Nigeria Finally Gets It Done

Ashby Monk

Reuters is reporting that the Nigerian Senate has finally passed the Nigerian Sovereign Investment Authority Bill. The Bill still has to pass the House of Representatives before it is sent to President Jonathan for his assent, but the experts don’t expect too many difficulties from here on out. As such, Nigeria seems to have finally overcome its last big hurdle to establishing a new sovereign wealth fund.

But it wasn’t easy. There was considerable opposition within the Senate to certain aspects of the bill. In particular, many lawmakers opposed the selection criteria for the SWFs’ new Governing Council:

“Clause eight of the Bill, which deals with the membership of the governing council of the Authority, generated the greatest heat during the debate as senators questioned the rationale for the inclusion of certain persons in the council, particularly representatives of the civil society organisations.”

Interestingly, just as debate over the clause was at its hottest, the Senate session to review the Bill clause-by-clause was postponed due to a faulty cooling system in the Senate chambers (…picturing opposition party operatives stealthily unplugging air-conditioning unit…). But the Senate had to persevere, as it really had to pass the Bill before a new parliament is sworn in later this month; President Jonathan’s party’s parliamentary majority will be weakened due to the recent election results. In short, this would have made the negotiations even more challenging.

Anyway, the Nigerian Senate eventually got it done. Nigeria thus appears set to replace the much-maligned Excess Crude Account with an institution that has a strong legal basis. And Senate President David Mark was quite enthusiastic with the final product:

“It is an extremely important bill and we hope its passage today and subsequent inauguration would secure the future of our generation and the generation unborn.”

In my view, this is an important step for Nigeria, as the new SWF will help the resource rich country sidestep the ‘paradox of plenty’. The country’s natural wealth will hopefully become a catalyst (rather than a constraint) for development and growth. When the final Act is published, I’ll do a detailed assessment of the various design and governance arrangements.

2 Responses to “Nigeria Finally Gets It Done”

  1. 1 Jason Mosley May 12, 2011 at 6:09 am

    Thanks for flagging this up, Ashby, and for keeping on top of it.

    It will be interesting to see how all this plays out. At root, the key question for Nigerian revenues is whether there’s any push factor from the design of institutions, and the improvement in governance. It may be a chicken or egg question, but my money is on ‘good governance first, good institutions later’. The former will aid the implementation of the latter, but institutions can’t restrain poor governance — which will find a way to penetrate or circumvent the institutions, no matter how well designed.

    It could be that Nigeria has reached a key moment in terms of improving governance. I think it’s a process, rather than a binary change. I will be watching with interest to see whether the Jonathan administration sticks to its own guidelines, and then whether they outlast him.

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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