FACTS ABOUT NIGERIA’S SOVEREIGN WEALTH FUND

The Sovereign Wealth Fund (SWF) is a state–owned investment fund composed of financial assets such as stocks, property, bonds, precious metals or other financial instruments. Essentially, it is a state owned pool of money invested in various assets .The purpose of an SWF,

the world over is to channel a nation’s budgetary surplus back into the country through investments. The essence of the fund which is traceable to Kuwait is to invest excess oil revenues thus generating revenue for future generation and also to act as a buffer for the economy against oil-price fluctuations risk (for countries that are oil-revenue driven economies).

In Nigeria, the SWF was established to address the problems emanating from the operation of the Excess Crude Account (ECA).Before now, excess liquidity (cash) arising from crude oil sales were held in the ECA, which was subject to the whims and caprices of the political leaders thus raising serious issues of transparency and accountability or even the justification for the continued existence of the ECA regime. Although of major contention was the fact that the ECA was essentially an administrative tool developed in 2004 without any recognizable legal backing.

The SWF is thus an interventionist approach by the government to address the perceived shortfalls of the ECA and also bridging the gap between the old regime and the new one. In order to secure a legal foundation for the take-off of the Fund, the President on the 27th day of May 2011 signed the Nigerian Sovereign Wealth Investment Act 2011 into law.

According to Shafii Ndanusa in his Article- “What Nigeria stands to benefit from its Sovereign Wealth Fund”, the benefits of the Fund to Nigeria are as stated below:

Economic Competitiveness: The Nigerian economy will certainly become more attractive for Foreign Direct Investments (FDI). The high level seriousness which the establishment of the NSIA will signal will be a good yardstick for measuring Government’s commitment to the global standards of transparency and accountability in the management of natural resources.

Prudence in Resources Management: The culture of unrestricted spending of unanticipated income will be curtailed. Investments will be based on 

1. sound, clear and beneficial economic/financial parameters.
2. Availability of a Pool of Savings or Back-up Funds for future generations.
3. Availability of a Counter-Cyclical Economic Stabilization Fund: This will assist in smoothing budget variations in income over a period of time.
4. Availability of an Infrastructure Fund to provide intervention in critical areas of the Nigerian economy. The infrastructure deficit of Nigeria is a major challenge that requires massive investments in resources. This benefit will cut across different sectors in line with due to the multidimensional nature of the potential/actual interventions.

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