The Federal Government, as part of its transformation agenda, tinkered with the idea of creating a Sovereign Wealth Fund. SWF, common among oil producing nations, is a state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals or other financial instruments.Most SWFs are funded by foreign exchange assets and may be held by a central bank, which accumulates the funds in the course of its management of a nations banking system. This type of fund is usually of major economic and fiscal importance. Other sovereign wealth funds are simply the states savings which are invested by various entities for the purposes of investment return, and which may not have a significant role in fiscal management. Comparatively, SWF is different from funds held by sovereign entities from foreign exchange reserve held by central banks. The funds can be characterised as maximising long term return, with foreign exchange reserves serving short term currency stabilisation and liquidity management.The motives for creating SWFs vary from country to country. SWFs are created when governments have budgetary surpluses and have little or no international debt. This excess liquidity is not always possible or desirable to hold as money or to channel into immediate consumption. This is especially the case when a nation depends on raw material exports like oil, copper or diamonds. In such countries, the main reason for creating a SWF is because of the properties of resource revenue: high volatility of resource prices, unpredictability of extraction and exhaustibility of resources. Other reasons may be economical or strategic, such as war chests for uncertain times. For example, the Kuwait Investment Authority was said to have managed excess reserves above the level needed for currency reserves during the Gulf War of the early 90s. The government of Singapore Investment Corporation and Temasek Holdings are partially the expression of a desire to bolster Singapores standing as an international financial centre. Most serious minded oil producing, and even commodity bearing nations of the world have put in place mechanisms to save surpluses that accrue to them from the sale of their commodities for future purposes and for the interest of their unborn citizens. The first SWF was the Kuwait Investment Authority, a commodity SWF created in 1953 from oil revenues before Kuwait even gained independence from the United Kingdom. According to estimates, Kuwaits fund is now worth approximately $300bn. Some other oil producing countries with similar investments are United Arab Emirate (Abu Dhabi Investment Authority established in 1976 which currently has savings of $875bn); State of Alaska Permanent Fund in the USA established in 1976 with $39.7 billion in its kitty); Canada, Albertas Heritage Fund created in 1976 with current investment portfolio of $14.4bn; SAMA Foreign Holdings of Saudi Arabia has been able to save $439.1bn for unborn Saudis; Brunei Investment Agency created in 1983 has $30bn to its credit; and Iran Oil Stabilisation Fund, which came into existence in 1990 has been able to save $23bn.It should be noted that some non-producing oil countries have borrowed the idea of saving for the future. One of the first registered SWFs by a non-producing oil country is the Revenue Equalization Reserve Fund of Kiribati which was created in 1956 when the British administration of the Gilbert Islands in Micronesia put a levy on the export of phosphates used in fertilizer, the fund has since then grown to $520m. We also have Malaysias Khazanah National created in 1993 which now has $36.8 billion.It is against this backdrop that the Jonathan administration, following the example of other oil-rich states, went ahead to establish a sovereign wealth fund and reportedly deposited $1bn taken from the Excess Crude Account as seed money. This commendable effort has, however, received stiff oppositions from some groups, notably the opposition and the Governors Forum, which had instituted a case at the Supreme Court against the Federal Government on the issue. In view of the fact that this bold move of FGN is working towards correcting the mistakes of the past in which oil funds were frittered away without thinking of future, Nigerians should support the establishment of the fund, as its advantages are enormous. The fund would provide a veritable platform for saving money for future generationsa modern answer to waste, which is not good for our economy. Through it, government can provide finance for the badly-needed infrastructure; while it can also act as a stabilisation fund to defend the economy against commodity price shocks, and serving as a means of accruing profit for the benefit of the economy and the citizens. Nigeria is one of only three OPEC member states that are yet to have a sovereign wealth fund. The other two are Iraq and Ecuador. The Governors Forum and members of the opposition should therefore allow the SWF to be.Ejibunu, currently on a training programme at the ILO/UN Training Centre in Turin, Italy contributed this piece via babaeji@msn.com
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