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A Sovereign Wealth Fund is arguably a good thing, it gives
Nigeria a powerful tool that can be used to advance our national interest.
However, the issue comes down to vision and transparancy. Fir...Read the full article.

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To begin to imagine that Nigeria has a Sovereign wealth Scheme beggers believe not beacuse we should not have one but considering what our leaders do with our money,to have thought of this, if you allow me deserves a pat on the back:rolleyes::rolleyes::rolleyes:.

However it's one thing to have the fund, it's another to use it for the common good of Nigeria. As the author has rightly quoted, countries in the middle East and South East Asia are using these fund to transform their country,Dubai is building a city called the "Silk city", and this is proceed from the excess they got from the recent surge in oil price.
With the recent crash on Wall styreet, the West is going to borrow from these fund,just for a minute imagine a scenario in which Nigeria is borrowing money to the World. However in the real world, these is not happening because we have a bunch of people who have vow to improvish this nation to it's bare bone.

However they won't have the last laugh, we may be crying now(Skumus rinamus), but that does not mean we cannot see,the day is coming(and very soon) when all these illegal squattor of our sovereign wealth are driven off, and the authetic owner come and use the fund judiciously.

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Daniel:

Thanks for this short piece on Nigeria and SWFs. SWFs have always fascinated me. I guess I was too busy flenjoring in the Lounge when you posted this article so I did not react.

First, I think your definition of SWF is somewhat limited. I prefer the U.S. Treasury Department's definition, which is that an SWF is an investment vehicle established and controlled by a government entity with funds separate from official reserves. The emphasis is on investment activity and governmental control, rather than just a list of investments as your preferred definition emphasizes.

Nigeria does not have an SWF. The SWF Institute is overreaching in classfying the Excess Crude Account (the "ECA") as an SWF. The ECA was established in 2004 as a stabilization account for funds above the set benchmark crude oil price that is used to create the budget. The idea was to have a fund to stabilize government spending if the price of crude fell below the benchmark. Therefore, the ECA was not initially created as an investment oriented construct like normal SWFs. In other words, the rationale behind the ECA was not to such as would entertain coming over to the U.S. to buy into Wall Street etc etc.

However, given that the crude oil price remained relatively high, the question then arose, what do we do with the funds in the ECA? Well, that is where the typical Nigerian yahwah started. You may have followed all the brouhaha in the press a couple of months back as to where the funds were. Government's position, as I understand and recall it, was that the funds were being used for infrastructural development in the power industry! Of course, NEPA is still postrate, so how far? Then, Hamman Tukur, Chair of Revenue Mobilization Allocation and Fiscal Commission (RMFAC) alleged that the money was misused and that many of the power instrastructure projects were empty, i.e., equipment and works allegedly paid for out of the ECA were missing! You may recall Ngozi Okonjo-Iweala providing one figure for the amount saved in the ECA and someone else (cannot recall who) providing another.

The ECA construct has also been criticized on the ground that it is unconstitutional. According to Sub-paragraph 3 of Section 162 of the Nigerian constitution, any amount standing to the credit of the "Federation Account shall be distributed among the Federal and State Governments and the local government councils in each State on such terms and in such manner as may be prescribed by the National Assembly.” Some argue that putting money into the ECA account and saving it rather than distributing amongst the three arms of government is unconstitutional. I have always thought our constitution is redundant in many parts. I don't see why this type of provision needs to be addressed in the consitution, rather than in some law that will require less legistlative muscle to amend. Then, of course, you have those who think we need a lot of money to spend on the masses (education, health, housing etc), so saving money in the ECA makes no sense.

Anyway, it is a long story beyond the scope of your piece. I just wanted to throw some further color. If you want to know more, just do google searches. There was quite a bit of talk about the ECA during the Ndudi Elumelu led probe of the power sector that has led to nothing but heavy national titilation up till now!

I doubt that if and when Nigeria gets its act together to establish an SWF, it will find it easy to just walk into Wall Street and buy big into a U.S. financial institution as China's CIC (Morgan Stanley, Blackstone), Singapore's Temasek (Merrill Lynch), and Abu Dhabi's ADIA (Citigroup) did. And, I am not suggesting that it was easy for these countries either but they definately have a first mover advantage. There is protectionism in the air. Several U.S. Congress committees (House and Senate) have held hearings on or are investigating SWFs and their investments. Even on the State level, in California, there is a proposed law to prevent the state's biggest pension funds from investing in private firms that are wholly or partly owned by SWFs. Of course, the idea is to disincentivize private equity from accepting SWF money in California.

There is much fear that SWFs are not transparent investors and that their motives are not clean, i.e., investing is for purposes other than mere profit making. Motives are alleged to include controlling another country's economy, stabilizing the SWF's currency as against that of the country in which it invests, and just politricks of various sorts, i.e., as you put it so colorfully, "advanc the national interest." But, at whose expense? So, one can expect some protective laws out of Washington or protective policies from the SEC, for example. Indeed, international entities such as the IMF (read the Treasury Department) and the OECD are working on initiatives (read protection guidelines) to increase transparency in the workings and investments of SWFs. So, the playing ground will be different by the time Nigeria comes on scene, if at all. The unfortunate thing is that, as usual, such "guidelines" will be set in stone by the time we come on board without any input from us. We keep playing last fiddle in the global economy.

To the extent that you are further interested in SWFs, one good person to read constantly is Stephen Jen. I believe he is the chief economist for Morgan Stanley. He writes in the Economist and various Morgan Stanley publications. He is somewhat protectionist in his approach so read him with a pinch of salt. As you know, the SWF Institute is also a reasonably decent source of data.

Okay o!

Soul Sista a/k/a Soul Sizzling