The ECA was not backed by law; consequently since its establishment there has been a raging controversy The abolition of the fund is clearly not an option in light of the numerous economic benefits of operating and managing the fund. ... Nigeria… [2] As a member of the IFSWF the fund has signed up to the Santiago Principles on best practices for managing Sovereign Wealth Funds[18] and publishes a self-assessment on how it adopts and implements the principles within its governance procedures. Necessary cookies are absolutely essential for the website to function properly. Business News Update: FG to withdraw $150 million from sovereign wealth fund, to borrow $6.9 billion. The benefits of the fund on the Nigerian economy are evident and there is reason to believe these benefits will continue. The issue of the sovereign wealth fund undermining the fiscal federal structure in the country has been the major argument canvassed by state governments in Nigeria for the non-establishment of the sovereign wealth fund. The constitutional lacuna should, therefore, be addressed and more funds be disbursed to empower the NSIA to invest more in infrastructure and carry out more investments globally through the stabilization fund and future generation fund. The legal framework for the Nigeria Sovereign Investment Authority (NSIA) is the NSIA Act 2011. [5] The Stabilisation Fund was allocated an initial 20 percent, while 32.5 percent each went to the Future Generation and the Nigeria Infrastructure funds.[1][20]. Nigeria’s Sovereign Wealth Fund was an upgrade on the ECA. It is not difficult to conclude that the continued investment by the NSIA in other areas of the economy will boost economic growth and could lead to the provision of employment opportunities. While the sovereign wealth fund faces the same legal and political challenges as the ECA, regarding its economic results, the fund has been more successful. Nigeria Sovereign Wealth Fund. Click . The objectives of structuring the sovereign wealth fund through three different funds are principally to protect the economy from the ‘boom and bust’ effect of oil prices in the international oil market; to address the huge infrastructural deficit in the country; and to create a fund for future generations of Nigerians. #ReadSomethingAfrican The future generations fund will focus on providing and generating income for the country’s citizens. Nigeria will soon join the economies of the world that have used their foreign reserve to set up sovereign wealth funds to create more assets for the country with foreign reserves. [7] It is also one of the largest producers of oil, on which the majority of its economy relies. The Nigerian Sovereign Wealth Fund. A sovereign wealth fund is a state-owned investment fund. By controlling the benchmark, the federal government can effectively tilt the sharing formula in their favour whenever they choose. Sovereign Wealth Fund Institute (SWFI) is a global organization designed to study sovereign wealth funds, pensions, endowments, superannuation funds, family offices, central banks and other long-term institutional investors in the areas of investing, asset allocation, risk, governance, economics, policy, trade and other relevant issues. Proponents of this school argue that if the Constitution did not mention such an instrument when describing revenue allocation, then the sovereign wealth fund is unconstitutional. 2. NIGERIA SOVEREIGN WEALTH FUND: A ROAD MAP TO AVOID THE OIL CURSE. Awolowo: the greatest president Nigeria never had? [4][5][12][13] It is also expected that managing these reserve funds will help to protect Nigeria's economy from external shocks. Since the inception of the ECA, the idea of managing Nigeria’s sovereign wealth through the deduction of monies from the federation account has been the subject of intense political debate among all the federating units in Nigeria. The NSIA operations are professional and transparent. ", "All quiet at Sovereign Wealth Fund as excess crude account depletes", "Volatility delays investment from Nigeria sovereign wealth fund", "Senate Passes Nigerian Sovereign Investment Authority Bill", "Nigeria Sovereign Wealth Authority Plans $525m Infrastructural Investment", "Nigerian Sovereign Investment Authority", "Nigerians to pay for amenities financed with Sovereign Wealth Fund", "FG Saves N119bn with Integrated Payroll System", "Santiago Principles Self-Assessment Nigeria Sovereign Investment Authority", "Nigeria Sovereign Investment Authority unfolds areas of interest", Nigeria Sovereign Investment Authority's Official website, Q&A with Uche Orji, CEO of the Nigeria Sovereign Investment Authority, https://en.wikipedia.org/w/index.php?title=Nigeria_Sovereign_Investment_Authority&oldid=994917430, Creative