Nigeria’s “Diaspora Wealth Fund”

Ashby Monk

In a bid to leverage Nigeria’s diaspora communities, new Minister of Trade and Investments Olusegun Aganga (formerly Minister of Finance) is looking to build a “diaspora wealth fund” from remittances. The idea is to leverage the tens of billions of dollars already coming into the country and “crowd in” investments into capital-starved sectors. It’s actually quite an intriguing idea to finance a development fund through a sort of ‘national contingent asset’.

To give you a sense for why Nigeria is going down this path, consider that remittances represent the second-largest source of financial capital for developing countries (coming second only to FDI). And, according to USAID, when the Diaspora goes one step beyond remitting and actually begins investing in their native economies, the development impacts can be quite profound:

“Standing at the intersection between the Diaspora, remittances and FDI, Diaspora Direct Investment (“DDI”) offers immense possibilities given the willingness, motivations and resiliency of the Diaspora to investing in risky markets.”

A seminal 2004 paper by the Migration Policy Institute also notes,

“The poorest countries are not positioned to take advantage of many kinds of business investment, but millions of poor people in countries that are more technologically sophisticated might benefit from the multiplier effects of Diaspora investment.”

Clearly Aganga has been taking notes; here are some excerpts from a recent speech:

“We have so many Nigerians in the Diaspora. The economies of many countries were built based on investments from people living abroad. We are in the process of structuring a fund, which we hope to put in place sometime in September when all the approvals are in place. That fund will be targeting those Nigerians in the Diaspora.

“They will come in, bring their money and invest. According to the World Bank, in 2009, about $18.6billion was remitted to this country by Nigerians in the Diaspora. If we take half of that, and channel it the right way into the country, we will have enough capital to invest in this country. That is just focusing only on what you already have.”

It may sound a bit far fetched, but Aganga is a guy who could actually develop a $10 billion domestic investment fund sourced from the diaspora. After all, he managed to get Nigeria’s new sovereign wealth fund up and running, which was no easy feat. Moreover, his new role is all about finding creative ways to attract investments into Nigeria, which means he’s been given a license to do this sort of thing.

The real question, then, is whether the diaspora communities will trust the Nigerian government to do the right thing with their money? I’m no expert, but I’m guessing — after the experience with the Excess Crude Account — that some serious trust building is required before that happens. Much will depend on the ability of the government to prove that the national development policies are not only sound but better than just transferring cash to the people who need it.

And, once again, this will depend on the governance, transparency, and professionalism of this new “diaspora wealth fund.” As Aganga said, it’s all about structuring the investment vehicle; it’ll be quite interesting to see what he comes up with.

3 Responses to “Nigeria’s “Diaspora Wealth Fund””

  1. 1 Jason Mosley July 20, 2011 at 12:15 pm

    Very interesting post, Ashby. I’d have to agree with your last point: trust in the Nigerian government to efficiently and accountably channel investment from the diaspora will start from a very low base. The ECA is just one example of the malaise that affects the public sector’s governance; most Nigerians can probably come up with several, personal experiences — on a much smaller scale — which would dissuade them from participating in such a vehicle.

    That said, it’s possible for Aganga, who has a decent track record in office, and already had a good profile in Nigeria before coming into government, to sidestep some of that baggage. And if Nigerians perceive the investment to offer reasonably secure and sizeable returns, the fund may have a chance. As you’ve said, it will be interesting to see what they come up with.

  2. 2 Shafii Ndanusa July 27, 2011 at 3:12 am

    I must commend your insight on this subject matter. It is a novel idea with a high degree of potential for all stakeholders (Diaspora Investors and the Nigerian Government and Companies).
    I am of the view that the ECA is not a good comparison for schemes such as the Diaspora Wealth Fund or the Sovereign Wealth Fund. The governance framework for the DWF and SWF are totally different from that of the Excess Crude Account.
    With the proper governance framework, asset safety is taken seriously. This therefore makes abuse of the system quite difficult. I am certain that asset protection and safety will be a key consideration in the design of the Nigeria DWF.

  3. 3 Lanre August 2, 2011 at 8:23 am

    I am a Diaspora Nigerian that has refused to build a 150m Naira house in my village or any where else because i have been waiting for a programme like the DWF.
    I have resisted that tendency to remit money because i beleive my money will be put to better use if properly invested.
    The DWF is a vehicle that will allow me and a few other like minded people to start giving back to a country that has given us so much.


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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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