Nigerian Soverign Wealth Investment Fund. II

By

Sampson I.M Onwuka

It is worth 1.3 billion which for me is far less than expected and should be a line of year to year inducement from Federal Purse or ECA accounts if any. The long term relationship between China and US and these nations and Nigeria may be argued to be setting a right tone for these investment options in U.S and in China - especially for Nigerian business men and women based in these countries.


Perhaps a lengthy discussion on the need for foreign asset or credit based economic agenda for Nigeria and Nigerians is necessary and should toe the received lines of reasoning stated below.   

Investment from debt…Iron strategy akin to total strategy…gaps in Joseph’s investment strategy and why…The relevancy is exaggerated…or over-simplified at least without analyzing margin propensity issue----given the frozen desire and trapped momentum and end of flow argument or the existential process of debt.

Sovereign Wealth Fund is not new to Nigeria and Nigerians. In the 80's, the idea of raising and exercising pockets of financial influences around the world especially the issue of regulating the currency. Excess introduction of any currency in Nigeria can be very difficult to manage and may not support long term view of most investors comfortable with Nigeria. Keeping a flow of these currencies into or removing it entire may hindered healthy economic growth and may force the rate of return of the Global market. 

While countries like Nigeria and Ghana for instance, may struggle to have their economies stabilize in the global market, there are arguments that political economies such as China and Russia and their behavior tendency to world market is perhaps a shift from one economic definition to another. For instance, China is shifting from Neo-Communist economy to capitalism and Russia is doing the same. The width of these markets force a given value by the amount of currency rotation that shift from Asia to United States and back through Hong Kong in Europe and elsewhere, helps to regulate the rate of currency appreciation for Chinese Renminbi and Russian Ruble. 

It is a straight, cut and dry argument, that pockets of influences by receiving or booming economies such as Nigeria, that has grown an average 9.9% (Bloomberg) for the past 5 years, may have no cultivated influence elsewhere and as such is still ridden to all kinds of shocks to its system and to its currency. It falls differently on the priced ownership of individual decision making process, with or without insurance is equal to credit level and FICO rate. We can emphasis the differences between Credit based expansion and the Saving Fund expansion, some of which support degrees of disequilibrium and individual interpretation of the market. Best of which is the decision that compares with national averages and rate of investment which utility complex achieves - as such the inverse relationship of price to bond market is remediable through the expansion of credit for nations shifting from surplus to debt or investment to surplus depending on the levels of production curve and employment numbers - for instance the stimulus end - a surplus which investment achieves or stimulus or proposed tax economy achieves - possibly through credit to new lines of businesses or towards the new economy. 

For a balance of currency rotation to co-exist between Nigeria Naira for instance and teh rate of business interest between Nigeria, Nigerians, and China and United States, the deep and widening exercises of its functional banks (dynamic banks) and the issue defensive banks which relies almost exclusively on fund rates and size of money storage - dependable in part to rate of crude oil or other cash crops for bifurcating - that decoupling one tier economic frontier such as represented by a central bank and in this examples ECB, almost relies entirely on what happens to U.S market and Japan's Funds rate which for defensive reasons and reasons of busting an over-valued currency, force interesting to remain low, diffusion rate to remain low, and attracting as a way to diffuse value from over sea. Case in point is the rising Mexico Pesos since the indirectly decoupling of U.S dollars from Crude oil - achieved with Greek Debt and partial European recovery at low Crude oil prices. 

Deep Sovereign Wealth Investment Fund penetration like C.I.C is pushing or Nigerian stay in these countries, either through the physical money base increases or through direct Reserve Purse allows the cultivated rate to withstand the stress of attracting by lending to U.S banks or to Federal Reserve as a way to guarantee a future comfort with the long term U.S bond market. Generally we shift in this case from the bond market to Real Estate and as we have seen, the attraction of foreign capacitance to U.S has weltered down the influence of Federal Reserve hence a stay at Fund's Rate - at least up to the June 2015 draw down.        

Natural we have several key areas of business or requirement such as Physical temporary/Permanent resource base and Requirements for Credit in trying to ensure the function of any Sovereign Wealth Fund and Sovereign Wealth Investment Fund. Economic advantage includes amounts from private contribution, percentage profit, credit and rate which has to do with the public.