Commons Attribution-ShareAlike License, Uche Orji - Managing Director & Chief Executive Officer, This page was last edited on 18 December 2020, at 06:02. This argument is further strengthened by the fact that the Constitution in Section 162 presumably establishes a trusteeship over the revenue of the government and the objectives of the sovereign wealth fund align with the management of the funds accruing to all the governments of the federation as envisaged by the Constitution. * Questions remain on financing sovereign fund. [5], Excess oil reserves were previously allocated to the Excess Crude Account (ECA), which was set up in 2004 as a stabilisation fund to meet the country's yearly budget deficits and to contribute to the development of local infrastructure. Sovereign Wealth Fund Institute (SWFI) is a global organization designed to study sovereign wealth funds, pensions, endowments, superannuation funds, family offices, central banks and other long-term institutional investors in the areas of investing, asset allocation, risk, governance, economics, policy, trade and other relevant issues. Economists argue that, in the context of the Nigerian economy, a sovereign wealth fund is important since it helps to diversify the economy and stabilize it in the event of revenue shortfalls. [20] The funds will be invested in various securities. The only tactful way of doing this is for the federal government to initiate a constitutional review process for the amendment of the provisions of Section 162 of the Constitution. bill into law, creating the NSIA and authorizing the establishment of the three ring-fenced funds which are jointly owned by the three tiers of Government. EKOKOI: LEGAL AND CONSTITUTIONAL EVALUATION OF THE NIGERIAN SOVEREIGN WEALTH FUND 105 the potentials of an efficiently managed SWF. Nigeria, Africa’s top oil producer, started a sovereign wealth fund with an initial capital of $1 billion and hired KPMG to select its management team. Origin On 27 May 2011, the President signed the Nigeria Sovereign Investment Authority (Establishment etc.) #EndSARS: A Refusal to ‘Suffer and Smile’. He joined NSIA as CEO in October 2012, from Switzerland’s largest bank, UBS Securities, where he was Managing Director in the New York branch of its Equities Division. is an Associate at Kenna Partners, Lagos and holds a Law degree from the Faculty of Law, University of Lagos. The key features of the SWF’s legal basis and structure, as well as the legal relationship between the SWF and other state bodies, should be publicly disclosed. It is intend… Rather than saving with the cooperation of state governments, Nigeria saves amid vigorous opposition from its federating units (who sense that an arrangement like the fund is fundamentally against their interests). [17] The total professional and administrative staff complement of the NSIA is 25. The fund was established by the Nigeria Sovereign Investment Authority Act, signed in May 2011, and commenced operations in October 2018 . [1][3][4] Of the initial $1bn, 85 percent of the funds will be distributed among the three windows with an initial 15 percent or $150 million remaining unallocated, to be assigned to either of the three funds as needed in the future. The Nigeria Sovereign Investment Authority is the manager of Nigeria’s Sovereign Wealth Fund. Nigeria’s Sovereign Wealth Fund was an upgrade on the ECA. Daniel Olika September 16, 2019 August/September 2019. [9][10] The constitutionality of the ECA has been brought into question. Nigeria has increased in its Sovereign Wealth Fund (SWF) capital by an additional $250 million, bringing the total investment portfolio to about $1.750 billion since inception, according to the business news website, Global Financial Digest. Sovereign Wealth Fund in Nigeria: Issues and Challenges Benjamin J. Cohen argued over two decades ago that ‘high fina nce can no longer be kept separate from high politics (M onk, 2009; 451). Nigeria will soon join the economies of the world that have used their foreign reserve to set up sovereign wealth funds to create more assets for the country with foreign reserves. As at the end of 2013, all capital had been deployed in accordance with the allocation to three managers: UBS (US Treasury mandate), Goldman Sachs and Credit Suisse (Corporate Bond mandates). Sorry, your blog cannot share posts by email. This data is collated by 2 employees from Nigeria Sovereign Investment Authority (NSIA). The second school believes that the Constitution in Section 162 does not expressly preclude the disbursement of funds to the Nigerian sovereign wealth fund. NSIA was established by an act of the National Assembly in May 2011. I. IMF report on Nigeria’s Sovereign Wealth Fund not reflective