Sovereign Wealth Fund: Aganga’slegacy

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By Emma Ujah

THE appointment of Dr.  Olusegun Olutoyin Aganga as the nation’s Finance Minister on April 6, 2010, elicited high expectations in many quarters, especially among private sector operators. The expectations stemmed from his background as Managing Director, MD, of Goldman Sachs, based in London, United Kingdom, a position he held until the ministerial appointment. Dr. Aganga’s wealth of experience, Nigerians had hoped, would be put into use in the formulation of  macro-economic policies that would jump-start the economy.

The nation’s economy had been riddled with the problems of poor macroeconomic management, corruption, inadequate infrastructure, high unemployment, high public debt portfolio with the nation owing about $4  billion to foreign creditors and more than N4 trillion to domestic contractors.

Closely related to the above was the divestment which the economy had suffered as many multinational manufacturing companies in the tyre, textile and several other sub-sectors left Nigeria for Ghana.  The divestment was due to harsh operating environment, especially the cost of doing business with regard to lack of electricity supply.  Nigerian businesses, run on personal and industrial generators.

Embarrassingly, government offices also depend on generators for their electricity power supply.
Dr Aganga’s appointment also heightened hope that sound budgeting and financial management would be enthroned at the federal level which was expected to provide a guide for the two lower tiers of government.  The stories of budgeting in the country, had for long, been characterized by a lopsidedness of recurrent against capital, as well as, poor implementation.

Of the myriads of problems plaguing the economy, Dr. Aganga’s most outstanding achievement in the one_year period in office is the passage of the Sovereign Wealth Fund, SWF, Bill by the National Assembly.  That piece of legislation is critical to the idea of saving part of the nation’s oil revenue as well as utilizing part of the savings to effectively diversify the economy.

The SWF, shall receive a seed fund of $ 1 billion which translates to about N150 billion.  After that it will receive the excess of oil revenue benchmark- the difference between the budgeted oil revenue per barrel and the prevailing oil price at the international market.

Currently the excess is paid into an Excess Oil Revenue Account which was created by Dr. Ngozi Okonjo_Iweala under the Chief Olusegun Obasanjo administration.  She had stood her ground against all odds from state governors who argued that the entire revenue that accrued into Federation Account must be shared.

They insisted that there was no point saving for the rainy day because according to them, “the rainy days are already here”.  But Dr. Okonjo_Iweala had her way, particularly because Chief Obasanjo closed his ears to the complaints of the governors, since he was convinced by the lady that saving the excess of budgeted revenue was international best practice.

Reacting to the passage of the SWF bill early in the month the minister said it will straighten the fiscal framework of Nigeria for better management of resources.

Nigeria, Ecuador and Iraq are said to be the only Organisation of Petroleum Exporting Countries (OPEC) members without a sovereign wealth fund.  Both Ghana and Uganda have moved forward with establishing their sovereign wealth funds, even when their oil production is not yet fully online. Algeria established its sovereign wealth fund in 2000 to save the difference between the actual and projected revenue generated from petroleum resources. That Algerian fund is currently estimated to be worth $56.7 billion.”

One sore spot of the one year within which Dr. Aganga held sway as head of the nation’s economic team was the altercation between him and the duo of the former Vice President, Alh. Atiku Abubakar and  former Governor of the Central Bank of Nigeria, Prof. Chukwuma Soludo.  2010’s rating of Nigeria’s economic performance by several world bodies and rating agencies did not particularly show any significant improvement in the standard of living of Nigerians, in spite of claims by the Bureau of Statistics of improved growth of the macro-economy.

For example, World Economic Forum, WE, criticised Nigeria over poor governance and inadequate infrastructure financing which led to the downgrading of the country to 127 out of 139 countries. In its 2010 Human Development Report, the United Nations Development Programme,  UNDP, Nigeria also grouped Nigeria among the 41 countries considered to have the “least human development”.  The nation’s Gross Domestic Product, GPD, per head was also said to be $ 1, 224 which poorly compared to South Africa’s $ 9, 812 and Cameroon’s $2, 197.

Nigeria was also reported to have fallen in Life Expectancy to an average of 48.4 years, compared to Benin Republic (62.3), Ghana (57.1.), Cameroon (51.7).  Transparency International equally downgraded Nigeria from  130 in 2009 to 134 in 2010 among the countries rated.

Both Alh Abubakar and Prof. Soludo latched unto the various statistics to heavily criticize the handling of the economy by the Jonathan administration. Obviously, Dr. Aganga who heads the economic team viewed the criticisms as a direct attack on his competence and reacted sharply.

He viewed the attacks on the Jonathan government based on the economic performance as a political move and therefore told the former VP who was eyeing the Aso Rock Villa not to play politics with the economy.

For Prof. Soludo, Dr. Aganga blamed him for allegedly deceiving the country about the stability and immunity of the Nigerian economy and the banking sector which he handled and said that in other climes  where public officers were made accountable, people like Soludo should be in jail.

The minister also made reference to Prof. Soludo’s handling of the Africa Finance Corporation, AFC, in which Soludo was a stakeholder and provided it funding from public resources as some of the reasons, why the Professor of Economics should have kept quiet rather picking holes in the performance of the economy by the Jonathan administration.

Even though he refused to be drawn into the debate for which Prof Soludo challenged him, the reaction indicated how uncomfortable the minister was about the criticism.

In a veiled reaction, the Minister also responded to Alh. Abubakar, that the economy was too technical for some people to understand.

In spite of several promises to rejuvenate the economy through various schemes such as the agriculture and textile special funds, the story has hardly changed in any significant way. To say that unemployment remains very high in the country is stating the obvious.  The textile companies remain prostrate and the nation continue to depend on imported textile materials.

None of the bid multinationals that left for Ghana where uninterrupted electricity is guaranteed has returned as the power sector reform has yet to bring about improved power supply for domestic and industrial consumers.

If re-appointed, Dr. Aganga must work with National Economic Team members to translate to reported economic growth into better living standards for Nigerians. He must also strike a balance between a massive investment in infrastructure as well as putting inflation in check.

Nigeria’s experience with foreign loans were very sour and we can’t appreciate any administration that will build it to another  unsustainable level as was the case before the exit strategy of the Obasanjo administration. The minister must always remind himself that Nigerians don’t want another debt burden, no matter how attracted the lenders may portray such “concessionary” loans.

President Jonathan has been  told in clear terms that his priority must be the economy.  The Minister of Finance cannot afford to play politics even if anyone wants to play politics with the economy.  Nigerians want results-employment, industries back on stream, food on the table and be able to provide themselves decent accommodation, among others.

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