Christopher Jenck’s of Harvard University and Joseph Minarek -----Brookings Institution < who discovered in 1970’s that inflation hit the Rich the hardest (drug) who save the most and who invested the most. The problem with the inflation and tendency to surplus theory is that a shift occurs between inflation and inflation curve, and what happens when there is a….COLA – Cost of Living of Adjustments away from CPI with additional inflationary pressure.

The Solution reverts to Credit facilities even for 30 vanilla and estimated growth rate of any economy, the attempt at jogging his reasonable price range and rate of rate from external and internal rate, for instance attempt by Chicago to correlate its rate of return – usually return of investment from debt – hence debt driven credit bracket – illustrate why FDI or Foreign Direct Investment usually alters local investment rate and send the market to a very different and unusual ends.

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One of the vast examples of this incident is the premise of Sovereign Wealth of several parts of the World and global economy.

Then the rate of public debt and responsibility ‘Country crushed by debt’, and the essence of Harsh IMF Rules and Austerity  –  Bolsheviks. The intent is to address the problem “inequalities of the currency rate’, which is depended on human actions are not subordinate to it.

 The root of Nigerian political instability and Economic restlessness is the higher international Hot money, the Pandora of private Airlines and Ship lines that until recently plowed their games above the norm. It is a usual form of penetration – when we associate ‘fright capital to high interest rate and ‘debt’, with FDI investment category.   

Yugoslavia (H2) Sovereign Debt, ‘Brazil’ South Africa – (b) Experience of Chile under monetarism (c) Philippines under the ‘World Bank’ programs (d) African Debt problems and IMF (E) ‘South Korean ‘curb’ market’ (f) ‘Crash of the Souq el-Manakh in Kuwait’ (G) The Role of Diamonds of ‘contrabandista’s (h) Lebanese banking (in “peace and war”) ‘under world of arms’ ‘drugs’ ‘flight capital’ ‘Credit Squeezer’ and its impact. Other examples of hot money which replaces FDI includes Service economy, military manufacturing flat, farm economy…and payroll…..using  R.T Naylor’s  Hot Money and the Politics of Debt.  

International to curb Nigerian Hot money……

Companies or Banks borrowing on the Eurobank – could not be salvaged in the past by member countries…..IMF intent…to create international money standard to replace Gold….. This was to be achieved through a currency basket – between ‘Afghanis and Zlotys’, and then members are allowed to borrow from the basket past at a higher rate or perhaps as a correlate between rate of return of a State or System dynamic and existing market condition. 

This ideological prologue did not work since it required profit margins higher than most and the placement of U.S dollar a replacement for international currency….It was most evident in the U.S Marshall plan and which had the plan to save Europe under the relocating some of the problems of the saving gluts somewhere.

This of course warranted investment in treasury bills and ended been auctioned at the later process to off-stage deficit. Some of the problems of this exportation of excess liquidity are the balkanization of local currency and inflation.

This is a tight prolegomenon that leads to IMF Austerity which usually borrowing as a form of investment, but ends up with too currency basket and a failure to localize the return rate of a specific economy of interest and its correlation to the foreign markets and Foreign Direct Investment.

The risk involved in guesstimating rate of return and investment risk is usually a junk bond category with expansionary clauses that attempt to mitigate on the underlining securities of the existing market economy.

When any economy is over-weight with foreign investment which is the same thing as having the rate of investment over 22 cyclical percentage of new lines of credit for small business administration and new economy, or the rate of debt servicing to national GDP and due process requirement for serviced debt and requirement of processing it which usually convert the inflationary pressure to spike in currency exchange and ends up squeezing the disequilibrium of individual economy.

It is especially important when there is the common .5 diffusion rate from non-VAR housing index, in such an instance, the rate at which economies improve from small business administration to mid-cap reverts to a 3-month bank stocks index performance and rate of economy.

There are several ways a bank can raise money, IRA and Mutual Account.

(2) It can raise money through depositors – lending through interest ‘lower than inflation rates’ as the economist say.

