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IMBROGLIO OVER SOVEREIGN WEALTH FUND

By NBF News
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Controversy broke-out recently over the Sovereign Wealth Fund (SWF) which was signed into law by the President on May 27, 2011. The on-going tussle over the fund assumed a pungent legal dimension last week when 23 state governors filed an application before the Supreme Court over legality, and to restrain the Federal government from tampering with money domiciled in the Excess Crude Account (ECA).

Interestingly, not much public excitement has attended the political and legal controversies, partly because they have been out-flanked by the more combustible debate over the removal of the fuel-subsidy. The relative lack of public attention to the SWF may also be due to the fact of diminishing public trust in the ability of government- Federal, State, and Local to deliver on bold initiatives, too many of which are flagged-off enthusiastically but end-up in the filled-to-the-brim dustbin of abandoned projects.

This latter point bears repetition considering the fact that the Excess Crude Account created during the Obasanjo administration to warehouse oil revenues above a benchmark per barrel of oil- never mind its controversial legal antecedents- in its heydays accumulated a reserve of $30billion, but which eventually cascaded down to a meagre $5billion. Not only that, Nigeria appeared to have returned through the well-known back door of raising jumbo loans to renewed debt slavery as its debt over hang now hovers around $40billion. And so, although Wall Street and other financial investment institutions are angling for a piece of the action in the SWF, they are doing so amidst pessimism that it may all end-up as another Nigerian project abandoned in the throes of sensational mismanagement and all-too-familiar incompetence.

SWF, defined as investment funds belonging to a State, comprising Assets in the shape of bonds, stocks, properties, and other financial resources is traditionally viewed by economists as strategic planning auspices to achieve generational equity by which it is meant wealth stored-up for future generations; to accumulate buffers and financial shock-absorbers for the rainy days as well as to regulate a spending-spree mentality which can impact negatively on the economy. The objectives of the Fund as enunciated by the Nigerian government are inclusive of these factors as the Fund is divided into three compartments namely an Infrastructure Fund designed for addressing well-known woes in this area, a Future Generations Fund, as well as a Stabilisation Fund to defend the economy against rainy days, occasioned by commodity price shocks. If well-articulated and managed, such a scheme may enhance the ability of a State to plan and initiate long range projects, approximating a kind of developmental state that is sufficiently stable to weather the volatility of commodity markets, and be less dependent on the vagaries of the international economic system.

The trouble however, is that, the Fund has run into heavy political weather through a failure of statesmanship in squaring-up its admittedly noble goals with the stringent demands of vertical-intergovernmental relations which require that the coordinate and co-equal sub-national authorities be carried along in such a long-term commitment. Early signs that trouble was brewing and that the Fund would hang in the balance for quite a while was given in Port-Harcourt recently when a miffed Governor Rotimi Amaechi, Chairman of the Governors' Forum thundered that while the governors are not opposed to the Fund, the way the Federal government has gone about it was tantamount to 'the kidnapping of our money'.

The governor went on to say that the rule of law had been flagrantly breached in the modalities adopted by the Federal Government. Of course, it may be hazardous to discuss the legal intricacies of a suit before the Supreme Court, but it is pertinent to mention however, that the governors' actions are evocative of conflictual Federal-State relations during the Nigerian Second republic when a clutch of governors acting on the platform of the progressives successfully challenged at the Supreme Court a Bill passed by the Senate, which tacitly effected an upward revision of the Revenue Allocation Formula in favour of the Federal governments. In this sense and to a certain extent, the current imbroglio between the Federal and State governments over the SWF is part of a long historical struggle to re-compact an over-centralised Federation, and to renew the Federal bargain in such a way that the States would enjoy the requisite autonomy due to them in a Federal set-up.

Let us clarify however, that the SWF does not seek to revise the Revenue Allocation Formula, but the programme has been introduced in a way that falls into a pattern described by Professor Rotimi Suberu as 'the systematic manipulation of statutory inter-governmental revenue sharing arrangement in a manner that has reinforced the financial hegemony of the centre and the fiscal emasculation of the State'.

This is another way of saying that the Federal government has gone about the whole thing as if it had a right to dictate to the States what proportion of their entitlement should be saved-up in the SWF, especially bearing in mind the provisions of Section 162 of the 1999 Constitution which mandates the Federal government to pay into the Federation Account 'all revenues collected by the government of the Federation'. Thorny legal issues apart, the argument has been raised that if Nigeria had a capable State, which had all along invested in infrastructure and social services rather than a contractocracy slowly milking the nation to death, such investments would not only have jump-started the economy, but would have generated spin-offs which can endow future generations with a heritage.

This is to say that had all the billions of Dollars earmarked for infrastructural uplift been productively harnessed rather than having gone to enrich a handful of well-connected political chieftains, we would not be in the sorry mess in which we are once again imposing indirect taxes on the Nigerian people through the projected removal of fuel subsidy, and in a manner of speech through the SWF.

In essence therefore, the governors are saying: Why do you want to force us to pay for accumulated mismanagement which has laid the nation low by saving-up funds which could be more immediately utilised for pressing needs?. Such an argument strikes an echo with the Nigerian people, given the fact for example that many of the States run shoe-strings budgets and can hardly make ends meet. To concede this fact is not to lose sight of the reality that the States, although relegated to second-fiddle status in a Federal set-up in which they are meant to be co-equal with the Federal government, have hardly been exemplars in financial prudence.

The political culture at all levels of government is characterised by accumulative and prebendal propensities of a few men at the top and their cronies whose obscenely luxurious lifestyle contrast sharply with the increasing desolation of those they claim to govern. And this syndrome in which political top-shots live in more opulence than American billionaires cuts across all parties and all dimensions of government; between a blundering Central government, providing a Federal umbrella for the 'democratisation' of the pillage of public resources, and the States, in which the corruption at the centre is replicated on a lesser scale, Nigeria has been cruelly short-changed.

Having said that, it is just possible that the arena of the State governments, if creatively re-ordered, away from the current politics of consumption and money sharing hold more promise for development than the somewhat intractable Federal arena where comparatively greater resources are concentrated without corresponding accountability. Not so long ago for example, Professor Pat Utomi revealed that hardly any major road projects embarked upon by the Federal government since 1999 have been fully completed. This brings us in a round-about way to the persisting national question as well as issues of building an economy of productivity rather than one of rent-seeking.

To conclude, there are more issues that should be brought on the table than the current rupture in inter-governmental relations over the SWF; if the SWF must succeed, it must do so in such a way that does not further wither the severely eroded powers of the State governments in a Federation in which decentralisation through the creation of States has paradoxically increased the hegemony of the Centre. To the extent therefore that the controversy helps to police the boundaries of Federal power, it is a worthwhile controversy which also underlines issues of political and constitutional reforms, as well as revamped political ethos.

Professor Olukotun writes from Lead City University, Ibadan.