• Monday, December 11, 2023
businessday logo


Nigeria short of dollars as Norway’s next-gen fund earns $143bn

Nigeria is in dire need of dollars while Norway, which has the same oil production capacity as the country, saw its oil funds post a gain of $142.65 billion in the first half of 2023.

Norway’s sovereign wealth fund, a national savings pot designed to help the country prepare for life after oil, has announced a huge boost of $142.65 billion from the AI-driven tech surge in the first half of 2023, putting the investment titan back on track after one of its worst years ever.

Norway’s $142.65 billion gain is three times Nigeria’s 2023 budget of $49 billion (N21.83 trillion), according to BusinessDay’s calculation.

“In a season of scarce dollars, Nigeria has missed opportunities to leverage the surplus oil revenue to build wealth for future generations,” Niyi Awoyemi, a public finance expert and managing director of Brightlve Capitals, said.

He noted that funds from Nigeria’s Excess Crude Account (ECA) were at times diverted for political purposes rather than being utilised for economic development or specific projects.

“This would have been a perfect time for Nigeria to earn dollars to feed its shrinking economy, but struggling oil production, a lack of rules governing deposits and withdrawals from the special account remain big elephants in the room,” Awoyemi said.

Read also: Only the domestic private sector can save Nigeria’s economy

BusinessDay findings showed the $1.4 trillion fund’s holdings in tech companies jumped by nearly 39 percent in the first half of 2023, with Apple, Microsoft, and Nvidia as the stocks contributing the most, helping to drive the fund’s 10 percent overall return.

“The stock market has been very strong in the first half of the year, following a weak year in 2022,” said Nicolai Tangen, CEO of Norges Bank Investment Management—which manages the fund. “Technology stocks especially have seen significant growth, largely driven by the increased demand for new solutions in artificial intelligence.”

In a statement on artificial intelligence, the fund said it believed the responsible development and use of the technology will be “important for well-functioning markets.”

Read also: JP Morgan’s shock reveal puts Nigeria’s fx reserves at $3bn

“It has the potential to affect the financial return on our investments over time,” it said. “We support the development of a comprehensive and cohesive regulatory framework for A.I. that facilitates safe innovation and mitigation of adverse impacts.”

Norway is the fifth largest oil exporter in the world, with a daily production capacity of 2.4 million barrels,

While Norway is preparing for life after oil, Nigeria is yet to come to terms with the reality of a post-oil economy as it lives as though the demand for black gold will be there forever.

This is as the country keeps struggling with foreign currency shortages that make investors struggle to do business in Africa’s biggest economy.

Findings showed the balance in Nigeria’s ECA remained stagnant at about $474 million in the last two years despite a remittance of N907 billion to the Federal Account Allocation Committee by the Nigerian National Petroleum Company Limited.

“Save for the Obasanjo administration, the abuse of the ECA has become serial. It is deeply disturbing that the Buhari government managed the account poorly despite global oil price staying above the benchmark of the federal budget,” Charles Akinbobola, a financial analyst at Creditville Limited, said.

He also blamed “poor levels of transparency exhibited by various agencies and officials of government charged with managing the funds as reasons for squandering extra oil proceeds on frivolous spending and rampant corruption”.

“It’s terrible behaviour though. They didn’t tell the owners of the account, just spent and reported it,” a senior source in Nigeria’s energy sector said. “It means they don’t care about providing any structure for the unborn generation”.

Two weeks ago, the House of Representatives resolved to investigate the Central Bank of Nigeria (CBN) for alleged mismanagement of funds and non-disclosure of details of interest on investments from the excess crude oil/petroleum profits tax/royalty account.

While moving the motion, Esosa Iyawe, a lawmaker from Edo State, noted that the CBN is the banker to the federal government and custodian of investment vehicles, including the petroleum profits tax (PPT) and the ECA, among others.

“The House is also concerned that the CBN has flagrantly and consistently refused the requests by the Auditor General for the Federation to disclose the details regarding the management of interests accruing from the Petroleum Profit tax (PPT)/Royalty and Foreign Excess Crude Account,” Iyawe said.

“The House is further concerned about reports which revealed unapproved and indiscriminate withdrawals from the ECA, including current year expenditures, fuel subsidies, debt financing and power projects, all of which are outside the fund’s mandate.”

Experts say persistent demand by states to fund various programmes and the inability of the Federal Government to generate adequate revenue to fund its operation had put pressure on it to draw down the ECA.

Findings by BusinessDay showed that following former President Obasanjo’s decent start to encourage oil savings in Nigeria, late President Musa Yar’Adua and former president Goodluck Jonathan came into office, and the story quickly changed.

In 2012, the account recorded total outflow of N2.07 trillion. Out of this amount, the sum of N1.39 trillion was used to augment revenue distribution among the three tiers of government.

Read also:Nigeria to raise $17bn from asset sales- JP Morgan

For the 2013 fiscal period, the sum of N1.99 trillion was taken out of the account by the federal government. Out of this N1.99 trillion, about N1.08 trillion was withdrawn to augment revenue shortfall to the three tiers of government, while N505 billion and N405.63 billion were used for fuel subsidy payment and special intervention fund, respectively.

For 2014, the account was drawn down by N927.33b billion. From this amount, N400.23 billion went for fuel subsidy; N303.56 billion for revenue augmentation and N223.54 billion went into special intervention fund.

President Muhammadu Buhari also dipped his hand into the stabilisation fund. Between 2016 and 2018, he dramatically increased the monthly security allowance allocated to the 36 states.

In 2017, he withdrew $1 billion from the ECA without any formal consultation from the appropriate bodies. When confronted, he played the “Boko Haram” card like his predecessor — an explanation many experts did not buy.