (RTC), a business advisory and research firm based in Lagos, said.

“They are therefore instinctively opposed to lean budgets, deregulated markets, fiscal prudence, transparency and indeed, economic efficiency.”

Nigeria, Africa’s top oil producer, has set up a $1 billion SWF, which is puny for its $270 billion-sized economy, and equivalent to 0.37 percent of Gross Domestic Product (GDP); compared to Angola, whose SWF is 4.95 percent of its $101 billion economy.

The progress of Nigeria’s SWF is being hamstrung by political wrangling between the executive and the powerful 36 state governors who oppose it.

“The Nigerian fund is mainly for liquid, low-yield assets, while the Angolan fund’s mandate is broader, with investment in the real economy domestically,” said Richard Segal, head of emerging markets strategy at Jefferies in London.

After a decade of rapid economic growth, averaging more than 6 percent per annum, data from the National Bureau of Statistics (NBS) shows rising poverty, unemployment and inequality in Nigeria.

Reforms that may help to tackle some of that disparity is unfortunately stuck in parliament, hobbled by a dysfunctional political class that is estimated to have siphoned $400 billion out of the country in the past 40 years, and an almost byzantine law-making process, with legislators mostly disconnected from the reality of everyday people.

The PIB, which aims to unify all the necessary legislation in one bill and provide a clear framework for investment in the energy sector, has been largely stuck in the National Assembly, while multi-national oil and gas companies like Shell, have in recent year’s halted investments, due to the policy uncertainty.

Analysts estimate investment of at least $28 billion has been lost or deferred since 2010 as a result, with the beneficiaries being other producers in the sub-region, such as Angola and Ghana.

Other reform killing actions by politicians include the impasse over the budget benchmark oil price, and a seeming disregard for the rule of law, with Senators routinely threatening to overturn valid concession contracts, and Ministers flouting court orders, as the case of Maevis and FAAN illustrates. The impact on growth, of the politician’s stalling of reforms is negative.

The oil sectors contribution to GDP has declined from a high of over 20 percent in 2005 to 14.71 percent in 2011. The oil sector’s contribution to growth last year, was minus 0.57 percent, generating little job creation in the process.

A higher oil benchmark price (which the politicians insist on having) would lead to fiscal expansion at the federally consolidated level and eventually threaten the exchange rate and price stability, given its liquidity implications, say analysts.

Samir Gadio, an emerging markets strategist at Standard Bank London reckons, “this would also force the CBN to keep policy and market rates high for longer,” which would also be a negative to efforts at job creation.

Skeptics say it is no surprise that the only significant reform process that has taken place in the past five years, has been in the banking sector and by the Central Bank, an institution which is independent, and mostly out of the reach of the political class.

According to Agbaje, Nigeria’s political class define politics in terms of how much money they can get out of it, “this means they are an embedded opposition to sensible reforms which reduce rent opportunities and corruption,” he said.