Did Nigeria’s Governors Read The Fine Print?

Ashby Monk

In May of 2011, Nigeria’s President Jonathan Goodluck signed the Nigerian Sovereign Investment Authority (NSIA) Bill into law, thereby creating the NSIA. After years of murky dealings with the Excess Crude Account, the country was making some very positive steps towards a more transparent, accountable and legal resource revenue management policy. Or so we thought: enter Nigeria’s 36 state governors.

Apparently Nigeria’s Governors have decided that, after having acquiesced before the election, they don’t really appreciate the new sovereign fund after all. And, as of this morning, they are calling on the Federal Government to suspend all SWF operations. Here’s a blurb:

“The thirty-six state governors under the aegis, Nigeria Governors’ Forum, NGF, yesterday asked the federal government to suspend the operation of the Sovereign Wealth Fund Act…until all issues concerning the fund are resolved…the governors’ described the SWF as unconstitutional.”

I’m sorry but the irony of that statement is simply astounding. The whole point of setting up the new NSIA was to stop the debate over the constitutionality of the ECA! Now we’re talking about the constitutionality of the NSIA? Come on, people. Anyway, the real question here is what’s got the Governors so bothered? I’ve got a couple of thoughts on this.

1) Fiscal Pressure:  The Governors’ ire over the NSIA apparently stems from mounting pressure on States to meet their funding obligations. According to one of the Governors:

“The thing is that it is our money and we need it. We are faced with so many challenges beyond the scope of our financial capacity and we cannot have a situation where the federal government will compel us to save money by not giving us our full dues from the Federation Account…For example, we need money to develop our region, how do we get that? We are confronted daily with security and conflict resolution matters, yet we don’t have enough resources to tackle them.”

Actually, that’s a fair point. But shouldn’t that point have been raised before the Bill passed? Why are the Governors preparing their legal teams for a fight now instead of when the Bill was being developed? And this brings me to my second point.

2) NSIA Independence: If you recall, the Governors were originally convinced of the NSIA’s merits only after they were all given seats on the fund’s “Governing Council”. As NSIA head Aganga recently noted:

“…it was agreed that all the 36 states will be represented on the SWF Council that will preside over the fund instead of the six representatives drawn from the six geopolitical zones that was initially recommended to seat on the council.”

In other words, the Governors were told that they would have authority over the fund. And, as such, perhaps the Governors thought they’d have a similar level of flexibility and influence over the NSIA as they did with the ECA? It’s hard to know. But if that was the case, then they definitely didn’t read the fine print.

If you go back to the Act, you’ll see that the Governing Council actually doesn’t have much authority at all. The NSIA Board, which is the body that actually oversees the NSIA, is quite independent from the Council. In fact, the Act was quite deliberate in stripping the Council of any investment or managerial or operational powers:

“The Board shall be independent in the exercise of its responsibilities under this Act…Without prejudice to the provision of subsection (I) of this section and except as expressly provided in this Act, the Council may not, by resolution or otherwise, require the [Board of] directors to take, or refrain from taking, any specified action…Members of the Board have fiduciary obligations to the Authority, and shall not act in any circumstance where their personal interests conflict with the interests of the Authority.”

So the Governors were given seats on a Board that didn’t actually have much influence over the NSIA. And so, you may be asking, what is it that the Council does? Not much:

“Except as otherwise provided under this Act, the Council shall provide advice and counsel generally to the Board having regard to the objects of the Authority under this Act…The Council shall, in the discharge of its duties, observe the independence of the Board and officers of the Authority.”

In other words, the Council isn’t going to be telling the Board or the Authority what to do; it’s only there to give advice.

And so this got me wondering: Are the Governors only now realizing that their “carrot” (ie., a seat on the Council) isn’t really much of a carrot at all? Are they only now aware that the NSIA will really and truly operate in an arms length capacity? Are they only now starting to appreciate the good governance practices that will prevent them from being able to impose their personal or political will on the operations of the NSIA? Or perhaps they knew about the rules stipulated in the Act but had expected a “workaround” from government officials that has now failed to materialize?

I have to say, if that’s the case then Nigeria’s NSIA is in even better shape than any of us could have expected. To be sure, there may be some court battles ahead, but the fact that the Governors are upset about the NSIA may not be a bad sign; it may in fact be a positive development. (I’ll however defer to any Nigeria experts on this last point.)

Oh and I do have one final thought: If you’re a Governor arguing against a new transparent and accountable sovereign fund, perhaps it’s best not to voice your complaints from your gold-plated throne

1 Response to “Did Nigeria’s Governors Read The Fine Print?”



  1. 1 Nigeria’s Federal Government Perseveres « Oxford SWF Project Trackback on October 20, 2011 at 11:01 am

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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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