Sovereign Wealth Fund Gist

Nigeria’s Sovereign Wealth Fund kicks off tomorrow (October 2nd). 

You can read the bill establishing the Nigerian Sovereign Investment Authority below. I have had this document for more than a year now and I am assuming it is the latest one or perhaps has only had minimal revisions to it. Nevertheless, the document is watery enough for anyone to understand.

Sections 29 – 31 give the gist of how the NSIA will be initially funded (initial $1bn seed) and subsequent funding. This is all still subject to the Governors allowing the thing to proceed and not torpedoing it as they are threatening to do. Their position is somewhat understandable because recent experience has shown us that whenever the Federal Government takes a top line charge on govt revenues, the results are usually ‘interesting’ to put it mildly (fuel subsidy as an obvious example).

As announced in September, the fund will be run by a chap by the name of Uche Orji. His LinkedIn profile is here. Sadly you can no longer view it except you are ‘connected’ to him. More on his background can be found here. He’s a Harvard MBA which is never a bad thing but it is interesting that his very recent experience is in semi-conductor investment research. I am not entirely sure how this is relevant experience for a wealth fund especially as in the Business Week link above, he already seems to be scraping the bottom of the barrel to prove that he will know what he is going to be doing. 

“I’m actually very close to many of the sovereign wealth funds in the Middle East; I’ve known many of them for many years and I’ve watched them grow,”

I can say the same thing above (I’ve interviewed with one of the biggest ones) but I doubt that makes me capable of running a wealth fund. Moving on.

There’s a lot of money at stake here and given high oil prices, it could very quickly accumulate to multiples of the $1bn seed it has been started with. As I type, the wealth fund has no website anywhere I can find on the internet. Perhaps the website will be ‘launched’ tomorrow at the same as the fund. Perhaps. 

Examples of other countries’ wealth fund websites include the following

Singapore http://www.temasek.com.sg/

Abu Dhabi http://www.adia.ae/En/home.aspx 

Norway http://www.nbim.no/en/ (there have been complaints that this website is in fact ‘too transparent’) 

The State of Alaska http://www.apfc.org/home/Content/home/index.cfm/ 

The point of pointing out all of the above is that there can be no excuse for Nigeria’s wealth fund not having a detailed and up to date website. None whatsoever. This should not be tolerated at all. Not only must the website show how much the authority has under management on any given sunday, it must show where these funds are being invested and on what terms. Anything less than this will be the equivalent of a handshake that has gone beyond the elbow. Again, absolutely no excuses, e no go beta for ‘Nigerian factor’. Since this is a new thing, we must start as we mean to carry on.

Sections 39 – 48 of the bill give the gist of how the fund will be structured. There will be a Future Generations Fund [FGF] (sections 39 -40). You can see how ‘watery’ the wording here is. One trick that politicians in the west learnt a few years ago is how to steal from the future. The people to be affected by such stealing usually havent been born at the time of the theft not to talk of being able to vote. So it’s a very convenient heist indeed. From the wording of this bill it does look like the future generations have entered the proverbial ‘one chance’. But let’s wait for the fund to kick off and see what’s up.

There’s also the Nigeria Infrastructure Fund [NIF] (sections 41 – 46). This evidently more detailed and some thought at least went into drafting it. It’s also the part that should give much cause for concern given that in Nigeria, voting money for infrastructure does not always mean that said infrastructure will appear. 

Finally there’s the Stabilisation Fund (sections 47 -48). That sound you are hearing as you read this is the sound of politicians rubbing their hands together in delight. To put it in much simpler language, this is the ‘allocation’ segment of the bill. Again you can see how alarmingly watery section 48 is as to how these funds can be disbursed. It looks like it can be done by a text message from the Finance Minister to the Managing Director of the NSIA even. Dont laugh – when things are not clearly spelt out, expect the unexpected. 

All told, a minimum of 20% of the fund will go to the FGF subject to some other formulas. Another minimum of 20% will go to the NIF, again subject to other formulas. While the Stabilisation Fund will get 20%. In between the FGF and NIF, the remaining 40% will be allocated. 

Finally finally, I draw your attention to section 8, subsection 2 of the bill. This is the section on ‘Membership of the Governing Council’ of the fund. It does not disappoint on the comedy front. There will be ‘4 reputable individuals from the private sector’ there. Should I name them for you or I shouldnt bother? I shouldnt bother? I thought so too. It will be packed full of the usual suspects – Mr President as Batman and the Vice President as Robin. The CBN Governor, of course, and not to forget the most important minister in the whole of Africa in general and Nigeria in particular, the minister for ‘national planning’. It is my earnest prayer that, given the amount of committees these people are already on, no one will die of committee in Nigeria IJN. 

Since my readership on this blog is a young one, I cannot help but point you to point J in the same section. Ah yes, there it is, ‘two representatives of Nigerian youth’. Up Youth!

 

Happy Independence anniversary. I woke up this morning to start a course I am taking online along with millions of other people worldwide on Development Economics. The course is being run by Professors Tyler Cowen and Alex Tabarrok of George Mason University. I am a big fan of Tyler Cowen and it is impossible for me to go 6 hours in any day without checking out his blog. 

The course is being delivered through www.mruniversity.com and is completely free. I urge you to get started on it. Just register and follow at your pace.

Did you know that in 1950 Nigeria was richer than South Korea? That was one of the things I took away from the introductry video this morning. You will do a lot worse than signing up for the course.

That is the end of today’s gist.

FF

 

 

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4 thoughts on “Sovereign Wealth Fund Gist

  1. Immediately Paul Ryan was announced as Mitt Romney’s running mate, a website (
    http://my.barackobama.com/Go-Back-Team),- a ‘progeny’ of the parent Obama/Biden website complete with every information voters need to know (from the Democrats’ standpoint) about Paul Ryan- went live. Before Ryan’s pick as running mate, at least three other Republicans were seriously being considered for the role. It won’t be inaccurate to submit that the Obama campaign’s opposition research team must have had replicates of the Ryan website ready and complete with dossiers on each potential VP pick. That’s how people serious about what they have been called to do, think and act. When Nigeria is ready to wake up, no one will be in doubt. As usual, great job Feyi!

  2. Very good point Ifeanyi there on his age.
    I hope this wont be another nuisance point to distract from the real issues because 6 years is not a mistake.
    I dont know why they cant get something so simple right. …

  3. Good critique and my first time here FF. I wrote on the SWF last year for the International Finance law Report. It was all hopeful and optimistic. Its nice seeing a followup article and sad that the optimistic note I wrote on has dwindled a bit. Like almost all things Nigerian.

    P.S : Great finding your blog bro.

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