Abubakar Abdulkadir was once a permanent secretary in the ministry of finance and at a time, served as managing director of Nigerian Industrial Development Bank (now Bank Of Industry). In this interview with LEADERSHIP WEEKEND, he speaks of the relevance of the Sovereign Wealth Fund and suggests that the existence of the Excess Crude Account is meaningless
There are still differences between the federal and state governments over the Sovereign Wealth Fund. Where is this likely to lead?
Well, I think the Sovereign Wealth Fund is a kind of project that not many people understood its purpose. It would be good to start from the main purpose of the fund. But first, let me highlight the nature of governance we have n Nigeria. We are a federation and we put all revenue that comes to the country, either in the form of tax, customs or any form, the surplus into this Sovereign Wealth Fund, which the federal and state governments contribute to. In effect, this money does not belong to the federal government alone. Because of that, the federal has very limited authority over the fund because 37governments contribute to it. This raises a lot of constitutional problems.
Because of the constitution, the state governments insist that all available money should be shared. It is left to them to decide what to do with the money. It is not to be dictated by the federal government. But on the other hand, there is this law of the Sovereign Wealth Fund, which I think is a very vital instrument for keeping this country financially buoyant. And as such, it is the duty of the federal government to make sure that we stay buoyant over the years.
There has to be a kind of give and take between the federal and state governments with regard to even funding this account. We also have Sovereign Wealth Fund Investment Authority. In spite of the fact that a lot of areas have to be sorted out between the federal and state governments, there are still some grey areas where both governments can agree. But, all the same, a start has been made and I believe with sincerity, this fund can be a success to the nation as a whole.
Having said so, why this fund in the first place? It is to function in three areas: one is to create money for the rainy day most especially in a country like ours which is a mono economy. We depend mostly on oil. Time shall come when we will have problems as regards cash flow. We can easily run out of cash. So part of this fund is to have some money available somewhere and in the case of difficulties, we can always go back to it and add to the budget.
This can help to cut down and avoid foreign debts. The second reason is budget deficit. It always happens. Instead of having a large deficit, we can always decide to move some these funds into the budget. Third is for investment purposes. The fund can be used to finance projects that should be managed, funded by the three tiers of government without asking each individual state government to contribute money to it.
Now, this idea of Sovereign Wealth Fund is not peculiar to Nigeria alone. Almost every country in the world now is creating something like it. More particularly countries which have been endowed with oil and always have surplus. Until recently the only oil producing countries in the world that did not have this fund were Iraq and Nigeria. Thank God, two years ago, the National Assembly enacted this law and was successfully signed by the president. We have this fund authority. Naturally, they called it surplus fund.
We cannot leave it dormant, waiting to be used. We have to invest it either within or outside Nigeria in order to generate money for us in the form of profit so that we can use the money whenever we wish to. This is why the Sovereign Wealth Authority recently invited Goldman Sachs and other financial experts to manage the portfolios of the fund. The idea here is that these monies could be invested outside and any income approved could come back to the country while at the same time we have money we can use within the country.
The federal government and state governments will share this. In other words, there are some projects which are the responsibilities of both the states and federal governments. I only hope that abuses will not come into it. I think it is right involving Goldman Sachs and other investment experts. They will not allow abuses, of course for their own reputations. I believe that the effects of this will be seen in the next five years in the country.
State governments have consistently said that in principle, they are not in disagreement with the fund. Their fear is that the fund will be mismanaged the way the excess crude account has been cornered by the federal government. How can the federal government be stopped from dipping its hands into it whenever it feels like?
That is exactly the opposite of what the Sovereign Wealth Fund is out to do. It is the exact opposite in the sense that whenever you keep money in the treasury, you would dip your hand anytime you want and use it indiscriminately. Now, with this Sovereign Wealth Fund, it is no longer possible because there is an authority which is taking care of the fund both within Nigeria and outside Nigeria.
Even the federal government cannot dip its hands into the fund because it is now under effective management. So, it is the complete opposite of Excess Crude Account. The excess account is a purposeless venture. You keep money there and you do not know what to do with it. But now, all these monies have gone into the SWF and the federal government cannot even touch it.
The state governments have also complained that the federal government short-changes them in revenue generation because a chunk of the money they generate, more than is constitutionally allowed, is not paid into the federation account. The finance minister said such when she said some agencies run illegal accounts. How can this be stopped?
In that respect, I really blame the federal government for that. The state governments are not to blame for money that does not come to them. It is the federal government which has created these agencies, Central Bank included, NNPC and all others you can think of. The federal government should strictly control their budgets and how they spend. Whatever surplus they generate should go into the federation account, no doubt about that.
This has been an old existing problem even from the time I was a permanent secretary with the federal ministry of finance. Illegal accounts were opened at random and money siphoned. We do not even know how much institutions like NNPC and CBN receive and how much they spend. While I would not agree with controlling their budgets, there must be a way for the National Assembly to know how much these institutions receive and how much they spend.
At least there must be a way they should let the nation know, through the National Assembly, about how much they receive and how much they spend. This has been an old problem but they have refused to co-operate. There must be a way for the federal government itself to force them to let the nation know about these. And whatever is the surplus should go into the federation account. I really go along with that.