For every nation worth its salt, it is imperative to save and invest a certain proportion of it wealth as part of a deliberate effort to drive growth and development. China, for example, has $827 billion in its SWF, United Arab Emirate $709 billion, Saudi Arabia $444.4 billion, Kuwait $202 billion and Libya $70 billion. The Funds have helped these nations achieve their development objectives.
The Federal Government has tried to take a cue from these countries by setting up its own Sovereign Wealth Fund. The bill was passed by both houses of the National Assembly and signed into law by the President. The SWF replaced the Excess Crude Account (ECA) which was the accumulation of windfall savings from oil prices above the budget benchmark. The ECA had been depleted uncontrollably in past years. Therefore, the SWF provides a legal framework for the disbursement of excess crude funds.
The main purpose of the fund are to build future savings, develop infrastructure and provide economic stability for the Future Generations. According to the Act, the future generation and Infrastructure funds shall receive a minimum of 20 percent of seed capital and will be funded on a monthly basis with a minimum of 20 percent of monthly revenue (with the percentage reviewed every 2 years) till they reach a ceiling percentage of GDP. For the Stabilization Fund, apart from receiving a minimum of 20 percent of seed capital and monthly funding of 20 percent minimum, on a quarterly basis, it will be used to bridge revenue shortfalls as required with all proceeds for reinvestment, according to the Act.
By the provision of the SWF, co-investments with strategic investors, sovereign and internationally recognized investment funds and private companies, are allowed but without a guarantee.
No doubt, the successful operation of the SWF will go a long way in instilling fiscal discipline in the economy. And that is why we view the opposition from state governors as unfortunate. It is unfortunate because the executive bill was debated at both arms of the National Assembly before it was passed into law with Presidential assent.
The retreat by state chief executives who describe the creation of the Fund as unconstitutional is therefore not acceptable. Also their argument that the payment of the minimum wage cannot be possible with the operation of the Fund misses the point. This is because there is so much wastes in the states that if checked, much savings will be made to finance the payment of the minimum wage even with the SWF in place. We therefore share the vision of setting up the Fund.
Our advice, however, is that the Fund should be transparently managed with strong oversight by an independent body that will determine asset allocation decisions and actual returns from investments. With this, we believe that the interest of the states and Nigerians generally will be protected.
For states that want the money shared to enable them invest it the way they choose, they should realize that the public sector, including state governments, are not good investors and cannot profitably manage such savings.
The SWF should not be a political issue. We consider it such a serious matter that the development of the country can be tied to its success and governors must not play politics with it. It is imperative that we should join countries that have used the SWF a mean of meeting the needs of the people.
Source: www.businessdayonline.com
The Federal Government has tried to take a cue from these countries by setting up its own Sovereign Wealth Fund. The bill was passed by both houses of the National Assembly and signed into law by the President. The SWF replaced the Excess Crude Account (ECA) which was the accumulation of windfall savings from oil prices above the budget benchmark. The ECA had been depleted uncontrollably in past years. Therefore, the SWF provides a legal framework for the disbursement of excess crude funds.
The main purpose of the fund are to build future savings, develop infrastructure and provide economic stability for the Future Generations. According to the Act, the future generation and Infrastructure funds shall receive a minimum of 20 percent of seed capital and will be funded on a monthly basis with a minimum of 20 percent of monthly revenue (with the percentage reviewed every 2 years) till they reach a ceiling percentage of GDP. For the Stabilization Fund, apart from receiving a minimum of 20 percent of seed capital and monthly funding of 20 percent minimum, on a quarterly basis, it will be used to bridge revenue shortfalls as required with all proceeds for reinvestment, according to the Act.
By the provision of the SWF, co-investments with strategic investors, sovereign and internationally recognized investment funds and private companies, are allowed but without a guarantee.
No doubt, the successful operation of the SWF will go a long way in instilling fiscal discipline in the economy. And that is why we view the opposition from state governors as unfortunate. It is unfortunate because the executive bill was debated at both arms of the National Assembly before it was passed into law with Presidential assent.
The retreat by state chief executives who describe the creation of the Fund as unconstitutional is therefore not acceptable. Also their argument that the payment of the minimum wage cannot be possible with the operation of the Fund misses the point. This is because there is so much wastes in the states that if checked, much savings will be made to finance the payment of the minimum wage even with the SWF in place. We therefore share the vision of setting up the Fund.
Our advice, however, is that the Fund should be transparently managed with strong oversight by an independent body that will determine asset allocation decisions and actual returns from investments. With this, we believe that the interest of the states and Nigerians generally will be protected.
For states that want the money shared to enable them invest it the way they choose, they should realize that the public sector, including state governments, are not good investors and cannot profitably manage such savings.
The SWF should not be a political issue. We consider it such a serious matter that the development of the country can be tied to its success and governors must not play politics with it. It is imperative that we should join countries that have used the SWF a mean of meeting the needs of the people.
Source: www.businessdayonline.com
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