Nigeria is the only OPEC member without a SWF, and, if the country’s 36 state governors have their way, it may stay that way.
While the country appeared ready to dump its Excess Crude Account — a fund that has no legal basis and has been described by Finance Minister Olusegun Aganga as “…just an administrative arrangement…” — there was a major setback yesterday to setting up a new (legitimate) SWF.
The problem apparently stems from Aganga’s idea to use the ECA as the initial source of funding for the new SWF. The state governors rejected this idea; they want other sources of funding for the SWF. In other words, they like the present arrangement.
Why? Because the state governors have been the primary beneficiary from the ECA and the “flexibility” that this arrangement has afforded them in determining when and how money can be drawn down. As such, they want to keep the ECA in place and find other cash for any new Nigerian SWF:
“We the governors think there should be an alternative source of funding to be used (for the sovereign wealth fund) than that of the excess crude account,” Benue state governor Gabriel Suswan told reporters after a meeting with Aganga.”
At its heart, this is a debate seems to be about whether there should be strict and rigorous rules governing the dispersal of Nigeria’s crude revenues. With the ECA, the governors basically have a slush fund to do with as they please (albeit with considerable political wrangling and negotiation). The new SWF would have removed this flexibility…and, with it, the potential for corruption.