Nigerian Soverign Wealth Funds

 

 By

Sampson I.M Onwuka 

The new political framework of these Nigerians and the new government which begins May 29th, 2015, may presume to have in its muscles a daunting task of transforming Nigerian economic landscape. But this is not the case, the in-coming administration would have the shovel handed to them, it is really up to the new messiahs to apply the spade astutely in nursing the economic fiber of the country.   

While the theme of financial transformation in the Nigerian and the wealth of debt in the country from power based resources and deals will not like fracture, it is a very B category Junk bond investment interest given what the country will likely to look like in the ten years.

 At least some of the men and women in office will no longer be active; some of the principal dogma that has so far defined the economy and the nations may also require additional remediation to cushion effects of new era Nigeria. The past-present finance and economic minister Ngozi Okonjo Iweala may be remembered for removing the oil subsidy may be remembered for other incentive involving the NITEL. 

But there are other legacies such as the Sovereign Wealth and ECA from excess crude profit which from systems lay down by Soludo and Aganga that Madam Iweala is to be remembered.   Information released by the board of administration from previous month of March show a formidable new administrative interest in new Nigerian Sovereign Wealth Fund Investment that she brought into business and into focus. 

According to the statement released by the Ministry of Finance and Economic Planning, 

“The Chair of the Board is Alhaji Mahey Rasheed, a member of the Board of First Bank.

That,  “Mr Uche Orji, Global Coordinator and Head of US Semiconductor Research and Co-Head of US Tech Sector Research at a prominent global investment bank, UBS has been appointed as Managing Director/Chief Executive Officer following his top performance in the contest for the position. Mr. Orji had also previously served as MD at JP Morgan.

“Other members of the Board include: Mr. Arnold Ekpe, Mr Jide Zeitlin, Mrs Bili Awosika, Barrister Bisi Soyebo (SAN), Alhaji Hassan Usman and Mrs. Stella Ojekwe-Onyejeli who will also serve as Chief Risk Officer.

The report mentioned that, “In all, 730 applications were received for three executive positions - Chief Executive Officer, Executive Director (Investments) and Executive Director (Risk). 40 of these were long listed by KPMG which assisted in sourcing suitable candidates, 16 candidates were shortlisted before the final three were selected.”

•             Build a savings base for future generations of Nigerians;

•             Enhance the development of Nigerian infrastructure

•             Promote fiscal stability for the country in times of economic stress; and

•             Carry out such other matters as may be necessary in furtherance of these objectives

“The process that led to the emergence of the new team kicked off on September 8 last year when the CME set up a six-man Implementation Task Force headed by distinguished banker and philanthropist Mr Fola Adeola with a mandate to assist in determining concrete steps to be taken by the Federal Government to actualize the Nigerian Sovereign Investment Authority (NSIA).”

“Following the recommendation of the Task Force, an Executive Nomination Committee (ENC) composed of six Nigerians with integrity, independence, proven qualification and tested market experience from the six geo-political zones of the country established. The Committee had the responsibility to assist with the selection of members of the Board, a key plank of the governance structure of the institution.”

With the CME as chair, the six ENC members are:

1.            Mrs Sola David Borha - (CEO, Stanbic IBTC; South West)

2.            Lady Nkoyo Toyo - (Hon. Member, House of Representatives; South South)

3.            Mr Uwa Etigwe, SAN - (Partner, Streamsowers & Kohn; South East)

4.            Dr. Obadiah Mailafia - (Former Deputy Governor, CBN, North Central)

5.            Mr Mahey Rasheed - (Board Member, First Bank; North West)

6.            Mr Hassan Usman - (CEO, Aso Savings & Loans; North East)

“The Task Force also recommends the appointment of KPMG to assist in sourcing top quality candidates for the three executive positions on the Board and the implementation of a competitive recruitment process through local and international advertisement of available positions. The vacancy adverts were subsequently published in prominent local and international newspapers and magazines.”

Among the names parties and interest is Shamudeen Usman and Dr. Mansur Muhtar and Mr. Segun Agaanga .

According to a recent article by Charles Soludo ‘

“My thesis is that the Nigerian economy, if properly managed, should have been growing at an annual rate of about 12% given the oil boom, and poverty and unemployment should have fallen dramatically over the last five years. This is topic for another day.

“So far, the Government’s response to the self-inflicted crisis is, at best, laughable. They blame external shocks as if we did not expect them and say nothing about the terrible policy choices they made. The National Assembly had described the 2015 budget as unrealistic. The fiscal adjustments proposed in the 2015 budget simply play to the gallery and just to pander to our emotions.

