“Speaking with One Voice”: Nigeria’s Sovereign Wealth Fund

“Nigeria's” Sovereign Wealth Fund, became operational in 2013, with 1 billion USD in seed capital. The fund has become a damaging and embarrassing self-inflicted wound to Nigeria's efforts to cast itself as an investment friendly destination. Its structure, operation, and philosophy have nothing to do with Nigeria and shockingly it continues to undermine and ridicule Nigeria's efforts to rebrand itself. The overall impact of the fund to Nigeria is so damaging that it would be better if the billion dollars was embezzled into the private accounts of corrupt officials and stolen than for it to exist and be constituted and operated in the manner that it now does. The fund is run by Uche Orji. The stated objective of the fund is to establish itself as a leading sovereign wealth fund globally while “playing a role in Nigeria's economic development”. The fund has been placed under the custodianship of JP Morgan, a US based international bank. The “Nigerian” Sovereign Wealth Authority is yet to explain why it selected a US bank to be the custodian of the fund at a very high cost as oppose to the several major Nigerian banks that could have been selected at a much lower cost. Nigerian's should understand that Nigerian banks are custodians to over 20 billion dollars of Nigerian Pension funds so there is no question that they can deliver the services required to be a custodian of the mere 1 billion dollar sovereign wealth fund. Also interestingly enough, it is this same JP Morgan who has been raking in tremendous fees from “Nigeria's” Sovereign Wealth Fund, that has threatened the Central Bank of Nigeria repeatedly to remove Nigeria's sovereign debt bonds from its global bond index, a move that would cause Nigeria's borrowing costs to skyrocket and would severely cause the naira to crash in value possibly even collapse. Even if JP Morgan was a Nigerian bank, it is clearly not an institution that should be rewarded in anyway with the exclusive custodianship contract with the “Nigerian” Sovereign Wealth Authority.

By using the US Bank JP Morgan, what is the Nigerian government telling global capital investors when it bypasses Nigerian banks and pays a much higher price to place its money under the custodianship of a US bank? Does this communicate to global capital investors that Nigeria is a safe place to invest? Does this tell foreign multinational businesses that are seeking to create subsidiaries in Africa that Nigeria is safest and best place in Africa to invest? Does it tell foreign business leaders and investors that they can safely use Nigerian banks and do business in Nigeria and with the rest of Africa from within Nigeria? Do the actions of the Nigerian government do anything but tell global investors that there is something so seriously wrong with Nigeria that even its own government does not trust its banks to do its business? Let there be no mistake about it, the decision by Nigerian officials to use JP Morgan as the custodian of the “Nigerian” Sovereign wealth fund, paying exorbitant fees to do so, bypassing fully qualified Nigerian banks that would charge less, is an act of treason. All those responsible for it should be banned from occupying any public office in Nigeria for the rest of their lives. There is no excuse, no justification, and no tolerance for this kind of conduct to occur in Nigeria ever again. If Nigeria were China, these officials would be executed on the spot. Why should the Nigerian people allow anyone to get away with such a brazen public disdain for our country, completely dragging the entire country in gutter, an collecting a salary for it in the process?

As if this is not bad enough, the first investments of the “Nigerian” sovereign wealth fund was to invest 50 million dollars in US treasury bonds, and 150 million dollars in US corporate bonds. The 50 million dollars was given to UBS Bank to invest in US treasury bonds on behalf of the “Nigerian” sovereign wealth fund. The 150 million was given to Credit Suisse and Goldman Sachs to invest in US corporate Bonds on behalf of the “Nigerian” sovereign wealth fund. Uche Orji the Managing Director and CEO of the “Nigerian” Sovereign Wealth Authority before he became CEO, was a portfolio manager at JP Morgan and Goldman Sachs, he later became a VP and Managing Director at UBS Bank. I guess it is coincidental that so far every act the “Nigerian” sovereign wealth fund has taken has given lucrative business to Mr. Orji's former bosses at JP Morgan, Goldman Sachs, and UBS. Only Credit Suisse does he not appear to have a previous visible working relationship. It is not clear what Mr. Orji plans on doing after his tenure as the MD/CEO of the “Nigerian Sovereign Investment Authority (NSIA), but from his actions as head of NSIA I am sure he would be welcomed back with a lucrative job at any of his former employers as well as Credit Suisse. Despite the obvious and glaring conflicts of interests with respect to Mr. Orji as MD/CEO, what do the investment decisions of of the NSIA tell international investors about the investment worthiness of Nigeria given that its own fund run by NSIA made its first set of investments in the US? How does NSIA's investment record encourage international investors and give them confidence that investment in Nigeria will bring them solid returns? Do the investment decisions of NSIA do anything but tell investors that there is something so seriously wrong with Nigeria that even its own sovereign fund run by NSIA does not trust an believe in it as an investment destination? Any fool, any grade school child can see how utterly ridiculous all of this is. In China, the South Africa, India, Russia, Brazil, even Cuba, somebody's head would be rolling by now. So why do they get away with this here in Nigeria?

