Sovereign Wealth Funds (SWF) has attracted lots of attention in recent years as more countries open funds and invests in multi-national companies and assets. Some experts estimate that all sovereign wealth funds combine to hold more than $5 trillion in assets in 2012, a number that is expected to grow relatively quickly. This has given way to a wide concern over the influence these funds have on the global economy.
The SWF initiative which Nigeria embarked upon early last year is designed to help the country achieve a turnaround in fiscal attitude and help address the country’s needless tendency to profligacy by setting aside some critical fund for the future.
Basically, SWF are funds of investable foreign currency owned by sovereign entities usually managed separately from the official exchange reserve of the country.
However against the backdrop of investing the SWF, outside the shore of the country, operators on the Nigeria capital market have called on the Federal Government to inject the fund in the stock market as move to help deepen the market.
The operators said the SWF if invested in the capital market, besides aiding other investment in the country, would go a long way to stabilise the equities market and bring back the much need confidence to the market.
Recall that Stockbrokers have been in the forefront of asking the government to bailout the stock market after almost N9 trillion losses incurred by investors between 2008 and 2010.
The President of the Chartered Institute of Stockbrokers (CIS), Mr. Ariyo Olushekun, had called on the Federal Government to invest significant portion of the SWF in the capital market to safeguard the fund and grow the economy.
Olushekun made the call during a courtesy visit to the Chief Executive officer of the Nigerian Stock Exchange (NSE), Mr. Oscar Onyema, in Lagos. According to him, the call came from the experience of other countries that lost part of the SWF in some foreign countries.
“Libya lost about 80 per cent of its sovereign wealth fund, because a large chunk of it was invested outside the country. Government should invest the SWF in Nigeria, especially in the capital market. There is no point investing the country’s resources outside the economy. If we do that we are using our resources to help other economies.
“Specifically, the future generation aspect of the fund should be invested here, so that the economy can benefit from it. This is particularly so, because if you invest the money outside the economy, there is no guarantee that the other markets will outperform your local markets, anyway, but it is also on record that Libya lost about 80 per cent of its sovereign wealth fund due to almost similar reasons”, he said.
Olushekun, noted that it is important for the government to urgently provide a stimulus package for stockbrokers, to enable and empower them to play their roles in the capital market.
he also said that it was essential for the investment strategy of the country’s Sovereign Wealth Fund to be reviewed, adding that if not, Nigeria stood the chance of losing a huge chunk of the fund.
He said, “Government should invest the sovereign wealth fund in Nigeria, especially in the capital market. There is no point investing the country’s resources outside the economy. If we do that we are using our resources to help other economy.
On tax issues as it affect businesses in the country, he noted that the recent calls by market regulators to ensure that tax incentives were granted to quoted companies should be heeded by the government, adding that this would go a long way towards reviving the market.
“Also, company income tax paid by companies should be reduced to about 25 per cent from 30 per cent currently. Investors are also paying Value Added Tax, when they buy and sell a stock. We do not think this right. VAT is more applicable to consumption items. Buying and selling of stocks are not consumption items,” he said.