WHY GOVS OPPOSE SOVEREIGN WEALTH FUND - FASHOLA
BY MICHAEL EBOH & CHINEDU IBEABUCHI
LAGOS - Governor Babatunde Fashola of Lagos State, yesterday, said state governors' opposition to the Sovereign Wealth Fund, SWF, and the Excess Crude Account is borne out of distrust for the Federal Government's ability to judiciously manage the funds and utilise it for the purpose it was meant for.
'These really are the issues. It is not that the governors are up in arms against the idea of saving. But we are asking what the rules of engagement are and do those rules of engagement work within the rules that bind all of us,' Fashola said at the Renaissance Capital's 3rd annual Pan-Africa Investor Conference in Lagos.
Fashola also said the governors' apathy stems from the fact that the fund lacks the necessary constitutional backing, explaining that until the controversial issues surrounding the fund are addressed, it will continually be seen as a high risk venture by investors.
He said: 'Which fund are you saving? Are they yours or are they mine? Before you save on my behalf, there is also need to address the issue of trust. How efficiently have you managed the funds that the federation has put in your trust? And what makes you the better saver and better investors. And is the saving done within an expectable framework of the constitution?
'Those are the issues surrounding the Sovereign Wealth Fund. For instance, the excess crude account has no constitutional legality. And I think in trying to find a way around that, we create another solution that will be subject to constitutional scrutiny. And indeed, can we, therefore, build an economy whose constitutional scrutiny is questionable? And until these issues are resolved, there are risk issues for investors.'
Textile sector's revival
He called for specialised investment in the textile industry, saying this will help bring about the much needed revival of the sector.
According to him, what is actually needed to drive the revival of the sector is not just funds but the necessary management capacity and knowledge.
He said: 'The textile sector has enormous potential to drive the economy of Lagos State and the country in general. What we need to revive the sector is for investment that will take over the management capacity of the textile firms.
'Knowledge and capacity is very much needed in the textile sector and not just throwing in money. Pumping money alone has not helped in reviving the sector over the years.'
Another round of banking consolidation coming
Meanwhile, Yvonne Ike, Chief Executive Officer, West Africa, Renaissance Capital, said Nigerians should expect another round of consolidation in the banking sector within the next 24 months.
According to Yvonne, the consolidation exercise will be driven by growth rather than by the need to compete by size.
She said the growth that would be engendered by the consolidation exercise would be much more orderly and would help the banks contribute meaningfully to economic development.
She said: 'If you think about the incredible work that the CBN has done to clean up the financial sector and to really prepare it for growth, we anticipate more consolidation, we anticipate banks having to be bigger and better to cope with the growth potentials and opportunities that presents themselves.
'We see the banking sector consolidating over the next 24 months. We think it is healthy for it to happen and the biggest driver of this is growth. So, to meet the growth demands in the banking sector, banks need to be more efficient, they need to be run better.'