(3) From International market – including the intrepid FDI and IMF who colonize the premier political leaders.

(4) Banks can raise money by begging for it, either through a reposition on the pyramid requirement or fund rate, which in this usually accompanies the long term thrust on the currency ratio, a bond market and the Vanilla which is no longer an affair but lasting 30 years.

This may require the unconventional method of insuring this future usually through tight-budget exercise, the re-invoked partnership and ownership and state property through debt, through ‘umbrella theory’ or not, Rotary Club and perhaps Bolsheviks given the participation of the moneyed type.  

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Based on the number of information available to several system and the Global SWFIs, (1) Reserve Investment Corporations and Stabilization Fund (2) Saving Funds (3) Risk Contingent Funds

(1) Reserve Investment Corporations and Stabilization Fund; Hong Kong, National Reserve Fund and National Wealth Fund (Russia) with policy mandate Macro-economic Stability and Investment objective of Capital preservation in stable and term investment return.

The risk level is medium (2) Saving Funds – Direct Investment, Abu Dhabi investment Authority, China Investment Corporation (China), China Investment Fund (China), Government Pension Fund Global (Norway), Government of Singapore Investment Corporation (Singapore), all have a yes Direct Investment Fund Categories, and non-Direct investment……

Abu Dhabi investment…..policy mandate – invest funds on ‘behalf of the government of the Emirate of Abu Dhabi’, long-term v risk and V, high 8.10% (10 Developed equities 3.5 – 4.5%, M.E equities 10 – 20%, Small Cap  1 – 5 %, Government bonds;  10 – 20 %, Credit 5 – 10%, Alternative 5 -10%, Private equity 2 – 8%, Infrastructure 1 – 3% (2012)

(3) Risk Contingent Funds; Savings Funds – China Investment Fund, Government Pension Fund Global, China Investment Corporation (China), Yes, Government of Singapore Investment Corporation – (Singapore) – Yes.,

U.S Market funds.

Alaska permanent Fund - (USA) – (Long term), Korea investment Corporation – (South Korea) (Long – term) (Yes), New Mexico State Investment Council = USA….

Government Pension Funds/Direct investment and Investment profile of Selected SWFs

Domestic equity, 51%, International equity – 10%, private equity; 6%, Hedge funds; 40%

(Sources, Castelli, Scacciavillani: 2012)

II

A Lobby.

If Nigeria makes half a trillion dollars mainly from selling Crude Oil that runs from your backyard to your Heritage or Inheritance Country United States and none of these material gains reach Nigerians in USA, Europe or Asia, and for a start Nigerians in US and Canada where much of money is realized, then something is really wrong with the picture.

Sometimes some of us try to understand if we Nigerians or Americans or Nigerians plus Americans or opportunistic ‘beast of no nation’ who are not really wanted by both parties will ever make it, and wonder how to proceed as a people far from our Africa which we cannot truly say we are far from home.

There are business opportunities which the society of the new beginning offers but not accessible due in large to the influx of immigrants from other parts of the world. As the story goes about migrants from several other parts of world, Jewish emigrants from different parts of Europe had to deal with harsh realities of the new country, that it was persistence in business ad linking the US to Russia, Europe and the Pacific that made the difference in the financial navigation.

Nigerians did not arrive to these states by boats or from persecution or expulsion as these Jews were.
They arrived by air and through the plane, with money in their portfolio, with degrees to buttress and had to stay with their families until further economic enhances.

In New York, there are business opportunities Nigerians in United States can get into, besides trying at the top of your shouting lungs to sell a small prized real estate with the banks signing off on it through a supervisor’s approval, we may consider other things, that majority of the companies in US have roots elsewhere, and only some level of long term investment comfort can guarantee partnership and employment in its key resource areas.
 

It is the question of inheritance and what happens…The question is what now happens to our share of Nigerian resources from our backyards in Nigeria and sold to our Country called United States. The answer is that we are cheated from our resources in Nigeria, cheated by…denied our birth right in US by default. Some of us may ask what it should matter that you are failed by Nigerians in your share on your heritage.