Countries that have become global economic leaders do not make these kind of decisions because they realize that you have to speak with one voice. When you say something, you have act on it. Your actions and your statements have to be the same. The most damaging voices bringing down Nigeria's image globally are the voices of Nigerians. The most effective tools that block investment and global capital from reaching the Nigerian economy are the tools wielded by Nigerians themselves. Nigerian people own massive assets all over the world, occupy high positions, build and own infrastructure, and do tremendous things for other countries and for their people. In discretionary spending alone, Nigerians in diaspora have more resources than any collection of foreign investors that Africa has ever seen. If they all chose to invest their discretionary spare change in Nigeria, the country would be one of the greatest economic powers in the world today, no level of corruption or mismanagement could stop it. By giving the best of ourselves to foreign lands, and leaving our obligation to Nigeria behind, the collective of Nigerian's in the diaspora do precisely what the NSIA is doing. An when we go home (if we ever do), in spite of our acts of treason, our people still embrace us as family. So why is it surprising that our public officials feel that they can get away with doing the same thing? Why is it that nobody in Nigeria says or does much to them about these glaring irreconcilable inconsistencies that would be massive controversies anywhere else? It is because sadly and unfortunately what these officials are doing is simply a reflection of us an who we are as people.

Moving forward, Nigerians as a people must learn to speak with one voice. When it comes to the development and progress of our country, our actions and our words must be the same. Certainly there is a higher standard of governance than what we currently have in Nigeria today, there is also a much higher standard of citizenship. Both the standard of governance and the standard of citizenship needs to rise nationwide. What I am seeing with the sovereign fund and NSIA is disgusting, it makes me sick to my stomach, I cringe, I yell and scream, but I am not in the mainstream in Nigeria. Our mainstream media in Nigeria praises NSIA for this foolishness and question almost nothing about this while the general public don't even see this as a serious issue. While other country's people would be outraged just like occupy Nigeria during the subsidy standoff, yet the reaction in Nigeria over this is muted. It is very clear that the core of the problem causing the general lack of accountability among public officials is within our society itself. If we want better governance we have to be better citizens. Those that are able are going to have to pay into our society and into our system so that others may have better opportunities. It is clear that the government is not doing everything it can, but neither are we. Go down unpaved streets in Lagos Island and you will see some of the nicest cars in the world parked there. Why is it that they are parked on an unpaved street? Yes, the local government did not provide sand and paving stones, but neither did the people who live on that street. Clearly from the cars they drive, they could collectively afford it. Yet they will all sit there night after night an blame the government for everything. We as a people are the cause and the solution to many of the issues Nigeria faces. No politician can deliver us, no government can replace the role its people. Moving forward, the Nigerian government is going to be primarily financed by we the people, not by our oil. We will have to contribute our resources for better governance, greater accountability, more jobs, more infrastructure, faster development, sustainability, and growth. Everyone will have to deny themselves, shoulder their cross, and get to work, joining in the struggle for the betterment of our country.

Kuranga and Associates Limited is an investment management advisory firm and an asset manager with a principle practice area of Africa. To learn more about Kuranga and Associates go to www.kaglobal.net. © Copyright 2014 David Kuranga. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

David O. Kuranga; Ph.D.
Managing Director
Kuranga & Associates Limited
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