An atmosphere of zest and economic optimism dominated the nation’s polity when the Sovereign Wealth Investment Authority Act, a.k.a. Sovereign Wealth Fund (SWF) was enacted in May, this year. But the zest is literally dead. Why? President Goodluck Ebele Jonathan and the 36 state governors are now in war of words over the SWF Act, meant to save the excess revenue from the sale of crude oil.
However, the president is undaunted. He appears set to dialogue with them (governors) over this touchy national issue. Apparently reacting to media reports that governors were singing discordant tunes over the SWF, he has asked the state chief executives to approach the Federal Government on any issue that they are not comfortable with so as to take a common position.
That way, he noted, both the federal and state governments would not be exposed to media hype, and warned them not to play politics with the nation’s economy. “We know, without fixing our economy (Sic), we cannot go anywhere as a nation. So, that is the first interest of government and I would want to urge all the different tiers of government, the states and local governments to place economic issues on the front burner because without a well managed economy, as a nation, we will not be planning for the future generation”.
The Nigeria Governors’ Forum (NGF), last week Monday, condemned the establishment of the sovereign Wealth Fund, and described it as unconstitutional. Rising from their meeting in Abuja, the governors not only criticized the SWF Act, but also called on the federal authorities to suspend its operation because of its unconstitutionality.
Chairman of the governors’ forum and Governor of Rivers State, Rt. Hon Chibuike Amaechi who spoke on behalf of the governors, said their meeting agreed that the constitutional issues arising from the SWF Act have to be dealt with. “Members resolved to call on the Federal Government to suspend operation of Sovereign Wealth Fund Act until all the issues are resolved because it is unconstitutional”, he said.
It would be recalled that the disbursement of excess revenue from the sale of crude oil to the three tiers of government has over the years been a subject of public controversy. In 2005, the price of crude oil at the international market hit an upward trend following instability in supply due largely to crises in the Middle East. As a result, the Federal Government raked-in hundreds of billions of naira as excess revenue, accruable from the sale of crude oil.
But while the various tiers of government were awaiting the release and subsequent sharing of the excess crude oil money, the federal authorities slammed an embargo on the disbursement of the money. Expectedly, the issue generated palpable bad-blood between the federal authorities, state governors, as well as the local government councils across the country.
However, a truce over the non-release of the excess oil money was later reached between former President Olusegun Obasanjo and the state governors, following the intervention of the National Council of States which spelt out a sharing formula for the excess oil money. Under the sharing formula, at the time, 50% of the excess oil funds was set aside to take care of possible fluctuation in the price of crude oil in the near future. The council, at the time in question, also agreed that 37% of the excess oil money should be shared by oil producing states.
The sharing formula, as rolled out by the Council of states, was that the federal government’s share would be N146 billion, N74 billion for state governments, and N41 billion for oil producing states. The council also directed that the disbursement should be on monthly basis to ensure probity.
This was how touchy national issues were resolved, resulting in the withdrawal from the law courts, litigations and other crises that accompanied the non-release of the excess oil money in 2005. Regrettably, the crisis reared its ugly head again during the last lap of the Obasanjo administration, as the excess oil money was being held in the nation’s foreign and domestic reserves by the Obasanjo regime, in spite of the cries of the governors, at the time.
Worried by the development and coupled with the empty treasury inherited by most state governors from their predecessors, the new governors had at several meetings with late President Umaru Yar’Adua appealed to him to use his good offices to put the necessary machinery in motion to effect the disbursement of the excess fund from crude oil which was being held by the federal authorities.
Happily enough, late President Yar’Adua, apparently moved by the cries of the state governors, graciously authorized the immediate disbursement of the accumulated excess crude fund. Under the arrangement, the federal, state and local governments signed an agreement on the utilization of funds accruing to the Excess Crude Account which grossed more than N1.4 trillion at the time in question.
Prof. Chukwuma Soludo, Governor, Central Bank of Nigeria (CBN), at the time, said in Abuja shortly after a meeting of the National Economic Council, that N1 trillion of the amount was to be saved in a base account for the state, and that the balance would be shared to the three tiers of government after reconciling debts owed by seven states and the Federal Government. The agreement for the disbursement of the excess oil money which was for four years, provided for the sharing of 80% of monies to be accrued in subsequent years, while the remaining 20% would be saved, according to Soludo.