“For a $540 billion economy, the so-called luxury tax amounts to zero per cent of GDP.  If the current trend continues, private businesses will come under a heavy crunch soon. Having put economics on its head during the boom time, the Government now proposes to increase taxes during a prospective downturn and impose austerity measures. Unbelievable!”

To understand the theory of Austerity from public savings and the role of interest rate in progress based economic, the two principle monetary based actors; Keynes and…, can be invoked in the process. Obviously the argument that men like Hyman Minsky makes for investment with or without government actions, seem to have descended from Adam Smith and through to John Keynes. In fact, when in recent times that Joseph Stiglitz argues for re-investment from Asia savings, he was perhaps toeing the lines of the argument from these authors and actors of investment. 

The origins of these ideas are not totally depended on any of the formal founders of modern day economics such as Adam Smith. Put it differently, the circumstances surrounding the application of that process may have been keen in Europe and may have worked, whereas Adam Smith was popular in US, his formative ideology of the role of surplus in investment which Marx used for a different interpretation, explicates on the general theory of his time and his day in the course of the society’s structural and intellectual evolution. 

It is easy to suppose that with money comes the need to exercise a spending option that even if there are cases of surpluses, that the saving or the conditional injection of money do not really preserve value. Savings may be equal to value on the short run, long run; savings do not yield money saving for investment. Money saved is not confined to end of a flow given the issue of co-efficient rate, do not really catch up to inflation if when we explain it from the problems of acceleration or the earliest and misfit applications of Laffer’s curve to the end of a flow, which continues into a stock. 

Of course Laffer’s curve for taxes can only be applied to taxes, which a constant not including the quantity, but a fixed variable and has history given the bias to government bond and rate of investment and spending, but would not apply at the level of quantity applicable to a running investment and stock.

Put it differently, Minsky’s investment options from surplus do not meet my argument or a general trade fair observation, that investment in terms of a flow seem to a large extent closer to Friedman than Keynes and Minsky, but it need to be said that Friedman did not emphasis investment from debt as a way to understand the flow or direction of inflation or income; each capable of playing the DNA of economics, yet Friedman measure of the rate of investment from debt is reasonable stock and flow option, that in realty, the illustration of aggregate demands by Keynes, did not meet the idea of spending when there is surplus, rather the ‘demand cave’ as I described in stagflation which is evident in the stagnation from inflation  - hardly the case as I argue elsewhere - and stagnation from deflationary prices as in the case of Crude oil in Global Market in 2014 which is the really a symptom of stagflation. 

This sort of economic condition could have been misdiagnosed in the years leading to what we presently have, saving for emphasis on surpluses and investment, whereas Keynes argued for de-linking of investment and savings, he never made to the summation or depth valley of investment from debt. 

He must have thought that over-investment is root of inflation which is notionally correct, and on the underlying fact is the premise perhaps started with Adam Smith and through to Karl Marx, maintained in Ricardo, that with Surpluses come a re-investment, ameliorated in Efficient Market hypothesis of Harry Markowitz and ability to expedite risk in any society or under compulsive situation when there are material concerns of excesses. 

We consider the role of investment from surpluses as a normative, we categorize this investment as only applicable to ordinary level, we consider that somehow the idea of circulating savings through investment in demand and supply, as only possible and profitable at the period when there conditions of this reserves. It merits the issue of expansion and contraction, it does not reach or abide with it, for if we put the theory of investment as a form of expansion, we would have left aside the main event of expansion during economic conditions, that the evidence of this expansion is re-focus the market through propensity, that here, it is only investment from debt without necessarily torching losses may fully justify the multiplier effect and the actual meaning of investment from negative-negative truncation. 

When we get into the way of debt from investment, the supply solution fits into the banter of investment from debt only one condition, the case of future rewards. In a sense, what causes the problem of depression mentioned by both Adam Smith and Keynes is attributable to high expectations, for here he looks at flow instead of stock, or stock of value away from flow. 

In reversal of role maintained for champions of Adam Smith such as Thomas Malthus, we prey on this error that the a piece grafting of the price ceiling under the debt condition of a given market is not justifiable under the nozzle of Austerity and lack of founding, that in surpluses, there are material cases that the next best alternative is savings, may also only appear to appeal from the issue of the levels and limits of the application. 

Combine this estimable of savings in the terms of surpluses to materiality of production minus labor, we have a matter of price advantage not competitive advantage, that price advantage in this case is a function of any market, that re-investment in different market and through a different stock of real capital is investment from savings. 

