Norway’s $1trillion Sovereign Wealth Fund holds lessons for Nigeria


September 14, 2017 | 3:30 am
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Nigeria’s oil funds have accumulated about $3.96 billion, which is capable of paying for only 16 percent of the 2017 budget, while Norway’s oil fund, reached $1 trillion on Tuesday, capable of resolving the country’s budget in 37 years, even though it was created six years before Nigeria’s.


Norway’s sovereign wealth fund, the world’s largest, rose to $1trillion on the back of a boom in global stock markets and a strong euro, which lifted the value of its assets, demonstrating the wisdom of the popular refrain ‘to save for the rainy day’, a reality lost on Nigeria’s leaders.


Established in 1998 to save oil and gas revenues for future generations, the fund was ranked first in a recent international rating of countries management of natural resources extraction and wealth, by New-York based Natural Resource Governance Institute (NRGI).


Norway’s oil fund grew through investing large surpluses generated by its petroleum sector. The savings included taxes of companies, payments for the license to explore and the state’s direct financial interest and dividends from the partly state-owned Statoil, in high yielding assets. As at June this year, Norway’s oil fund was the largest European stock holder with a total 2.33% stake in European stocks.


Experts say the biggest challenge for Nigeria in terms of resource governance is the country’s inability to target the right balance between consumption and investment.


“During some of the Federal Executive Council sessions, where I was present, the issue of saving funds generated from the sales of excess crude came up, but most of the governors at the time, firmly opposed the idea,” said Tunde Lemo, a former deputy governor of the Central Bank of Nigeria (CBN) at a religious conference last year.


They opposed it so that more money could be available to fund many bogus budgets at state levels, often arguing that there was no need for saving for the rainy day, since, as some of them said, the day was already rainy, said Lemo.


Nigeria created the Excess Crude Account (ECA) in 2004 to save oil revenues above the established benchmark at the beginning of every fiscal year. It was aimed at shielding budget estimates against shortfalls that may arise from volatility in crude oil prices at the international market.


Due to rising crude oil prices, by 2008 the fund had grown to more than $20 billion. At the height of the oil boom in 2008, Nigeria’s foreign reserves, including the ECA stood at $62billion.


Then, the years of the locust set in. In 2009, the Federal Government and the state governors agreed to withdraw about $5.5 billion from the ECA to invest in Independent Power Projects that are now generating massive megawatts of darkness.


In 2010, the Jonathan government sought to establish an SWF but agitations to ‘share the money’ were both deafening and alarming. Rotimi Amaechi, former Rivers State governor and then chairman of the Governors Forum fiercely opposed the fund, arguing that the constitution said oil proceeds should be shared.


“Governors agree that the Federal Government should save but the law has to be respected. What the Federal Government has done is the mere kidnapping of our money.” Amaechi said at the time.


Asiwaju Bola Ahmed Tinubu, a former governor of Lagos at the time, backed the governors’, saying the creation of the SWF by the Federal Government, was illegal and an attempt to hoodwink Nigerians.


“I’m in full support of the governors going to court. The Sovereign Wealth Fund is an illegal looting committed under an act. It is giving the Excess Crude Account (ECA) another name and taking it to the House for illegal constitutional amendment.”


By 2010, Nigeria’s ECA had fallen to $4 billion, largely due to funding budget deficits due to slump in crude oil prices and funding phantom projects inspired by avarice.


Bowing to pressure from the governors, the Jonathan administration from 2011 began making profligate expenditures from the ECA and depleted the foreign reserves to alarming levels. In 2012 alone, Nigeria lost over $1billion in a phantom subsidy payment to fraudulent oil marketers.


Stakeholders say it is not too late to start saving and investing, especially as the world looks increasingly ready to rely less on crude oil. A recent Twitter chat organized by the Nigerian Natural Resources Charter highlighted this urgency.


“Some would argue that Nigeria has no problems saving. The challenge is more in that savings are consumed and not invested,” said a tweet from NNRC.


Participants, including Oby Ezekwesili, a former minister of education and Waziri Adio, the executive secretary of Nigerian Extractive initiative (NEITI) and other discussants, urged the government to focus on saving and investing.


“Yes, we need to focus on the need for Nigeria to save more and at all times to overcome volatility of commodity prices. We have been saving and spending. And we are not investing enough of the little being saved,” Adio said in his tweets.


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September 14, 2017 | 3:30 am
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