The call by governors of the 36 states of the federation for the suspension of the nation’s Sovereign Wealth Fund, SWF, has generated fresh rounds of controversy. STANLEY NKWOCHA reports the hue and cry over the now delicate matter.
As predicted since the conduct of the April polls, issues upon issues have continued to dominate the nation’s polity. Gradually, against pledges by politicians to deliver the ‘dividends of democracy’ as promised Nigerians, what seeming hapless citizens are being confronted with is a roll call of distractive issues on the polity.
The latest controversial issue that has been heaped on the polity is the controversy that the governors’ call for the suspension of the Sovereign Wealth Fund is brewing. Like Boko Haram, the mess in the judiciary, single term tenure and others, the SWF has become the latest jigsaw in town.
The decision of the Federal Government of Nigeria to establish the Fund as at the time it was set up was said to be one of the most significant economic policy decisions taken in recent times.
Contrary to expectations, the significance of the fund was not put in terms of the monetary implications of the decision, but rather, in terms of the level of economic and fiscal discipline that the Governments at all levels in Nigeria wished to bring to bear on the process of sovereign resource management.
A Sovereign Wealth Fund (SWF) is an investment fund owned by a sovereign state/nation with the mandate to invest in financial assets such as stocks, bonds, precious metals, property and other financial instruments. The structure and scope of investments of a sovereign wealth fund depends on the circumstances of each nation as well as what the enabling law setting up the sovereign wealth fund permits. Sovereign wealth funds usually have long-term investment focus. However, their objectives might include providing liquidity stabilization funds as well as the funding of vital economic infrastructure projects.
A bill for the establishment of the Nigerian National Sovereign Wealth Fund was then sent to the Nigerian Parliament with and a seed capital of one billion US Dollars ($1 billion) sown on the Fund when it was conceived.
Although the last ten years (year 2000 to 2010) has witnessed a massive increase in the number of established sovereign wealth funds, they have been around for quite some time. For instance, the Kuwait Investment Authority, which was established in 1953 before Kuwait secured its independence from the United Kingdom, prangs amongst the first. The Kuwait’s Fund was created from crude oil revenues and is reported to be currently valued at about two hundred and fifty billion US Dollars ($250 billion). It has been argued that the Nigerian Sovereign Wealth Fund ought to have been established right from the moment Nigeria began to earn excess income from crude oil sales. With the apparent growing influence of successful sovereign wealth funds (together with their organs and subsidiaries) across the international financial and capital markets landscape, it is obvious that it will be difficult to disagree with the above argument.
As at today, the combined total financial assets base of all the Global Sovereign Wealth Funds under management is over 3 trillion US Dollars and it is growing fast. Due to the sheer volume of their financial assets base, sovereign wealth funds have become a major force to reckon with in the global financial and capital markets industry.
As sweet as these testimonies are, Nigeria’s Fund that came into existence May, this year, may be headed for the rocks. Like a bolt from the blues, the governors are calling for the Fund’s review, saying in a most subtle manner that perhaps the fund should be scrapped.
Hinging their arguments on the legality of the fund, the all powerful bloc is insisting for funds in the reserve to be shared. They cite as reasons its illegality as well as the pressure being put on them by the recently approved minimum wage for workers in the country. In a point blank position, they are insisting that its review is a condition for the payment of the N18,000 minimum wage. This posture has forced the government to set up an intervening committee headed by Vice -President Namadi Sambo to hold talks with the governors on how to redress the stalemate trailing the operation of the SWF. The governors are pushing for a review of the SWF on the grounds that while the fund is unconstitutional, they claim that the operation of SWF will short-change revenue flows.
Benue State Governor Gabriel Suswam and his Bauchi State counterpart, Isa Yuguda, on behalf of their colleagues made their position known after the National Economic Council (NEC) meeting in Abuja.
Suswam said, “The Nigeria Governors Forum is not averse to the SWF, the issue is that in the implementation viz-a-viz what we agreed on before, there are slight differences but as we talk to you, there is a small committee headed by the vice- president that is meeting with the president for further discussion on it.
“What we want is that some reviews have to be made giving the reality of the situation that we found ourselves now. We are talking about the minimum wage and that requires a lot of money in the hands of the state to meet up those obligations. So we are looking at it that giving this additional responsibilities. There is also the need for us to look at the way that the implementation of the SWF would be carried out.”
On his part, Governor Yuguda, who hinted that the opposition to the SWF was the unanimous position of the 36 state governors, added that the governors would definitely challenge the legal status of the fund.
He said, “If some of the dynamics involved might impact positively as it were, certainly the governors will have a review of the position because maybe it has been viewed by the state governors as a way of short-changing the revenue flows coming in tax and besides the legality involved.”
The SWF was set up by the federal government as a replacement to the Excess Crude Account whereby earnings above the budgetary benchmark price of crude oil are expected to be transferred to. But this will not be the first time the SWF will be swimming in controversy.
When the bill was introduced on the floor of the House of Representatives, former chairman, Committee on Inter-Government Affairs, Hon Leonard Ogor, viewed the Fund as illegal and unconstitutional.