of our role, impact – NSIA . [2] The firm, JP Morgan, was appointed as the custodian of the funds. Sovereign wealth funds in the Gulf, where governments are struggling to absorb the impact of lower oil prices, have been making adjustments to generate higher yields. T he debate on how to sustainably … Just as it reduces the revenue that all federating states of Nigeria receive, it also reduces the funds oil producing states are guaranteed under the derivation formula stated in the constitution. The Authority was due to present its credentials at an October 2013 meeting in Oslo, Norway. Nigeria sovereign wealth fund has only $1billion as take-off fund. It would be a last resort from which government may withdraw annually to meet shortfalls in the budget brought about by falls in oil prices[3] or other budgetary constraints. 2) (2002). In light of these issues, a sovereign wealth fund is essentially the only way the country can ensure a reliable stream of income. 03/01/2019. Furthermore,the fund can help to sustain and eventually improve the monetary value of the naira. The Stabilisation Fund is intended to safeguard against budgetary deficits. Unlike the political and economic perspectives to the debate on the establishment of the sovereign wealth fund, the debate’s legal perspectives are more robust and more developed, with two competing schools of thought. The first school believes that the establishment of the sovereign wealth fund is unconstitutional because the disbursement of funds that should accrue to the federation account was not envisaged by the Constitution (Section 162). The NSIA SWF is a savings account, set up by law, with an independent Board of Directors and a clear mandate. He brings a wealth of global experience in the financial services sector to his role as MD/CEO. This attention naturally came with a discussion of the myriad issues surrounding the fund’s management. This sovereign wealth fund was founded for the purpose of managing and investing these funds on behalf of the government of Nigeria. The Nigerian sovereign wealth fund has the important objective of addressing critical issues in relation to the Nigerian economy and is, perhaps, the most important fiscal initiative from the Nigerian federal government in the last decade. The International Monetary Fund (IMF) has ranked Nigeria as the world’s second worst country in the use of sovereign wealth funds.. In all this time, the central question has not changed: can the federal government unilaterally decide to save money on behalf of all the Nigerian people? To address this issue will require negotiations for the fixing of an objective formula for determining the oil price benchmark. State governments argue that disbursing excess revenue to the sovereign wealth fund substantially reduces how much revenue ends up in the federation account and, thus, how much the states receive within any fiscal period. [5] Given Nigeria's dependence on oil, its economy is susceptible to shifts in oil prices. Sovereign Wealth Fund Institute (SWFI) is a global organization designed to study sovereign wealth funds, pensions, endowments, superannuation funds, family offices, central banks and other long-term institutional investors in the areas of investing, asset allocation, risk, governance, economics, policy, trade and other relevant issues. The fund is intended as security against future economic instability, to contribute towards the development of the country's infrastructure and as a savings mechanism for future generations, using the country's excess oil revenues. The bill is tagged, “An Act to Amend the Allocation of Revenue (Federation Account, etc) Act Cap A15 Laws of the Federation of Nigeria 2004 and for Other Related Matters, 2020 . While the ECA was never repealed and continues to operate, the sovereign wealth fund has taken over its mandate. The NSIA operations are professional and transparent. The government has said the fund will provide a firmer legal basis to ring fence Nigeria’s savings. The recent ranking of the sovereign wealth fund by the International Monetary Fund (IMF) as the second worst in the world brought the sovereign wealth fund once again to the attention of the public. Today, around 52 SDFs manage approximately $1.6 trillion in assets, says Diego López, managing director, Global Sovereign Wealth Fund Capital in New York. Sovereign wealth funds can be derived from a variety of sources and used for a variety of … Historically, given the socio-economic antecedent of the country, there is no doubt that there is a dire need for accountable and prudent management of revenue from natural resources and diversification of the Nigerian economy. People walk past the London Stock Exchange Group offices in the City of