In the words of the CBN Governor, “the saving will accrue interest for the respective states to be utilised for a rainy day”. Commenting on the issue, many Nigerians expressed the belief that if the excess oil money is being shared, a large chunk of it would end up in private accounts of the few privileged ones in government at the expense of the poor ones. They reasoned that there was no sin in sharing the excess oil money from the foreign reserves, but it was not tied to specific programmes that will ensure the socio-economic development of the country. More so, as the excess oil money was being withdrawn, it was not attached to any socio-economic programmes, such as education, health, employment generation, among others.
The Minister of State for Finance, Mr Remi Babolala, at the time, explained that the Federal Government got the lion share of $841.911 million, the 36 states, $799,648 million, while the 774 local government councils received $358.440 million. Certainly, with the sharing of the two billion US dollars by the three tiers of government, there was more cash pumped into the system to enhance spending and rejuvenate the nation’s economy. It also meant that funds were made available for on-going projects at the federal, state and local government levels. La-mentably, the common man did not feel the impact of the excess crude cash sharing.
Again, barely two months after assumption of duty as President, Dr Jonathan, ordered the release of another two billion US dollars from the Excess Crude Account. Indeed, the money was released and the three tiers of government shared the oil windfall, accordingly. However, reactions trailed the remittance of the excess crude cash into the accounts of the three tiers of government. While some Nigerians saw nothing wrong in the president’s action, scores of others condemned it, insisting that it was rather too early for the president to have ordered the sharing of the oil money, barely two months after assumption of office. All that is now history.
Better still, the Federal Government, early this year, ordered the sharing of $1 billion from the Excess Crude Account to the three tiers of government. Indeed, the excess oil money was remitted into the accounts of the federal, state and local governments. According to the former Minister of Finance, Olusegun Aganga, a large chunk of such funds earlier shared had always ended up in the private pockets of the privileged ones in government. Worst offenders are the local government chairmen.
It is public knowledge that scores of the nation’s political office holders have a penchant for looting excess crude cash and statutory allocations from the Federation Account disbursed to the various tiers of government. Yes, not too long ago, Senate President, David Mark, accused local government chairmen of going to hotels to share among themselves, funds statutorily allocated to them from the Federation Account.
As contained in the new law, any excess money from the sale of crude oil will now be properly invested or tied to specific projects. This new economic feat, achieved by President Jonathan, has been widely applauded by economists and other well-meaning Nigerians. No doubt, this has added another feather to Jonathan’s cap of achievements.
But it is imperative to ask the federal authorities, especially the “managers” of the Sovereign Wealth Investment Authority to begin now to set in motion the machinery to invest the excess crude cash in specific economic projects, as well as infrastructural facilities that will spur the socio-economic developments at the federal, state and local government levels.
It is still fresh in the minds of Nigerians that the National Assembly in May, this year, passed into law the Sovereign Wealth Investment bill, a.k.a. Sovereign Wealth Fund. This follows an executive bill for the establishment of the fund which was mid-wifed by President Jonathan and duly sent to both the Senate and House of Representatives for passage into law. Happily, the president assented to the billed on May 27, 2011.
Indeed, the president’s action was greeted with applause by many Nigerians because, with the setting up of the fund, backed by law, the frequent sharing of excess crude cash by the three tiers of government was legally suspended or stopped. What’s more, with the new law now in place, the Excess Crude Account, from which the excess oil money was being shared, will not be in operation, any longer.
That said, it behoves the 36 states governors to sheath their sword over the SWF Act. Afterall, some elected public office holders have been fingered for looting excess oil money and monthly allocations, disbursed to them from the Federation Account.
Beyond that, with the Sovereign Wealth Fund Act, economic analysts believe that Nigeria is set to play in the $4 trillion global alternation assets club, address her critical infrastructure deficit and attract the needed investments. Again, renowned economists say Sovereign Wealth Fund has the capacity to do two things: either prevent drastic aftershocks of a systematic financial crisis or principally provide cash to the owner countries (or firms) that are on brink of insolvency or in need of capital for growth.
Happily, Nigeria has just enacted her own Sovereign Wealth Fund Act. No doubt, the wealth fund will provide a firmer legal basis to ring-fence the nation’s saving. Our governors must therefore allow the SWF to see the light of day.