WHEN on May 27, 2011 the immediate past Minister of Finance, Olusegun Aganga popped champagne in celebration over what he felt was a feat in warehousing Nigeria’s unbudgeted oil revenue from reckless spending because of the signing into law of the Nigeria Sovereign Investment Authority (NSIA) Bill to manage the nation’s fiscal price rule of unbudgeted oil revenue (Sovereign Wealth Fund, SWF), little did he know that the celebration was a false start.
Aganga, expressive as a Usain Bolt breasting the tape after a long marathon, spoke of the benefit of the SWF enactment: “The size and mandate of the NSIA will enable it to leverage international investment money to get benefits that are well in excess of the money that the NSIA invests directly. It would also serve as an investment catalyst, attracting international core investors into Nigerian infrastructure projects…
“The NSIA will provide a powerful signal to external investors that Nigeria has improved fiscal management, which will have a positive impact on Nigeria’s sovereign credit ratings and the cost of borrowing...”
The Minister continued that Nigeria is “the NSIA will put Nigeria’s oil wealth to work for all Nigeria; for the Nigerian people; for our common future; and for the future of our children.’’
In the same vein, even when President Goodluck Jonathan himself declared assuredly that withdrawals from the nation’s SWF would never again be made to cater for revenue shortfalls for any tier of government after his signing the NSIA bill, little did he know that the Governors’ Forum whom he said have been major stakeholders in the build–up to the law process would turn round to stab him in the back.
Jonathan who described the new saving initiative as creative ways a good father leaves an inheritance for his children said on his Face Book page after the Senate passed the NSIA law on May 17:
“Some of you may recall that on the 20th of April, 2010, the National Economic Council under my leadership approved the setting up of a National Sovereign Wealth Fund to secure Nigeria’s future growth. It further approved that $1 billion be set aside for the fund as seed money. Many of you may have heard about this fund and wonder what it is. Since it is meant for you, I will now take time to explain what this fund is and how it applies to you the Nigerian citizen.’’
Jonathan then in a capsule form explained that the SWF is a vehicle for growth that his administration conceived to secure additional capital for growing Nigeria’s infrastructure and putting aside money for the rainy day so that future generations will always have something to fall back on in the event that revenues are impacted by market forces which have been known to be volatile.
But in a swift counter, the Governors’ Forum wants the SWF scrapped. It wants the excess revenue which is to be pooled into the fund, to be distributed now against the NSIA law and President Jonathan’s concern, which holds that: “My concern for future generations is such that I do not want us to rely on just good fortune. I want us to rely more on plans and preparations guided by prudent management of resources. This is the reason why I ensured that the body, which will administer the SWF, the NSIA, may only make withdrawals from the fund for investment or infrastructural purposes…Governments must learn to make do with available resources or creatively find ways to generate more resources because a good father leaves an inheritance for his children.”
Based on the amended 2011 budget, benchmark oil price is fixed at $75 per barrel. The governors, according to their recent communiqué, want the money distributed now, because in their reckoning, the rainy days are already here with raised wages and development challenges in their states. At the August 12, Federation Accounts Allocation Committee (FAAC) meeting held in Abuja to receive report of the July 2011 from revenue generating agencies and distribute resources to the three tiers, The Guardian learnt that fisticuffs were barely averted between the Federal Government officials and states’ Finance Commissioners as the latter insisted that monies must be brought from the SWF to augment the allocation. The statutorily generated revenue for the month was N906.759 billion, excluding Value Added Tax, against an anticipated budgetary amount of N568.181 billion.
But by the time deductions were made to the various sub–heads, including subsidy for petroleum products importation, the net revenue for distribution was N536.437 billion, less by N17.713 billion of the budgeted N554.15 billion for the month.
The Guardian learnt that the suggestion by the Federal Government officials that the net amount be distributed did not go down well with officials of the states who insisted that augmentation must be made from the SWF and eventually they succeeded after much flexing of muscles and the sum of N16.453 billion was withdrawn from the SWF to make up for the budgeted amount.
Last month, N710.710 billion was pulled out of the Fund as augmentation arrears for the months of January to April 2011 and shared.
