Nigeria's Sovereign Wealth Fund (SWF) was one of the fastest growing in 2007. The SWF grew at a rate of 291% and many, like Dow Jone's Jan Randolf, consider it to be "a new financial power brokers, replacing the combined financial muscle of hedge funds and private equity, and usurping central banks as the international capital providers of last resort." Of what I am learning about the power of these financial arrangements, Nigeria could technically use their SWF to accomplish incredible feats.
generally defined as
"a state-owned investment fund composed of financial assets such as stocks, bonds, property or other financial instruments."
I contacted a Nigerian Curiosity reader, 'Saheed', and he used Brutish Airways to explain the relevance of SWF's to me. He wrote,
"if Nigeria for example bought into Brutish Airways through swf, the Nigerian government would essentially be a stakeholder in Brutish Airways and thus have a stronger voice in dictating the company's direction....in other words, that whole incident might never have happened the way it did." [sic]WHAT ARE THE IMPLICATIONS?
I didn't have to think too hard about the political and economic ramifications of Nigeria's SWF. Reader 'Saheed' provided further insight on this issue by indicating,
"[t]he consequence of Nigeria having a rapidly growing swf, means that, we can strategically influence key sectors in sovereign economies (perhaps buy into other African countries development, and have a strong voice in the direction of these economies)...On the other hand we can use this debt-free surplus cash for infrastructural development in Nigeria e.g.. laying communication cables, roads, housing etc.MY THOUGHTS
[H]owever, I do not see it as a sign of economic development because, if misused (excessive fiscal spending internally) it can lead to inflation and/or "Dutch disease" since most of our reserves come from the sale of oil and we have a weak commodities market. in other words, price of necessities will spike even though the purchasing parity remains low." [sic]
It is exciting to know that Nigeria is doing something good - SWFs are arguably a good thing. It is important that Nigeria could use its SWF to affect the development of our country and even the development of other countries. This gives the nation a powerful tool that can be used, if necessary, to bring about positive change especially for our fellow African brothers and sisters. For instance, funds can be invested in countries that actually practice democracy or invest in green/sustainable energy, assuming Nigeria, a country considered "partly free", ever gets to that point itself. As it continues to grow, Nigeria's SWF could effectively be used to wield the nation's influence across the continent, and ultimately around the world.
However, the issue comes down to vision. Will the SWF be maintained and its funds used in a means that advances Nigeria's interests or will it be used in a way that proves detrimental in the future? Most Nigerians, myself included, question the vision of past and current leaders and thus wonder if future leaders will commit themselves to using SWFs and other streams of national income to benefit Nigerians. The fact that the average Nigerian has no concept of what an SWF is means that the average person cannot hold Nigerian leaders accountable for and/or have a say on how the SWF is used or managed. This lack of transparency in itself is troubling and could lead to corrupt practices that will devalue the potential advantages of Nigeria's growing SWF.
Despite these and other current realities, one can only hope that Nigeria's SWF will somehow turn out to be a rewarding venture for Nigeria and its people.
- Check out a very helpful illustration of the various SWF's around the world and how much they are worth, from the Wall Street Journal. (Thanks to Oz, for providing this and much more helpful material).