My answer will hardly surprise anyone, it matters that people may not see how well cheated these Nigerians and Nigerian Americans or Africans of any junior or ranked investment category, who are living and spending so many years in US and Europe and having nothing to show for it than the money loaned from Nigeria or Africa except for special cases of those live who also live here and have to struggle for lack of financial competitive foundation saving exchange a rate’s advantage.

 But this should not be the case given the Shawley-Oxley laws in 2002. Above, there is such a thing as Re-investment Act in these United States which can be used from the stables of a Reserve System which is private resources matched by US Federal Govt. to the threshold of at least  25% non-refundable withholding of transaction receipts between Nigeria tor Corporation of interest coming from Nigeria and dealing on Crude oil or similar cash product with United States or private and institutional corporation of interest from US, on a market and real term quotes, year to year, to be rested on their Bank of receipt and choosing.

 This receipt does not mean that Nigerians or Africans who are pretty much struggling from day one in the States or Canada and who even constitute worker parasites deferred employment certiorari and qualification (odd jobs), should be given free hands on managing these resources or engage in charity without losing their formal reasons in being in the States, or have these investments so removed from US or similar country of interest and domain, without explication to Nigeria or anywhere else without due recourse to profit meeting for market standards.

In essence, U.S can't be forced to train and feed these Nigerians who irrespective of their standing agreement before coming to these states, bound by tax paying, or inheritance clause affecting new migrants, are dead set to participate in their new country and new economy.

That Nigeria or any African country can in respective levels of transactions with United States or any country of interest, be expected to support the future growth of these Americas and the countries, then the go-between persons of interest who reside there, here, born here or anywhere, have short and long term business interest in these United States, should participate in the estimate of these countries.

The Sovereign Wealth of these Nigerians in the United States is separate accounting and should not be compromised or misunderstood. Nigerians overseas suffer the most due to lack of organizational structure, rely on public employment or private interest in medicine, for instance, sojourners from Africa and Nigeria, easily turn their attention to CPA and Medical Careers, public and home health jobs, all of which are fine American job opportunities to take advantage of but rely mainly on Government benefits and insurance.

These Nigerians like Caribbean American before them, are happy to be paid peanut wages which by American Standards is poverty level which ensures without public acknowledgment is a cyclical trap that makes it difficult for Nigerians or Africans to barely make it into working class Americans.

The game play is to expand the future of the United States through consolidation.

Whereas these men and women from Nigeria or Africa, with serious education background do not mean to take on these jobs or need not, above all do not furnish any intention of lasting too long on them. In the past, the career move was to progress from CPA or GNA to Nurse and from Nurse to registered and Licensed Practical Nurse, or so others will choose, take interest in Medicine and medical studies.  

III

The war came to an end in 1970, and from 1970 began the decade of reconstruction which inadvertently formulated the mindset of Nigerian society.

It is in these recovery years that the significant rift between the Nigerians began to appear, the rift was between those who became the courier of Nigerian Banks during and after the war, and those who earned their pittance through ‘small cracks’ of lending and family borrowing, through the ‘inlet’ of trade and trans-border trade, through caveat emptor; the smaller units of businesses scraping around the larger, the law forbidding the expansion and the ratio in all things for space and rights which impeded mid cap companies.


 Such adverse business environment, largely out of mistrust eventually created a sense of business management, more like a form of attitude to business and to living which the banks completely endowed from the 70’s onwards. By the early eighties, few years after the fall of Shah of Iran, the Shell Company was readying to break in big in Nigeria and there was new and newer necessity of other banks.

The much of Nigerian banking can be described in three categories, one the Government managed, the Commercial banks which had their horns from the civil war era, and the Investment Banks which began to respond to the need of change in the larger world.

The curtain dividing the east from the rest may fallen by this time, but the rift was established, so much so that Banks were a quasi-property of certain people, who may now be called Old economy, the Commercial Markets, the First Banks and the Union Banks.

In future as better stability of the country is forged, there will likely emerge other banks in the country that will conduct social Industrial programs and development in many of its forms. But the rise of military in Nigeria, in an age of oil boom gave birth to Investment Banks, initially and ultimately owned by Northerners but this time, private families with long roots to the bigger banks gradually emerged.