When reporters enquired from the Minister of State for Finance who is also the chairman of FAAC, Dr. Yerima Ngama to know the status and savings in the SWF, he parried the questions severally and only said the board of the NSIA was yet to be set up by the President.
Under the NSIA plan, the government monthly sets aside excess oil revenues to be invested in the NSIA. The NSIA then allocates these monies to three separate warehoused funds: The Nigeria Infrastructure Fund, the Future Generations Fund and the Stabilisation Fund. And a minimum amount will be allocated to each fund to ensure that each of these goals is met over time: The Nigeria Infrastructure Fund works towards bridging the national infrastructure gap and providing financing for the development of critical infrastructure across Nigeria. In addition, 10 per cent of the Nigeria Infrastructure Fund is devoted to agriculture and regional government-sponsored development projects that promote economic development in under-served sectors or regions in Nigeria.
The Future Generations Fund is to build an intergenerational savings base by investing in long-term assets that generate a rate of return to accumulate wealth for the next generation of Nigerians.
The stabilisation Fund protects the budget by providing a stable, last-resort source of finance during periods of fiscal deficit as a result of sustained fall in oil prices. The Fund will ensure the smooth functioning of government and delivery of key services during periods where revenues from petroleum sales are less than the level anticipated and approved by the National Assembly.
Following international best practices of SWF worldwide, the NSIA is expected to have the highest standards of corporate governance in its administration and should conduct its investment activities in a fully transparent manner, in accordance with the internationally acclaimed Santiago Principles that were agreed upon by the world’s leading SWFs.
The NSIA will be subject to two levels of governance, first and principally by a board of directors made up of experienced investment management professionals and secondly, by a governing council with oversight responsibility.
The Governing Council of the NSIA will have eminent officials including the President, each of the 36 governors, the Attorney-General, the Minister of Finance, the Minister of the National Planning Commission, the Central Bank Governor and other national economic leaders. Representatives from academia, the youth and civil society will also be represented.
Meanwhile, experts including the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo–Iweala have been speaking on the need to obey the law and imbibe fiscal prudence and discipline. The minister who said efforts were on to discuss with the governors, explained recently that this was important to avert the negative impact of volatility since our economy was heavily dependent on oil.
Her words: “In all these economic uncertainties, we have crises on the globe that impact on our economy…Nigeria has to learn how to manage her economy the best it can on the context of uncertainty…That is why we are putting in place mechanism of managing this volatility. We have in place the oil price rule.”
According to her, “we need to maintain macro–economic stability, under this it means we need to manage our fiscal situation in a more prudent manner…Everybody is involved across the board: The Executive, Legislature, all the arms of government would have to look at how to contend spending.”
Reacting, the Institute of Chartered Accountants of Nigeria (ICAN) and a human rights group, HURIWA, have condemned calls by the Governors’ Forum for the scrapping of the SWF.
ICAN made its position known in Abuja when its newly installed President, Prof. Francis Ojaide and the chairman of the Abuja District Society, Mallam Shehu Aladire spoke to journalists after a visit by the ICAN executive to the Auditor–General of the Federation, Mr. Samuel Ukura, while HURRIWA’s reaction is contained in a statement by its boss, Emmanuel Onwubiko.
According to the ICAN bosses, the governors should exercise restraints and follow due process in their agitations because the Fund is backed by law and is for the interest of the entire nation and even the unborn.
Ojaide said: “I think they (governors) have made it a political issue. But as a professional body, the issue is that first and foremost you look at prudence and the judicious way of responding to the nation’s financial and natural resources.”
Aladire said: “When you look at the SWF Act, it shows that there is future for the children…Now the governors are saying let us share it (the Fund), it is not looking forward and not fair…But the most important thing is good management...”
Also speaking in the same vein, HURRIWA condemned the Governors’ Forum’s stand.
Dismissing the governor’s opposition to the creation of the SWF as “unpatriotic”, “nebulous”, “unrealistic”, “unreasonable”, and “untenable”, HURIWA tasked members of the organized civil society groups in the country and all well meaning Nigerians to champion the advocacy for the immediate and transparent creation of the SWF in compliance with the extant provisions of the law.
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