Governors Seek to Stop Sovereign Wealth Fund

THISDAY Newspaper

Ahead of Monday’s meeting of the National Economic Council in Abuja, the Nigeria Governors’ Forum will be meeting Sunday also in the Federal Capital Territory, during which the desirability of the nation’s Sovereign Wealth Fund will be discussed.

Already, there are indications that mounting pressure on state governors to meet their funding obligations, especially the national minimum wage, could see some of them heading to court to stop the transfer of a certain portion of their revenue to the SWF.

Lending credence to the opposition mounting against the SWF, the Chairman of the NGF and governor of Rivers State, Mr. Rotimi Amaechi, told THISDAY Saturday that in his personal capacity, he deemed the fund “unconstitutional”.

The NEC meeting Monday will be the first meeting this year. It will be presided over by NEC statutory chairman, Vice President Namadi Sambo and attended by governors of the 36 states of the federation as well as the governor of the Central Bank of Nigeria.
President Goodluck Jonathan on May 27, signed the National Sovereign Investment Authority Bill into law to give legal backing to the take-off of the SWF which is meant to replace the Excess Crude Account into which the federal government ploughed savings made from the differential between the budget benchmark for crude oil sales and the actual market price.

The SWF that took off with $1billion seed capital will be funded monthly from excess oil revenues from the Federation Account.
However, all the governors who were consulted before Jonathan sent the bill to the National Assembly for passage have started to make a U-turn, with those opposed to it arguing that the creation of the SWF conflicts with the constitution.

One of the governors from the south west, who craved for anonymity, told THISDAY Saturday that the operation of the SWF is in conflict with Section 162 of the 1999 Constitution, which states, “The Federation shall maintain a special account to be called ‘Federation Account’ into which shall be paid all revenues collected by the Government of the Federation, except the proceeds of the personal income tax of the personnel of the Armed Forces of the Federation, the Nigeria Police Force, the Ministry or Department of Government charged with responsibility for Foreign Affairs and the residents of the Federal Capital Territory, Abuja.”

Sub-sections 3 to 5 of Section 162 of the constitution further direct that money in the federation pool should be distributed among the three tiers of government based on a formula prescribed by the National Assembly.

It adds that the states’ portion should be shared among the states based on the existing revenue formula and that for all local governments in the federation should be so shared

According to the governor, the governors are ready to take on the federal government over the SWF, as it does not have the legal power to force them to save money as the operation of the fund connotes.

The governor disclosed that the legal advisers to his state government are on standby with the necessary court papers and are just waiting his nod to file them in court.

He said all collectible revenues are to go into the Federation Account and to be distributed among the three tiers of government in line with constitutional provision, adding that the operation of the SWF negates this principle.

“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,” he added.

A presidency source, however, said the possible legal challenge over the operation of the SWF was not unexpected, as some governors had initially opposed the creation of the special account but softened their stance when the general elections were looming and they considered it politically expedient not to be rigid on the matter.

He added that now that the elections are over, they want to do a volte-face on the matter, adding that the governors are changing their position because of pressure to pay the national minimum wage.

Giving some insight into the controversy over the creation of the SWF, the official in the presidency revealed that Lagos, Rivers and some states in the south-west had all along insisted on sharing all the accruals to the Federation Account in line with the constitutional provision.

His words: “One or two of them (governors) had expressed their reservation over the SWF at a NEC meeting late last year. But the vice president appealed to them at the time.
“More recently, one of them had also raised concern when we had a presidential retreat with the ministers and had invited some governors, former President Olusegun Obasanjo and Senate President, David Mark, about four weeks ago.

“In fact, (Rivers State Governor, Chibuike) Amaechi and (Lagos State Governor, Babatunde) Fashola who attended the retreat expressed their problem with the establishment of the SWF. They argued that it contravened Section 162 of the constitution.

“As a way out of the crisis, we then recommended that all the accountants general of the 36 states meet with the Accountant General of the Federation to look at the issue and reach a consensus on a way of addressing their concerns with respect to the SWF.