The expanded nature of the world business in the 80’s at a time when Nigerian oil began to make headway in the world, enabled Nigerians of the Investment grade to earn their ranks through the stock market and through international trans-border trade and in end, even attempted with help from Lebanese business group to provide interest rate for many francophone countries.

Such attempt made these Nigerians soft targets for the neighbors and in places Cameroun they faced open hostility. It also led to the first and formal fracas between Igbos, Ijaws, certain Urhobos, and Syrians and Lebanese. These Nigerians also warned against the impact of Euro, citing that francophone countries had very little to earn from the sub-categorization of their West African Markets if the franc is pulled.

 But they felt it necessary to outdo these new Nigerians and many of these Nigerians exited from these areas, poured into Lagos and some parts of the east as at early 90’s.

These Lebanese and others also played a pivotal hand in Investment Banks in Nigeria though private placement in the Nigerian stock market, but their real strength was the commercial where they supervised the inflationary curve price of building and real estate. There were others, especially from the far side of country and from the North.

But the success of the older Nigerian banks was a product of military era, an era that fed on to many Investment banks, many of them entirely reliant on Nigerian federal grants and contract with few scattered businesses.

When the military disappeared, these banks in their many numbers also disappeared. There was also the issue of insolvency, mainly comatose by non performing debt which accumulated in dues by inflationary pressure.

The main thing is that nothing was working aside the business of small administrations, and only a certain investment type could have supported these Investment banks. They rose so quickly and fail just as fast, with people losing much of their money.

The commercial banks such as First Banks and other older Banks held out the hopes of other businesses and served as protections for buffer tycoons roving in and out of federal account. In those years of the 90’s Nigerian banking society began to evolve into a different dragon.

As much Banks rose and failed, there was a newer group of Nigerians, but this time with an the edge of securities placement, with insurance which ones the home make of bigger banks, with newer avenues for merchant banking, with credit amortization and association, with the degrees of leases not unlike the commercial banks and where offering credit advisory and futures trading in all respect of investment management.

 These new banks acquired the rent prolepsis of micro financing and experimented with credit technology available in the US. It was these groups that began to chart the contours of Nigerian business, and began to underwrite for small business almost as the big guys.

But their small unit in several outfits helped these Investment banks to aggregate overtime gainer from Market Nigeria, though largely commercial but experimenting with quickly experimenting with size and the forms of businesses involving everyday bank in Nigeria.

The case of banks rising and falling and the case of people doing business through foreign exchange and parallel market made it easier for alternative to exist. It also made it easier for smaller banks to also fail. Commercial banks were digging too deep into the country and they had little competition. Commercial banks became the mother laden of many areas of Nigerian economy as smaller ones failed.

 
The advert of Obasanjo as President did not change the status quo, in fact he even deepened the vast resources of these bigger banks in Nigeria, who by market estimate where several in number.

Obasanjo’s privatization scheme enabled some survival of these smaller banks, but the rise of National debt to 30 billion and clear absence of sovereign wealth and zero foreign reserve led to the appointment of Prof Charles Soludo.

When he arrived at the office as CBN Chair, it was clear to the business world that business of Nigerian banking and the stock market would likely change. His idea of bringing several small banks together was to ensure they were reasonably fitted to compete and that there were too big to fail. What the effort however did was break the power of the old dominating banks and many of collision began to offer just as much credibility as the older ones.

This began a certain kind of race, not unlike Lehman and company in US and in Europe, but a race that almost naturally spike up price, where bankers went out of their way to look for customers even it mean treading on deposits that they were too thin. The bust was a natural consequence of that era, but more than anything, it brought down the inner walls of First Bank and their older groups in Nigerian Banking industry.

Those who led the new and Nigerian revolution in Banking were small business administrators who in the era past struggled against the tide. There was also Nigerian made Tycoons who were willing and able to stake their profit on Nigerian banks, the era of new banking cleared the sea of bad obstacles and at once proved an upfront to older.

