Nigeria has the same oil production capacity as Norway but that is where the similarity ends as Norway’s oil funds posted a profit 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, on Wednesday announced a huge boost of $142.65 billion from the A.I.-driven tech surge in the first six months of 2023, putting the investment titan back on track after one of its worst years ever.
Norway’s oil fund earning of $142.65 billion 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 utilized 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.
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,” Nicolai Tangen, CEO of Norges Bank Investment Management—which manages the fund—said in a statement on Wednesday. “Technology stocks especially have seen significant growth, largely driven by the increased demand for new solutions in artificial intelligence.”
In a separate statement on artificial intelligence, the Fund said it believed the responsible development and use of the technology will be “important for well-functioning markets.”
“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, which is the same level of output as Nigeria.
While Norway is preparing for life after oil, Nigeria is yet to come to terms with the reality of a post-oil economy as she lives as though the demand for black gold will be there forever.
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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 Excess Crude Account remained stagnant at about $474m in the last two years despite a remittance of N907bn 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, Nigeria’s 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 Labour Party (LP) lawmaker from Edo state said CBN is the banker to the federal government and custodian of investment vehicles, including the petroleum profits tax (PPT) and the excess crude account (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 a total outflow of N2.07tn. Out of this amount, the sum of N1.39tn was used to augment revenue distribution among the three tiers of government.
For the 2013 fiscal period, the sum of N1.99tn was taken out of the account by the federal government. Out of this N1.99tn, about N1.08tn was withdrawn to augment revenue shortfall to the three tiers of government, while N505bn and N405.63bn were used for fuel subsidy payment and special intervention fund, respectively.
For 2014, the account was drawn down by N927.33bn. From this amount, N400.23bn went for fuel subsidy; N303.56bn for revenue augmentation and N223.54bn went into a special intervention fund.
President Buhari, the poster child for fighting corruption, 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.
