During a presentation to the National Conference Committee on Public Revenue and Finance, the Central Bank of Nigeria (CBN) suggested that the Sovereign Wealth Fund (SWF) be included in the country’s constitution. The fund has been mired in controversy because it is clandestinely used as a substitute for the Excess Crude Account (ECA) to provide long-term savings for economic stabilisation, development of infrastructure and generational equity.
The governors of the 36 states have contended that such a move is unknown to law and are asking the Supreme Court to truncate the attempt by the federal government to withdraw $2 billion from the ECA for investment in the SWF. The governors had alleged that from the $20 billion in the account in 2008, the federal government had depleted it to $3.7 billion.
From the technical point of view, the ECA itself is a mere arrangement based on a memorandum of understanding among the three tiers of government. It is, therefore, expedient for the government to constitutionalise this spatial scheme. It is clear that the country cannot afford the “feeding bottle federation” or where all the tiers of government live from hand to mouth. Public-sector savings have become a norm in most resource-rich and resource-dependent economies as a way of fostering all-round development. Norway, Russia, Qatar, Iran, Kuwait, UAE, Botswana, Angola and Libya, among others, have used the SWF to guard against negative effects of instability in commodity prices. Nigeria can ill-afford the backlashes that wasteful public spending engenders.
Some of the challenges that make SWF a constitutional imperative are: taking care of future generations, reducing palpable tension and imbalance in inter-governmental fiscal relationship, enhancing budgetary process as well as empowering states and local governments to borrow to finance public expenditure. Nigeria’s over-dependence on oil revenue, limited levels of economic activities, poor tax awareness, and prevalence of expenditure mind-set as well as neglect of revenue generation authorities are issues that have continued to be canvassed. The present arrangement in the management of the federation account, if allowed to continue, will raise issues of the propriety of remittance and other fiscal responsibility concerns.
A matter as serious as a macroeconomic management policy has to be anchored on a firm constitutional foundation. Already, President Goodluck Jonathan has emplaced the Nigeria Sovereign Investment Authority for the management of the National Sovereign Wealth Fund (NSWF) and an executive bill is also before the National Assembly to legalise the SWF. There is also a Sovereign Wealth Fund Council with the president as chairman and the 36 state governors, among others, as members. For all it is worth, the institutionalisation of these bodies will amount to naught if the necessary political will and altruism are not entrenched. Also, there ought to be a collective resolve for social justice and the greatest possible accountability and compliance process in tandem with international best practices.
