ONE of the curiosities in our current national discourse is this argument over the desirability or otherwise, of having a saving and investment scheme as a nation giving the realities of our national circumstance. A nation with so much money, habitually engaging in wastefulness and is somehow ambivalent about saving for the future or against the rainy day, must be a study in self-destruct tendencies.
The Sovereign Wealth Fund (SWF) initiative, which Nigeria embarked upon early last year, is designed to help the country achieve a turn-around in fiscal attitude and help address our needless tendency to profligacy by setting aside some critical fund for the future. With the enabling legislation in place NSIA, 2011, Nigeria should truly be seen to have taken the right step forward just waiting for the fund to become fully operational. Never mind the governors’ current challenge of the legality of the fund and by extension, its necessity, however, much they deny the latter, which is the subject matter of this discourse.
Basically, SWF are funds of investable foreign currency owned by sovereign entities, usually managed separately official exchange reserve of the country. The practice and management of SWF have captured ample scholarly attention and a growing body of literature from the perspectives of legal, policy, finance, management to politics, all of which now exist on the subject matter. Authors like Balin B, Backer LC, Monk A, Bortolotti et al, Van der Ploeg et al, Gelpern A, to name a few scholars have done notable works in this regards. SWF has a huge potential for public wealth creation once well managed. They are similar but different from state-owned enterprises (SOE), which are more obvious as part of traditional state ventures.
It used to be the case that governments kept excess foreign reserves as a measure to control unanticipated or anticipated financial crisis, for example, the sub-prime crisis that hit the U.S. in 2008/2009 but now other financial structures have come into being like the SWF. And so when there is a windfall in national resource earning, a government would have some options open to it;
• use the fund to manage domestic and external debt;
• channel the surplus into short-term public spending and consumption for example in health, education, agriculture, etc or;
• accumulate public and private capital by transforming the exhaustible resource asset into interest earning foreign assets through setting up an SWF to enable long-term financial stability and better fiscal responsibility.
With that conceptual background, one can understand why a SWF is imperative in our national circumstance with the best choice being for us to pursue option (c) above. Now, this writer was privileged to serve in the legal team, along with several Nigerian legal, financial and foreign experts that articulated the broad framework of the fund. There was the need to find additional use for the Excess Crude Account to limit predatory recourse to the account and create a fund that will be a regenerative and functional part of the fiscal architecture of Nigeria’s financial system. Such a fund that can help to recondition our public finance mechanism from that of debtor nation steeped in debt management, debt servicing to wealth creation, asset management and a serious voice in the global financial system.
Having an SWF will further help Nigeria become a key player in the emerging platform on the global level where fund owners are earning ample returns from diverse investment portfolios. It will help Nigeria’s credit rating and facilitate foreign direct investments in all the sectors as a direct consequence. Yes, several issues had to be taken into consideration from the standpoint of our nation as a federal state, for example, with a maze of contending interests to a global environment in which the fund and its investment direction must wade through geo-political and governance challenges.
This is so because countries like the United States of America (USA) remain suspicious of foreign governments acting as state capitalists taking over firms and corporations through the existence of huge funds like pensions funds as in Norway or SWF as in China and Venezuela. Other fears elsewhere include the possibility that such investments may carry with them disguised political purposes. In terms of axis shift, scholars are already beholding the spectre of London, New York, Rome yielding some grounds as global financial centres to Doha, Dubai and Shanghai.
To be sure, these and other legal issues naturally weighed on the minds of the legal team, which it deliberated, evaluated and proceeded satisfied to be pragmatic and progressive in order to produce the legal and governance framework of the fund. There were comparative perspectives to see how the SWF practised by other nations fitted into their laws. In all, it was found that national interest far outweighed any suggestion or tendency to some purist legal adherence in the creation of the funds.
At any rate, this constitutional sparring between the federal and state governors on the fund in Nigeria remains a bridge still far ahead. This is more so for a document (1999 Constitution) that is still undergoing a full-scale review to bring it in line with our national realities and expectations.
Now, this is not a denial that certain legal queries do, in fact, exist as exemplified in the media and several fora. What is actually at stake is the contest of position for ascendancy between a development financial policy initiative (the SWF) that is positive, pragmatic and forward-looking and an undeciphered legal view point (the judicial interpretation of a section of the constitution), that may be activist and robust leaning favourably to the national framework for innovativeness, prudence and sound management, or, worst case, may engender a return to unchecked public spending, wastefulness and a spectre of fiscal indiscipline. The Excess Crude Account (ECA), which has turned out a veritable financial lifeline for the three-tiers of government since 2004, has same challenge from the state governors, now carried more frenetically against the sovereign fund. Without prejudice to the on-going litigation, this is a bit after the fact, as the Nigerian Sovereign Investment Authority Act, 2011, is already an existing legislation.
The governors’ case turns upon the interpretation and effect of Sections 80 & 162 of the 1999 Constitution. Section 162(1) says “The Federation shall maintain a special account to be called the ‘the Federation Account’ into which shall be paid all revenues collected by the Government of the federation…’ The matter is by no means that simple being a constitutional one, a supreme statute, which must be taken whole for which the questions that will ultimately be before the court would be: Does the Constitution expressly prohibit the existence of a fund, a subsidiary account, however, called administered and distributed among the three-tiers of government as envisaged per sections- 80(2) & (3), as well as 162(3)? The better view is that the Constitution is silent on prohibition by not prescribing one and only one account. Where a provision is silent on a specific issue, any act not likely to defeat the broader objective of the provision but rather help to facilitate its fuller realisation is permissible. The broad objective of Section 162 of the Constitution is the ownership, management and distribution of national revenue to the three tiers of government.
The 1999 Constitution restates the position in Section 14(1)(c) that “the security and welfare of the people shall be the primary purpose of government.” This is to show that all acts of government in pursuit of the welfare of the people are basically constitutional. Section 16(1)(a) further captures this by mandating the state to “harness the resources of the nation and promote national prosperity and an efficient, a dynamic and self-reliant economy’’.
The mandate, therefore, to promote national prosperity can be achieved through any scheme, including setting aside funds for savings in any such accounts and investment schemes that will ensure the financial health and overall welfare of the Nigerian people. This is the legal or constitutional circumstance under which the SWF can be seen and wholly appreciated.
Also, part of what will help the Supreme Court justices reach a firm decision would be whether the governors can continue to collect monies disbursed from the Excess Crude Account while asking the Supreme Court to freeze the account as it were a kind of approbating and reprobating situation? Again, whether there are some aspects of the mandates, structure or funding of the SWF that imperils the collective interests of the states in terms of budgetary stabilisation, infrastructure development and national savings for future generation? Finally, above all, whether section- 4(2), which provides for the legislative powers of the NASS to make laws for the ‘peace, order and good government of the federation’ excludes a law likely to enhance financial health of Nigeria when read together with the other foregoing provisions?
The governors and their legal team will shortly appreciate that canons of statutory and constitutional construction will be brought to bear on these provisions to understand whether even in the light of public policy in our jurisprudence an initiative, which will likely create national prosperity, will be vanquished in the altar of some narrow legal expediency. In an old English case on statutory construction The River Wear Commissioners Vs. Anderson (1877), the court held the view that “We are to take the whole of the statute together and construct it altogether, giving the words their ordinary signification, unless when supplied they produce an inconsistency, or an absurdity, or inconvenience, so great to convince the court that the intention could not have been to use them in their ordinary signification, which though less proper, is the one which the court thinks the words will bear.”
• Odiadi is based in Lagos.
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