By Dele Sobowale
“Once to every man and nation comes the moment to decide; in the strife of truth with falsehood, for the good or evil side”.

James Lowell, 1819-1891

(VANGUARD BOOK OF QUOTATIONS p 254).

As the year 2011 comes to an end and the President is getting set to present the 2012 budget before the National Assembly, one of the most contentious aspects of the proposed appropriation bill is the Sovereign Wealth Fund, SWF.

Readers need to be quickly reminded that this writer supports the SWF in principle because it introduces fiscal discipline which a mono-resource nation like Nigeria needs – especially when commodity prices are on the increase.

Possible global recession arising from the inability of European governments and the United States to develop the will to resolve the debt crises in their countries threaten a global downturn which could be devastating to oil-producing nations as well as commodity producers. SWF representing “savings against the rainy day” could provide the saving grace if a global recession, increasingly likely, occurs.

Again, it needs to be repeated that there are several reasons for caution – not least of which is the penchant of the President to abandon the rule of law and opt for force when it suits his purpose. Many Nigerians who fell for the façade of the President’s humility are now beginning to realise that it was all an act.

The real Jonathan has shown up in the Bayelsa PDP primaries. While force might work in politics, its deployment in economic matters, if not grounded on sound economics, will certainly end up in disasters. The laws of economics are not subject to the whims and caprices of individuals – no matter how highly placed.

SWF is a good idea; not a panacea to all the ills plaguing the Nigerian economy. This column will therefore attempt to present the two sides of SWF; its prospects and the possible problems we might experience if we adopt it – as I hope we will eventually.

Perhaps the place to start is to define the concept of the Sovereign Wealth Fund, as it is meant in this presentation. Like love, which is generally assumed to be a “good” thing, it has many definitions and it can also lead to disastrous consequences.

SWF is also a two-edged sword which can cut both ways and lead nations into financial prosperity as well as nightmares because it is still an attempt to invest money now to earn returns in the future and to keep it safe until it is inescapably needed. Like all investments, it can backfire.

Wikipedia.org defines it as a “state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals or other financial instruments”. In practice, all SWFs invest all around the globe. Part of the problem is state ownership, as will be explained later.

The definition alone points to other risks, which will be discussed later under problems. In the main, the proponents of the SWF, in Nigeria, have been overstating its benefits while its opponents have been exaggerating the risks involved. There is a need for a balanced view – which this is intended to be despite the declared support for SWF in principle.

Incidentally, the greatest tragedy which has befallen SWF is President Jonathan, ably supported by his National Economic Management Team, NEMT, who together have turned a fairly difficult sales job into almost a mission impossible.

The first lesson I learnt as a salesman in my first job in Boston in 1968 was not to introduce a difficult product to sell to customers when they are in a foul mood. With fuel subsidy palaver, Minimum Wage controversy and ASUU winding up its war machine, soldiers parading the streets of Bayelsa, among other self-inflicted disadvantages, Jonathan has no time left to lead the battle for the most important item on the national agenda in 2012 — saving for the future before the oil price escalator turns downwards as it might any time soon.

Jonathan and his closest advisers, including Ministers, have been talking as if others don’t recognise the need to save for the future. They are collectively wrong because under Nigeria’s presidential system of government, every government official becomes infected with the mistakes of the Commander-In-Chief.

The truth is, people, including many of his own party members don’t trust Jonathan – whereas SWF is basically a “Trust Game”. Jonathan either does not know how or does not care to add building trust as a component of his campaign.

However, patriotism dictates that irrespective of the destitution we experience in leadership in this regard, we must take a close look at what is on offer, ignore Jonathan’s ineptitude and make the right choice all the same. Jonathan will go; Nigeria will remain. So we must decide what is best for our country – not vent our anger on Jonathan.

GLOBAL OUTLOOK ON SWF

Nigeria, as a resource rich country, is actually “light years” behind other nations which have learnt from the verdict of history that “Fortune’s favours never last” (Seneca, 4BC-65AD, in BOOK pp 65-6). Today, crude oil is in high demand; tomorrow, technologies fast developing might render it all a pool of black mess in the ground – take a look at coal and copper which once upon a time were the indispensable elements for leading industrial sectors.

So, forward looking countries have borrowed a page from the religious books – Bible and Quran – in which Joseph or Yusuf stored away food during the seven years of bumper harvest in preparation for the seven years of drought he himself had predicted. The lesson remains an enduring one – especially for Nigerians who fail to remember history. “Fortune’s favours never last”.

Our nation experienced rising oil prices from 1973 to 1982, from $3 per barrel to $28 per barrel. And we spent it all. In fact, we did worse, we took our first loan of $2.8 billion on the excuse that it will easily be repaid.

Then oil prices crashed such that by the time President Babangida pronounced the Structural Adjustment Programme, SAP, it went below $10 per barrel. The loan, instead of being easily repaid escalated to $36 billion by 1999. Who among us can predict that it will not happen again?

The fact that the leading lights of economics have run out of ideas regarding how to stave off recession in Europe and the US, is one reason for rethinking our options about squandering our present inflow of wealth. Unlike the Egyptians of old who listened to the futurist among them, we might one day rue the year we refused to make provisions for the future. SWF is not just one of many choices we have; it is the only game we have to play for our future to be assured.

Over 20 countries have made similar investments. Most of these countries are resource rich like Nigeria, others, like China and India, are export rich. Either way, they operate on the principle that “Fortune’s favours never last” and they invest now in anticipation of when the flow of funds, currently enjoyed, is reduced or stopped.

Countries, or group of countries, with significant SWF investments include, but are not limited to the following: Saudi (US$439 billion); Kuwait (US$202 billion); Qatar (US$85 billion); the United Arab Emirate, UAE, (US$627 billion); and Libya (US$70 billion).

Obviously, Nigeria’s initial $1 billion, over which we are now bickering, does not even qualify us for the big leagues of global SWF investment. But, it is a start in a direction which could be right if well handled, or, wrong, if it is steeped in the Nigerian Factor. The Nigerian Factor for this purpose is defined as our penchant to fail where other nations, including small African nations, have succeeded on account of corrupt practices.

Nobody ever argued that SWF is risk-free; but the reversals other nations have suffered have never been attributed to corruption on the part of government officials entrusted with the responsibilities of managing the funds. Jonathan must be prepared to appoint men of unimpeachable integrity, not party members, to manage the fund. Otherwise, forget it.

PDTF milked to the tune of at least N500b in three years. No Wikileaks. Try Deleleaks. Read the book N5000 per copy.