” Well I think you must be mindful of my oath of allegiance on the floor of the House. I took an oath to defend the constitution of Nigeria without fear nor favour and guarded by that oath we must be very careful when we are passing some of these bills because in as much as it is such a beautiful bill, guarded by the fact that such a bill when passed would be of major benefit to Nigeria. What we practice is federalism where there are clear principles of separation of powers.
“We have the federal, the state and the local government. Now when we look at the clear provision of section 162 of the 1999 constitution this is what we call the federation account and under that clear provision states that a federation shall maintain a special account into which shall be paid all revenues except the income taxes of the Armed forces and the host of others.
“Under section 162 sub-section 2 it states clearly that the president upon the receipt of advice from the Revenue Mobilization and Fiscal Commission shall table before the National Assembly the revenue proposal. What the president is doing in this situation is to take a revenue formula that originated from the Revenue Mobilization, Allocation and Fiscal Commission before the National Assembly, The National Assembly under the provision of this constitution 162 sub-2 has been given some wonderful powers on the distribution of the funds between the three tiers of government.
“For emphasis under section 162 sub 3 states clearly that any amount standing to the credit of this amount shall by distributed among the three tiers of government on such terms and in such manner as prescribed by the National Assembly I am mindful of the fact that this account a distributable poll account band we as a National Assembly lack the power and authority to order withdrawal from that account,’’ Ogor had submitted.
When the Bill came up at a recently organized joint Public Hearing of the Senate and the House of Representatives, Fund had enjoyed overwhelming support of the organized labour represented by Nigeria Labour Congress (NLC), former Minister of Finance, Dr Olusegun Aganga, Deputy governor of Central governor of Nigeria (CBN) Tunde Lemo and also the Attorney General of the Federation.
Olusegun Aganga, who spoke at the public noted that the initiative will help in curbing wastages. According to him, 10 percent of the sovereign wealth fund would be devoted for development of infrastructure at the state level and federal capital territory (FCT); stabilization fund for sustenance of the economy as well as savings fund for future generation.
He explained that the initiative was in adherence to the Santiago Principle aimed at ensuring transparency and accountability in line with international best practice agreed by the world’s sovereign wealth funds and authorities and regular reporting to the public on investment decisions and the structural independence of the NSIA.
The erstwhile minister added that the move to establish the sovereign wealth fund was applauded by over 18 countries and hundreds of investors and Fitch on the desirability of the fund, stressing that the fund would be managed by proven asset custodians.
He explained that the fund provides the country with the opportunity to transform its economy and attract both local and international investment towards the provision of infrastructure as well as help in making Nigeria one of the leading economies in the world.
Aganga noted that the excess revenues accrued from sale of the crude oil would be remitted into the sovereign wealth fund and shared by the three tiers of government when the price of crude oil falls for about four months, noting that the sharing of excess crude Account has faced serious criticism from Nigerians for lack of transparency and accountability.
He disclosed that Nigeria, Iraq and Ecuador are the only oil producing countries that have not established the sovereign wealth fund, while Algeria has about $56.7 billion set aside in its sovereign wealth fund out of the $3 trillion accrued into the fund globally, while maintaining that the money accrued into the fund would be shared based on the recommendations of the Governing Council and Board of the Sovereign Wealth Fund and that the amount accrued into the account would be made public.
The Minister who expressed concern over the huge infrastructural deficit noted that the country has been bedeviled by lack of power and other infrastructure.
Also speaking then, Lemo of the the Central Bank, had noted that the Authority is expected to use both the initial and subsequent funds to set up the future generation fund, Nigeria infrastructure fund and stabilization fund with a minimum investment of 20 percent of the amount in each of the funds.
“The Authority may declare a distribution (dividends) provided that it made profit across all funds for at least five years following the enactment of the Act and made profit in the year the dividend is to be paid. Besides, the distribution must not be more than 60 percent of the profits of the Authority at the time of the distribution and must be approved by the Governing Council,” Lemo had declared.
The NLC on its part called on the National Assembly to amend relevant sections of the 1999 constitution which could jeopardize the setting up of the fund, noting that the establishment of the sovereign wealth fund was overdue.
While the introduction of a new minimum wage has been adduced to be the cause of the latest rift, the poser as to why it is the SWF that should pay the ultimate price has continued to be subject of concern. While some are quick to take a swipe at the governors’ decision, describing them as fritters who do not have the interest of the nation at heart, others simply discard their action as borne out of greed.
According to the leader of the Senate, Senator Victor Ndoma – Egba, work on the Act has been concluded and no further reference could be made to it. He added that thre was nothing in the Act that contradicted the Constitution.
‘’ If they have any problems with the laws, they should go to court. For us at the National Assembly, we have done our job and there is nothing more we can do’’.
Like the several issues that have dominated the polity in recent time, is the Sovereign Wealth Fund, the next issue to keep the polity busy in the weeks ahead? Will the governors hinge on the alleged constitutional fix created by the Act setting up the fund to set up a blackmail mechanism and get their way? Will Nigerians rise and tell the governors that the SWF is a ‘no-go’ area? Again like other issues in the polity that have remained on public discourse, there seem to be more questions than answers.