It matters that this can only apply to a certain period of profit – perhaps during ordinary levels of application, second to this level of application is the issue of profit margin which needs to be maintained without a diminishing effect on labor. But a true measure of the investment is the future estimate of its possible rewards, beginning with the applause of a negative balance when for all probably purposes the flow is come to an end. 

Here as I argued elsewhere, the right form of investment is from debt where the propensity may be reduced to the suppression of the market or the lack of general equilibrium during excessive white noise leading or falling short of marginal value per execution of stock or a given demand and supply, leads us into a question of measure, that one, the only time that Joseph Stiglitz advice in 1997 to Asia and China to expedite of their savings may work is when there is necessarily a standing institution such as United States, that at the absence of a command value system like the established value system and price function like the US, is a problem of ensuring a continuity of profit or returns of investment directly from labor or production based. 

In reality, China expanding through CIC investment routes, need not conform to the standards of the general market that requires a certiorari of an existing market, that a point is reached when the total amount on invested interest in Chinese or elsewhere, do not conform to any standard and the question of savings becomes a matter of reverting to metals and stable and non-perishable economic tender other than cash.

Debt and Investing  

Minsky “Hicks interpreted Keynes as allowing for two sets of interdependent markets, one for commodities and the other for money or finance (bonds). In each set of markets Hicks derived the interest rate and level of income combination consistent with equilibria. He identified the problem as asset up by Keynes as the determination of the simultaneous equilibrium in both sets of markets. Hicks have aggregate output and interest rates settling at the level that simultaneously satisfies the equilibrium conditions in the commodity and money sets of market.” 

“Hicks therefore t that would treat the determination of aggregate demand as if it were a supply and demand problem; he argued that there are combinations of interest rates and incomes that would equate supply and demand in both commodity and money markets. As in Hansen, private domestic demand for commodities is made up of two parts; the demands for consumption, and the demand for investment. Consumption demand was taken to be a function of income and the interest rate. The use of income as a variable is a bow towards Keynes, while the use of the interest rate as a determinative of consumption is a bow to classical views of savings.”

According to Minsky, “Hicks took investment to be a function of the interest rate and the level of income (mainly as an afterthought). At this point Hicks made a major step toward forcing Keynes into the classical model, for he interpreted the relationship between investment demand and interest rates as reflecting the marginal productivity of capital. 

This identification of the interest rate – with a production – function attribute meant that Hicks was implicitly assuming that the economy gravitates to some unique full employment income level. In an economy in which the level of employed to employable labor varies, the profits earned by capital assets depends upon the extent to which aggregate demand leads to scarcity of capital-asset services.’

Wealth and Poverty by George Gilder, a foreword by Steve Jobs ----who is one of the better journalists in the world and a personal favorite arguing on the merit of wealth and money in the opening brief to the George Gilder, stated clearly, that “Gilder understands the intangibles of capitalism. 

Wealth comes from ever expanding pools of information. The greatest source of wealth-creation is the human mind. Entrepreneurs don’t need all their money to meet their basic needs. But the reason they should be able to continue to own the wealth they create is precisely because they are better Stewards at reinvesting that capital – and thereby multiplying it at for benefit of us all – than government bureaucrats are.” 

Education and lots of care ‘have the scopes for free enterprise’ nominated ‘sound money’ and the crying need for modern society, “Stable money conveys priceless information to entrepreneurs and consumers. A government that undermines the basic values of money is the equivalent of a hacker introducing a virus that corrupts information on your computer.” 

Surplus is argument centering on both investment and savings. For all we care, there is an effective and economic separation between resource allocations procured during surpluses that are when there is more enough reason to accede exogenous recovery rate to endogenous rate of balance. What happens during surpluses is that the national expectations from year to year balance sheet exceed the balance sheet. There are generally several reasons why this happens in any economy; perhaps it was due to the issue of the foreign direct investment, which is argued to have a short-term bias from long term disadvantage. 

It could be the effects of new policy and economic theory on a pre-existing economy for instance the introduction of new rate of taxes, or the introduction of new tariff levels in any society. It could be the same case with the problems of the migration increase – at least at the onset of the boom economy which has its ingredients. It could be a result of the presidential years where certain recycling of money and currency, during perhaps periods of spending including presidential years or as part of the recovery process of from depression economic when stimulus enters the market.