“On this basis, 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.”

The presidency official said another agreement reached was that within the Infrastructure Fund of the SWF, 10 percent of the money would be allocated to disadvantaged states to develop their agriculture sector.

The SWF has three components: Nigeria Infrastructure Fund, the Future Generations Fund and the Stabilisation Fund.
The infrastructure fund is dedicated to investments in the development of critical national infrastructure, with 10 percent of it going to agriculture and government-sponsored projects that promote economic development in under-served sectors or regions of the country.

The future generations fund is aimed at building a savings base by investing in longer term assets that generate returns to accumulate wealth for future generations of Nigerians, while the stabilisation fund will help to protect annual national budgets by providing a stable, last resort source of financing during periods of fiscal deficits resulting from a sustained fall in oil prices.

Minister of Trade and Investment, Dr. Olusegun Aganga, who conceived the SWF when he was Minister of Finance in the last political dispensation, told THISDAY Saturday that the federal government consulted widely before it went ahead with the idea.

He said during the consultation period and public hearing on the SWF at the National Assembly, the governors of Anambra, Benue, Cross River, Niger and Kwara (then under Dr. Bukola Saraki) States were very supportive.

He added that their Akwa Ibom State counterpart, Chief Godswill Akpabio, was more concerned about the derivation principle and once his concern was allayed, he bought into the idea.

According to him, the federal government further sought legal opinions on Section 162 of the 1999 Constitution and the consensus of those contacted, including the State House legal adviser and the Attorney General of the Federation, was that Section 162 states that revenues of the federation must be distributed, but this is distinct from revenues being shared.

“It was on the basis of the legal advice that we said money put into the SWF should be seen by the states as deferred distribution and share certificates issued to them accordingly,” he said.

Aganga added that during the public hearing that preceded the passage of the bill, the government also got a justice of the Supreme Court to give his opinion on the issue, stating that it tallied with those of the AGF and the State House legal adviser.

Aganga said the management board of the SWF is to be set up by the Minister of Finance, Dr. Ngozi Okonjo-Iweala, “since that is what the law establishing the fund provides. But the board will report to the NSIA Council.”

Aganga, who acknowledged that some governors may be gearing for a legal battle with the federal government over the SWF, warned that that one of the reasons Fitch, the rating agency, revised Nigeria’s outlook was because it suspected that governors and other influential politicians would not support its establishment.

“But since the NSIA Act came into being, Fitch had made public statements that it would revise Nigeria’s outlook, and indeed, its credit rating, at the next review.

“So this will take us back and we will be left with the ECA which the governors also claim is illegal,” he said.
When contacted on the issue, Rivers State governor confirmed that there was opposition to the creation of the SWF, stating “the president who is aware that some of us have issues with the SWF had counselled during the retreat for ministers that we should not go to court, requesting that we wait for Okonjo-Iweala to resume.

“Our view is that we can only go to court if the federal government cannot address our concerns,” he said.
Amaechi, however, added that on a personal level, he considers the creation of the SWF unconstitutional. “No law can tamper with what the constitution provides.

“Besides, I have told them that Rivers State has its own wealth fund into which we save N1 billion monthly. So why should anybody save for us? I have asked this and no one seems to have an answer on this,” he stated.

The governor confirmed that his Lagos State counterpart, Mr. Babatunde Fashola, has the same reservations about the creation of the SWF as he does and had expressed them to Jonathan.

Other than the issue of the SWF, the NGF today will also discuss how to meet targets under the Millennium Development Goal, the quarterly polio campaign of the forum, the review of the revenue allocation formula, and the need to split the office of the Accountant General of the Federation.

The governor from the south-west said the dual role played by the office engenders lack of transparency in the way the nation’s revenue is managed.

“What the nation needs is to split the office into two. From it, we should have the Accountant General of the Federation who will be responsible to all tiers of government and the Accountant General to the Federal Government that will handle the finances of the central government,” he explained.


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