SOVEREIGN WEALTH FUND? WHY NOT!
I learnt one big lesson during those nervous times of Islamic banking squabble. I think it is more of a confirmation, actually. I came away with a confirmation that it is not advisable to jump into a bus if you don't know where it is headed. That is, if you are not sure of its direction, because, chances are that, you'd end up in opposite direction. Ask questions. That way, you won't find yourself in a wrong location and you won't end up with rotten eggs on your face - embarrassed. I want to believe that, that is how many of those who jumped into the Islamic banking fight ended. They ended the fight with a bloody nose and, therefore, thoroughly embarrassed. It is good to fight, though. But first, find out the cause and the object or the subject of a fight.
That is exactly what I tried to do a few days ago with this concept that goes by the name Sovereign Wealth Fund (SWF). It is one concept that has caused so much bile in the system. But at present it seems to have been drowned in the din of petroleum subsidy removal. The fight, essentially, has been between the Federal Government and state governors. Truth is that, the issues involved have largely remained sublime to many people, including me. And given the heat it has generated, I thought it was something worth looking up at. So, I went to Wikipedia free encyclopedia and it told me that SWF 'is a state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals or other financial instruments.'
It also told me that: 'SWFs are typically created when governments have budgetary surpluses and have little or no international debt. This excess liquidity is not always possible or desirable to hold as money or to channel into immediate consumption. This is especially the case when a nation depends on raw material exports like oil, copper or diamonds. In such countries the main reason for creating a SWF is because of the properties of resource revenue: high volatility of resource prices, unpredictability of extraction and exhaustibility of resources.'
It continued: 'There are two types of funds: saving funds and stabilization funds. Stabilization SWFs are created to reduce the volatility of government revenues, to counter the boom-bust cycles' adverse effect on government spending and the national economy. Savings SWFs build up savings for future generations… It is believed that SWFs in resource rich countries can help avoid resource curse, but the literature on this question is controversial. Governments may be able to spend the money immediately, but risk causing the economy to overheat, e.g. in Hugo ChÃ¡vez's Venezuela or Shah-era Iran. In such circumstances, saving the money to spend during a period of low inflation is often desirable. Other reasons for creating SWFs may be economical, or strategic, such as war chests for uncertain times.'
I am not knowledgeable in or acquainted with the mumbo-jumbos of economics, but I certainly appreciate the basis for SWF. I think it is profound and therefore desirable. Indeed, we need it. I have also read that those who put the whole thing together expect it specifically to serve as a savings fund for future generations; for economic stabilisation as well as an infrastructure fund. The modus, as I hear, will address the issues associated with country's excess liquidity arising from crude oil sales. It is also expected to replace the Excess Crude Account, which has always spewed a shower of controversies. Hitherto, earnings above budgetary benchmark price for crude oil were held in the Excess Crude Account and when there were budget revenue deficits, funds were withdrawn from the account and disbursed to all the three tiers of government.
I like very much the fact that it will serve as a savings fund for future generations and its place in economic stabilisation. Truth is that, over the years, we have been living like the prodigal and eating with 10 fingers. The wisdom to save is as old as man himself. Save for the rainy day, they say. Even conventional wisdom tells us that no matter how little the income, we should always put something aside in form of savings. And as it is with an individual, so it is with a people, a nation. Anyone who eats with 10 fingers today, is decidedly making his way into the house of hunger, tomorrow.
That is not to casually dismiss the position of antagonists of the fund. Those who have been hacking at it, definitely have their point. The caveat, however, is that their prism may have been a bit narrow. I've heard people say you can't be putting money aside for tomorrow when we cannot do the most basic things today. Ordinarily, that is a sound logic. But let me say that this country has all the resources to achieve every basic need of Nigerians, and more. I'll come back to that. But suffice it to say that once we cease to have total access to the easy and consistently flowing oil money, we would begin to think creatively - economically, that is. This may not be saying something entirely new. But I think that we have become so nomadic with our oil wealth.
The nomadic mentality is a ruinous one. A nomad comes to a locality with his animals and renders the place desolate. And once that is achieved, he moves on to another place and does the same thing. Since we discovered the gushes of oil and their source, we have put all else away and settled down on it. And the sad thing is that oil is a wasting asset. Oil has made us lose our sense of creativity and striving. Every end of the month, every tier of government lines up in Abuja to share oil proceeds. Which is why state governments (as well as the federal) must draw up their annual budgets based on how much allocation they expect from oil revenue. What happens to other economic sources?
What about other mineral resources? Every state in this country, if we look well, must have been as endowed as any of the states in the Niger Delta area. But we have failed to see this, because, like the nomad, we delight in quick and easy fixes. And because today, there is enough to steal.
I said earlier that Nigeria has all the resources today to achieve every basic need of every citizen. And that is a fact. Saying that Nigeria has no business with poverty, is now trite. But it does not invalidate the truth, nor does it detract from it. Nigeria has the resources to make Nigerians live decently, with dignity. The conditions of the 21st century Nigerian are abject because he has the misfortune of having a successive band of buccaneers called leaders - political and bureaucratic. Imagine, for a minute, what the country could have done with all the monies stolen by these characters and their collaborators outside government and outside officialdom. And just imagine, also, that every kobo this country makes is in the national till and accounted for. But the trouble is that everything leaks away through a million holes. Apart from direct, bare-chested thievery, there are so many indolent, unproductive people permanently at the table. They trap the cake even before it is served; before it lands on the table. Imagine, again, that our legislators earn decent wages, and not the haul they make every quarter.
I did a piece in this column last February, titled: We aren't sufficiently provoked, I think. Please, allow me to quote from it. I had said: 'But the legislators' criminal take-home pay is not all there is to it. It may just be a fraction of it; a small act in a big drama of the macabre. On the whole, the cost of running our government is obscene; it is crippling, if not killing. Indeed, it is killing the country and it is doing so in many ways. One of which is that, the resources of the country is ceaselessly squandered in servicing a legion of ravenously unproductive bureaucrats. For instance, in the presidency. I'll be shocked if the president knows the exact number of his aides - I mean advisers and assistants. We are not talking of lesser assistants and advisers. And of course every one of them has a train of assistants.
'That is in the presidency. Now multiply whatever number of these assistants and advisers, their lesser opposite numbers and all the members of the train by 37 (representing the 36 states and Abuja). Then multiply the same number of aides with the number of ministers and number of junior ministers. When you have got that, add everything and you can have an idea just about how much this country spends in sustaining indolence. I'm not asking you to add hangers-on, court-jesters and fawners, international errand men and women, hatchet men and attack-dogs. Nor am I requesting that you consider the clan of First Ladies and their leeches. No, these ones are in a class of their own.
With a colony like that, a colony of vampires, how would a nation have the resources to give its citizens the good life?'
Now, do you understand what I mean? We have enough to spend; enough to make us live up to the full measure and standards of the 21st century civilisation. And enough, too, to save. But let me also say that I appreciate a particular fear that Governor Peter Obi dropped the other day in Abuja. At the public presentation of Nigeria's Golden Book, the very ambitious work by The Sun newspaper, the governor said one of the fears is that the fund may go the way of similar government efforts. 'Tomorrow,' he said, 'we may start looking for the money.' Now, that is quite profound, even though it sounds so simple and benign. While it is something we must do - in fact it has started with $1 billion - we must stay at it, and be accounting. Sovereign Wealth Fund is something we can do; something we should do and something we must do - for our good. And why not!