The Nigeria Extractive Industries Transparency Initiative (NEITI) has called for the transfer of all the country’s oil revenue savings into the custody of the Nigeria Sovereign Investment Authority (NSIA).
In an Occasional Paper titled: “The case for a robust oil savings fund for Nigeria”, NEITI stated that its position was informed by the transparency rating of the NSIA by the global Sovereign Wealth Institute. The NSIA had scored nine out of 10 on the Sovereign Wealth Institute’s transparency index, the highest score by any African Sovereign Wealth Fund.
The NEITI Occasional Paper recalled that the Nigeria Sovereign Wealth Fund was set up in 2011 to build a savings base, develop infrastructure and provide stabilisation in times of economic stress for the country. The fund was structured into three components – the Future Generations’ Fund 40%, Nigeria Infrastructure Fund 40% and 20% for the Stabilization Fund and started off with a seed capital of one billion dollars ($1 billion) in 2012. In November 2015 and March 2017, the government transferred additional $500 million into the fund bringing the total savings to $1.5 billion.
NEITI however observed that while these savings were significantly below projected transfers to the NSIA, it was satisfied that the funds under the management of the Authority have not been depleted unlike the other oil savings accounts – The Excess Crude Account and 0.5% Stabilisation Fund.
According to NEITI, “the NSIA Act (2011) is an improvement on the legislations for the ECA and the 0.5% Stabilisation Fund in terms of comprehensiveness, transparency and accountability. While the ECA and the 0.5% stabilisation fund were established each by a single clause in broader (fiscal) legislations, with no specific governance, transparency or accountability requirements, the NSIA is a comprehensive legislation with extensive corporate governance and management provisions in line with global principles and best practices”.
The NSIA law emphasises professionalism and technical expertise of both management and members of the NSIA board with clearly defined reporting requirements and accountability relationships between the management, Board, and Council.
NEITI noted that while the NSIA made N192 billion return on its investments, the Excess Crude Account and the 0.5% Stablisation Fund recorded zero returns on investment.
NEITI expressed concerns that unlike the Sovereign Wealth Fund, the Excess Crude Account and the Stabilisation Funds have suffered all kinds of abuses over the years thus undermining the objectives for which they were set up. The NEITI Fiscal Allocation and Statutory Disbursement Audit report released in 2013 had revealed that while N109.7 billion was transferred into the Excess Crude Account for the period 2007 to 2011, the sum of N152.4 billion was withdrawn from the account. As at May 31, 2017, the account had an outstanding sum of N29.02 billion.
The paper further revealed that between 2005 and 2015, the sum of $201.2 billion accrued to the Excess Crude Account, but $204.7 billion was withdrawn from the same account. In other words, outflows were 102% of inflows.
The NEITI Occasional paper noted that the relevant laws that prescribed the condition for disbursement of the 0.5% Stabilisation Fund and the Excess Crude Account did not specify how the funds should be withdrawn and allocated.
The Report says: “The inherent pitfalls in this arrangement became glaring in a recent report by the National Economic Council Committee on the ECA, where it noted that the President of Nigeria, the Federation Accounts Allocation Committee (FAAC) and the CBN were listed at various times as approving authorities for withdrawals from the ECA”.
These indiscriminate withdrawals, the Paper argued, pointed to the fact that Nigeria has no prudent and robust oil revenue savings scheme for purposes of generational equity.
NEITI advised Nigeria to learn from resource-rich countries like Norway. It explained that Norway transfers all oil revenues into its Sovereign Wealth Fund called the Government Pension Fund Global and then proceeds to disburse only the amount needed to finance any deficit in its budget (Norway’s budget is based on non-oil revenue).
From a modest ‘seed capital’ of less than $310 million in 1996, the total asset value of the Norway’s sovereign wealth fund is currently $922 billion.
The NEITI Occasional Paper therefore recommended that the $95 million currently in the Stabilisation Fund and the $2.3 billion in the Excess Crude Account should be transferred into the Sovereign Wealth Fund as investment savings. NEITI also renewed its advice to the government to ensure constant savings whether oil prices are high or low. It underlined the need for regular payouts from the investments proceeds, as stipulated in the NSIA Act, to compensate beneficiaries especially the three tiers of government for their sacrifice in saving for the rainy day.
The NEITI Occasional Paper further suggested that government should also delink its expenditure (budget) from oil revenues and pursue prudent macro-economic policies capable of shifting attention to the non-oil sectors.
Finally, NEITI urged the FGN and the States to speedily resolve the litigation before the Supreme Court to ensure that remittances are made into the fund without interruptions.