1 October 2013

Nigeria: Sovereign Wealth Fund and the Aviation Sector


The best way to assure the future of the SWF is to embark on projects that impact the people.

The idea of creating the Sovereign Wealth Fund (SWF) for the country is worth commending. It is premised on the wisdom of saving some portion of the "excess proceeds" from crude oil sales for the future so it could provide fiscal stability in times of economic stress. With a take-off sum of $1 billion, the Managing Director of the Nigerian Sovereign Investment Authority (NSIA), Mr. Uche Orji, has said that the authority was looking at investing in Monoline insurance, securities, health and aviation sectors of the economy. He also explained that each of the components which make up the SWF, including Stabilisation, Infrastructure and Future Generation Funds, would have to be operated profitably for five years before returns (by way of dividends) could be made into the federation account for the three tiers of government to share.

While we commend the initiative and the efforts of the NSIA authority, we are nonetheless worried by the proposed investment in the aviation sector and specifically in an aircraft leasing company. We fail to understand what informed such idea and how it translates into the development of critical infrastructural facilities across the country which is the purpose of the infrastructure fund established by the NSIA.

The Santiago principle upon which the three investment funds (the Nigeria Infrastructure Fund, the Future Generations Fund and the Stabilisation Fund) were instituted emphasises the need for adequate risk management, especially in the areas of investing. In fact, the purpose of the infrastructure fund is specifically to bridge the nation's infrastructure gap and develop critical facilities across the country. With this knowledge, it is our opinion that such fund should focus on such critical areas that will potentially translate into transforming the lives of most Nigerians. After all, the Sovereign Wealth Fund is for all Nigerians and not just for a select few.

Against the background that the estimated seven per cent annual growth of our economy has made little meaning to the ordinary Nigerian, the Sovereign Wealth authority should be thinking of investments that will impact on the greater majority of our people. The deficit in power, poor road network, decrepit rail, unreliable water supply and poor social infrastructure such as education and health care should be considered of far higher priority for investment than aircraft leasing. An investment in any of these critical sectors will naturally translate into saving lives and increasing productivity.

It is on record that various intervention funds running into hundreds of billions of Naira have been committed to the aviation sector, yet there is little to show for such humongous investment. It is therefore worrisome that more money would be invested in a sector where there are hardly any commensurate returns even in countries where the economic landscape is better and businesses are transparently managed. In any case, there are pertinent questions: What is the percentage of Nigerians who rely on air transportation? Would it be fair that an investment made on behalf of 170 million people as a stabilisation mechanism be committed to this unstable sector?

While we do not doubt the competence and expertise of the people charged with making investment decisions at the NSWA, we request that they use these skills for the benefit of all Nigerians. In the face of insecurity, high unemployment, religious fundamentalism, hunger and abject poverty, we implore the Nigerian Sovereign Wealth Authority to devote more attention to areas that would significantly impact on the development of our country.

Let it be seen that the creation of the Sovereign Wealth Fund contributed to fast-tracking our national development and not simply another fluke or weapon in the hands of politicians. The relevant authorities must return to the purpose for which the Fund was established and ensure that the savings committed to this fund do not fly away on the wings of the aviation sector.

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