 Although anti-cyclical economics theorist such as John Keynes may have given us some insight into means and ways of beating the cycle economic paradigms leading to healthy economic advantage, his theories gives hints of some gaps in the system that has not yet manifested – which can however be averted through problems of return rate for instance employment on an NAIRU level through to the land of exporting due to increasing in labor and production but approaching problems high wages shifting from long term fixed income attached to 10 year notes. 

In some sense, we experience as a consequence of boom economics the problem of inflation and balkanization of currency, whereas money such as mutual funds may just be indicating a shift from local economy to foreign markets due to shifts in bond prices away from U.S Bank stocks, an inflationary pressure reverts to questions of Savings or what I describe as price corruption given the burn rate between the new levels of inflation and the rate of return of profits or banks that give you 1-2% on a every 10-12% interest they charge.

These rate which correlate each other between the Banks offered money market rate and the rate of returns at the Federal Reserve or Funds Rate which is also correlative to what the banks offer CDO accounts. The main issue as it affects our money is that inflation usually go ahead of Bank estimate, as such price and market volatility do fetch a balance between return rate and the percentage margins offered by the banks over a period of time. In short, Banks can only increase forecast from year to year and at rate of lending from 3-montsh period co-joined with Interbank and overnight lending.

In sharp detour to the effects of profits or unexpected bump in the economy it has been the expectation and practice of most economists since Joseph and the Pharaohs of Africa to defray surplus through savings for a better day. There is nothing wrong with this theory, it has been practiced through and through, it leads to infinite speculations about the exogenous causality, perhaps something is happening with economy which we do not know, perhaps it has a mere disruption that fades the move for better years? 

What is important is that an economic analysis of this period will also guarantee that Joseph ideological persuasion is first and fore mostly driven by  accurate fore-cast which even in economist and market today is quite important, especially in market. 

The indications are very present when from signals in any system dynamic there are signs for new reality and new cycle that these days of boom or surpluses lead to days of burst. So when in Egypt and in Africa that the economic bubble busted and their wall street went belly, most economies of the world were able to trade with Egypt because from all account their stimulus was pre-set 7 years from bust. 

We can argue that Joseph’s economic theories regarding surpluses – seemingly logically and provisionally accurate – is faulty, if not faulty, it is entire restitution to the era when commodities was the only currency. When we compare livestock and grains and corns from a period no longer at ease with us, we remove this fear that welcomes the acceptance that harder days are ahead and hedging may be appropriate. 

That for I, may discourage this idea on the count of flow and stock, that if the treasuries of Egypt and Nubia were only meant to store nonperishable and end of flow material such as grains and gold, the alter frozen in its scythe, there are hardly any problems of defraying cost through cheap production on real time and perpetual economy. 

This idea of an ongoing economy and the continues flow, allows to deal with the subject through ventricles of the currency, it’s a product of free market and without government intervention allows you to play around the fact that you (buyer/seller) can exchange goods with the next of interest in class of business and interest using a pre-approved plan and tender called currency. In some required measure, the shift from surpluses to savings has a future which in Joseph’s case was a period of 7 years guarantee, a form of investments through savings but tied in retrospect to national economy and bond.

There is something to vitiate the bond; the count that the market will reverse and like the forecast presaging a boom, that there is additional forecast to make the argument about the Nigerian economic future and why there is need to embrace their sovereign market. This defense scenario leads into all forms of understanding, one of which is the case of the defense against the future market well known and can therefore be mitigated by savings and guarantee of returns absorbing the rate of diffusion. 

There is however the issue of currency bust and balkanization when in all l estimate that a country is looking to save the economic condition of its future market by guaranteeing a 10 year bond along the parameters of utility complex and development of new roads and bridges and they end up creating more jobs and more credit leading to new growth of the economy – asset allocation – investment – and permanent money. In this case, the rate may differ when there is a savings glut, when there is money is saved through treasuries. 

Whereas in Joseph and the Africans there is direct demands for products on hand, which may not be diminished and the changes of these commodities expanding was totally diminished by the savings rate and the building of seemingly bigger treasuries. When there is more money out there in circulation, the economist say you can raise interest rate, increase additional reserve balance sheet from banks and above all, create a room for accommodating surplus.

One fine example of this scenario is the recent issue of European system when there are cases of surplus currency flowing in from the Crude oil and Arab dollars. European banks were saturated with dollars that they began to experience a savings glut. Whereas we can push that a shift from currency to Gold can help to micromanage the boom and uncertainty with over-valued currency, there is nothing that can explicate the rate of money base when it is scoring above the rate of interest and rate of rate.  

