Between state governors, Aganga and the sovereign wealth fund

by Shafiu Ibrahim Abdullah

The recent gesture from the state governors’ forum that they will agree to the demand of N18,000 minimum wages only when the federal government agrees to suspend her Sovereign Wealth Fund (SWF) is another pointer to the complicated nature of our public policy formulation process. What that is showing is that no matter the merits of the Sovereign Wealth Fund (SWF), in as much as the federal government insists on the N18, 000 minimum wages, it should be shelved. Nigerian governors have a history of using any opportunity to demand for what ever they thought is their rightful allocation, which they later on spend on not necessarily important projects. The information coming from some quarters that the governors have assembled a team of lawyers to take the matter in the court, should not come as a surprise to any one who follow the history of our democracy since 1999. If there is to be a channel better than going to court, I am sure that these governors will go for it. And, it will not stop there because in as much as these governors do not get what they want they will continue to blame the SWF and federal government for their failures to execute meaningful projects. This is not the first time this is happening, it has happen during Obasanjo, late Yar’adua and with Jonathan before April elections with the Excess crude account. But doest that mean these governors are right? The answer is no, they cannot be right always on this issue.

The Sovereign wealth fund is simply a modern answer to wastage and spendthrift, which is not any good to any economy. The idea behind SWF, a term that come to global prominence beginning from 2005, though such type of fund exist since 1950s, is that countries should save the excess that accrue during the period of abundance for such a period when government coffers begin to dry. SWF money are normally invested in different types of assets such as equities, bonds, real estates, Gold and other financial instruments with the main intention of maximizing long term returns. SWFs have been established around the world for many reasons prominent among which include, savings, stabilization, economical or strategic. The history of resources rich countries is replete with episodes of wastage and absence of effective savings and investments plans. On this case we do not have to go outside Nigeria, the story of what happen to our oil surplus during the seventies is enough as an example to drive home our point that oil surplus if not save or invest is as good as no oil. The unplanned government spending that took place during the regime of Gowon and subsequent governments to the extent that Gowon government was quoted to have said our problem is not money but how to spend them and the current pressure governors are putting on SWF is another pointer to absence of plan in the Nigerian scheme of things.

As someone with a background in investment banking, who is in possession of good knowledge about the many benefits inherent in investment, be it by government, institution or individual, I am sure Olusegun Aganga was motivated by the zeal to see his country benefit from what other nations have been benefiting for some time. Therefore, when he proposed the replacement of excess crude account with Sovereign Wealth Fund the development was seen by many as positive move toward effective utilization of our present resources for the future of our country. Because even from the ordinary meaning of saving in economic parlance, it is the sacrifice individuals or nations make of their current consumption against bigger future consumption. As minister in charge of investment and commerce, the SWF is at the centre of Aganga plan to turn Nigeria into the darling of foreign investors who have been eluding this country for so long. What is, therefore, wrong with a scheme that will assist investment hungry country to attract the desired investment?

For example, the decision by the Central Bank to keep some of our foreign reserve in Chinese currency is a wise decision not necessarily because of the fear of the weakening of the dollar but for investment reasons as it will be seen by the Chinese as a positive signal from the Nigerian authorities that they are ready to do business with the Asian giant. If the same thing will be done with our SWF, I am sure the Chinese and any other country will reciprocate by increasing the amount of their foreign direct investment coming to Nigeria. One should not forget the fact that China currently holds the largest foreign reserve in the world running into trillions of Dollars. I want to appeal to our honorable governors to please for the sake of better tomorrow of our children and this country to stop playing politics with this SWF. Let change our thinking away from seeing progress only in spending into seeing it from the angle of saving and investment.

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