London, Britain, December 29, 2017. The Republic: A Journal of Nigerian Affairs © The Republic Knowledge Company, 2016-2020. [12][14][15], Uche Orji was appointed as the Chief Executive Officer of the NSIA[4][16] with Alhaji Mahey Rasheed as the chairman of the board of directors. Last year, Nigeria, the biggest oil producer in sub-Saharan Africa, replaced its Excess Crude Account (ECA) with three sovereign wealth funds, Future Generations Fund, Nigerian Infrastructure Fund and Stabilization Fund, under the management of the Nigerian Sovereign Investment Authority (NSIA). Sovereign wealth funds invest globally. [8] Petroleum exports account for approximately 90 percent of its foreign revenue and 80 percent of government revenue. Nigeria has so far invested in the SWF $1 billion, then $500 million, and a further $650 million. Editorial - After five oil booms and near depletion of the savings from the last round of booms, the Federal Government has initiated moves to establish a Sovereign Wealth Fund. Nigeria Sovereign Investment Authority (NSIA) is a Sovereign Wealth Fund located in Abuja Nigeria, Africa, and was founded in 2012. When they are low, the country can withdraw from the fund to pay salaries steadily and invest in the future despite low revenues. [3], International Forum of Sovereign Wealth Funds, List of countries by sovereign wealth funds, Sovereign wealth fund#Largest sovereign wealth funds, "Sovereign Wealth Fund takes off with $1bn grant", "Sovereign Investment Authority Swings into Action", "Sovereign Wealth Fund will become operational in March – CEO", "General Electric to contribute 15% equity in NSIA projects", "Nigeria Sovereign Wealth Fund to Start Investing in March", "Who will deliver us from this Goodluck? Nigeria’s sovereign wealth fund stood at $2 billion this month with the investment agency seeking further growth through agriculture and the addition of asset management, its chief executive officer said. The future sovereign fund will be designed to underpin Ivory Coast's strategic development over the next thirty years - a project being overseen by Patrick Achi. [3], The NSIA was invited to request observer status at the International Forum of Sovereign Wealth Funds (IFSWF), with the intention of eventual membership. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are as essential for the working of basic functionalities of the website. The average salaries for Nigeria Sovereign Investment Authority (NSIA) is 78,750 Naira. A sovereign wealth fund (SWF), sovereign investment fund, or social wealth fund is a state-owned investment fund that invests in real and financial assets such as stocks, bonds, real estate, precious metals, or in alternative investments such as private equity fund or hedge funds.Sovereign wealth funds invest globally. Nigerian sovereign wealth fund grows to $2bn, says CEO September 7, 2017 1.3K views 0 comments Uche Orji, chief executive officer of the Nigeria Sovereign Investment Authority said Wednesday that the country’s sovereign wealth fund stood at $2 billion this month with the investment agency seeking further growth through agriculture and the addition of asset management. There were allegations that accruals were being shared arbitrarily from the ECA across the three tiers of government, during the monthly meeting of the Federation Accounts and Allocation Committee (FAAC). Furthermore, the participation of the various federating units through their governors in the governing council of the Nigerian Sovereign Investment Authority will be useful in ensuring that the management of the fund is both transparent and gives the various states a feeling of being involved in the fund’s management. You also have the option to opt-out of these cookies. Although the decision to increase the investment in the SWF was taken by the government last November, the fund was not released until last month. Nigeria’s sovereign wealth fund has grown slightly over $2 billion, Managing Director and Chief Executive Officer of the Nigeria Sovereign Investment Authority (NSIA), Dr Uche Orji,revealed. He urged Federal Government to urgently consider funding the East-West road from the Sovereign Wealth Fund to guarantee its completion by 2022 as being taunted by the Minister of the Niger Delta. And investing these funds on behalf of the Supreme Court in AG Ondo v AG Federation ( ). Thefund is composed of three distinct funds or windows, each with specific Investment and objectives... - check your email addresses, Britain, December 29, 2017 naira. Aurélie M'Bida Posted on Friday, 17 January 2020 16:16, updated Tuesday. Ring-Fenced Investment funds fund created by the Nigeria Sovereign Investment Authority Act, in... 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