 In this case, a mitigating process like we say with European will be defraying the future problems of inflation through investment in US and its real estate. By shifting the inflationary pressures from Europe into America, you allow companies on both sides to reposition themselves through the demands of the Reserve system and hope they privately investment like many Chinese and Asia countries are doing in US during this period.

This process in US put spank on the real estate prices which injured the CPI and ended forcing the CPI to act ahead of the overall market, removing the mark to market status of Commercial Banks away from Investment threshold. This case did not pamper well and in explicating, there was a need for US banks attached to local market and rate of return to perform the frenetic rate of this hot money and shadow banking from Europe and Asia and the end result was a drastic boom of the US housing market and then the fall which was expected. 

In this case away from the case of Joseph and the Africans, we can see that lack of foresight or poor planning in the United States proved dangerous for the health of the housing market when there is a local rate of return that is behind the curtain on the presence of foreign companies in US and Foreign Direct Investment, there was inflation issue which China entering in the market helped to ease away.   

From here, we compare carefully that the attempt of distributing surpluses which is same as risk as we can better explain, promotes the fractured economic view of that the several markets are required during any event horizon from surpluses, whereas the advice that the shift is reasonably acceptable and hedges against the problems of glut from production or savings from reversals, it will take a different kind of market to absorb the new money, that it will take an economic view with national agenda – even with the Chicago School and free markets system – to sustain the rate of growth through direct investment without abnormally injuring any core areas of the economy; Core CPI and by direction, the VAR.

We may in this case laminate for the records that China or prospective democratic economics of the world such as those emerging from socialism characteristic of the BRIC or from Communist economies such as those leading new ground in money and world market; China and Russia to mention, reply extensively on pre-existing pro capitalist economy to have a chance at survival. Without US and Europe, majority of Asia economies and politically experiment and economic miracles will more than likely stagnate. It is not wrong to impose that the frenetic rate of investment from Europe into US was not from failure to come to grasp the danger in US or the risk from inflation, that it exists from other principles of economic meaning, that a buried treasure in US through house investment, more like Joseph’s saving glut of maize and corn, will reap a harvest that will ensure any future years in America by Asia and European countries hence a future is saved through a desperate mitigating of sales force. 

We can be sure that the temptation to shift a surplus earned through savings and through perhaps a central Reserve System, can distributed even through an efficient market hypothesis, and for a case such as Joseph and the Africans, these actions were actually taken and that it involves an end of flow or stock, a commodity and a perishable without technology. We compare that this scenario is obtuse from European attempt at deficit balance due primarily from the issue currencies flowing from Asia or any part of the global macro into Europe leading to savings glut of some proportions and some issues of saturation. It is common place that in Joseph and the Africans, we notice that there is a forecast involved  - away from any theories of modern financing there is a process involved in this growth of the African economy and in Egypt, that it was endogenous growth based on utility complexes transferred differently or what they call in advanced money situation options, that the rate of options available in transferring the risk in spending is deferment based on running tendencies of the necessary new margins from previous economic cycles – the bump – that the bump harvest is here deferred a form of mitigation of risk and for term structure with 7-run rate and year to year agility given the priced mention of maize and corns as the derived year to year to product.

This is the curve, that in terms of European panoply with surpluses during the rise of crude oil and the forwarding of fund rate, that the –crude oil prizes gouged upwards given the new grounds for money initiated and sustained by money and by crude oil sales, that these new grounds gave new and newer meaning to the monetary reality to defer in other hedge against the bad weather. We notice that the exogenous growth driven mainly foreign direct investment was meeting reason for attempting to diffuse inflation through investment which the local return of rate was comprised by the rate of influx of foreign currency hence the funk with ECB’s fund rate. 

To cut the fund rate inspired all kinds of reaction from crude oil and as long as Arab dollars flowed in Europe and America received from both Asia and Europe all savings funds and investment through third party cushioning it can afford, there are emphasis on its CPI which the Taylor that Alan Blinder was argued was principal in Greenspan’s use of moderation and its 4% was misled and ridden off. 

We notice that US unlike Egypt as Europe not unlike the rest of Africa, permission this increase in such a way that the fixed incomes earners with poor adjustment bureau and tendency, bound to the main street and the mortgage – its principal target and reason -  ballooned up and ended up in bankruptcies as the lines between the investment banks and creating money from credit and commercial banks and creating money from nothing or with future market; banks stock depended and bond market driven, were crossed and the meaning no longer at ease.