IV

The balkanization of Nigerian Naira through a unit per unit comparison with dollars through to 140 per dollar term, may have misguided calculation of actual perform grade on many Nigerian banks. The more culpable of these Banks are the likes of First Bank who could have shown no sign of internal event breaking.

Another factor is that of Petroleum. Twenty five years ago, crude oil was within the 7 dollars for a barrel and with the range of years winnowing in 2008, there was a sharp shoot of the gas and petroleum to about 150 dollars per barrel.

 This unbound continue of price importation to Nigerian financial facility should have done enough to congeal any hint of bloodletting or mis-pricing of Nigerian Naira. In a sense, the rate of the rise of oil has been continuous time on wend, a Plateau of graph on the absorption of rate into Nigerian economy in the place of actual and real time profit.

The good and bad thing about this flat or even keel is that the Naira in lieu of the rising oil should have remained at parry with local economy, essentially subdued with very little kinetic movement which would have in turn enabled a better estimate of Bank’s aggregate performance from local perspective.

 
As such there is a reason why Banks were harvesting big time wealth from Nigeria and why for three decades the only financial engine that functioned was the banking industry. The reason is quite simply the number accoutrement and the currency ratio to dollar, had nothing to do with value of Nigerian economy.

It sounds oxymoron but the fall of the Naira was not a Nigerian make, even though it represented Nigerian Naira. Nigerians were only tilted to earn beyond their means and the numbers made these Bank such as First Bank look good especially in those high earn years of 2006 – 2008.

The obvious nose dive of First Bank and other Older Commercial banks in Nigeria is attributed to lazes faire attitude towards raunchy business deals and ‘badonomics’ of the very aggressive 80’s and 90’s and a forward for 2000s where the false impressions of growth was only the Asides from prized crude oil which in real time Nigeria did not benefit.

The force of money velocity evident in the gap of 1999 – 2008, largely speaking, from the eve of a newly created force of money called Euro which rocked the US stock market to the financial debacle of 2008, revolve around money as the pendulum of decay, which note the corrosion or erosion of value when new function or shift in price function general appeals.

 I call this force of new and aggressive price movement on or upon older price, ‘price corruption’. That is the absence of a levitation force in well leveraged or even de-leveraged money market - however risk averse - will certainly lead to corruption of value, which naturally collapses any old system since the older value no longer apply.

The rate at which this price corruption occurs may be linked with the so called failure rate, mainly probable from an endpoint or probable end point of indexing. Failure rate is hypothetically closer to a funny kind of draw-down.

From the nature of the draw-down in Nigerian economy and its bond market in the years 2005 - 2009, attention of many risk managers would have been spooked. And by the tall edge of 2005, there was no clarion call from Sanusi on such problem and why it signified big trouble for Nigerian banks and stock market.

So margin risk become a complicating thing for big banks since we can say that a risk portfolio bathtub of graph is great for many other reasons including the reverse of the life-span in understanding the reliability of banking system or the markets. A reverse of the bathtub from DFR through CFR through IFR would have made a short put re-combination possible, thereby useful in mastering the variance of risk in well-oiled 1999 – 2008 Nigerian market.

If foreign agitation of Nigerian economy and investment remained a put for many years, irrespective of what was happening in terms of real estate in US and in the world, the general inference is that Nigeria was too risky since Foreigners probable earned more money from in Nigeria and from Nigerian than Nigerians did, than they probably did in any economy in the world, hence a put.

But with a put, we can pretend that Risk was under control, but the inverse is the expert's view that something was wrong and Sanusi at First Bank would made 'Real' out of the condition. I mean understanding that there were no degrees of inevitability in any event.

Ijeoma Nwogwugwu Sept 12, 2012, The Battered Nigerian Naira and Project Cure, “Another argument that has been raised by the central bank in the last few days to support the introduction of the N5, 000 banknote is that it will curtail the need for people to hold their money in foreign currency notes – another term for it is “dollarization”. This argument is defective on the grounds that another major characteristic of money is that it is a store value.

If the naira is stable and can serve as a store value, there will be no need for people to convert the naira to the greenback. It is irrelevant if the CBN prints the N5, 000, N10, 000 or N20, 000 banknote; insofar as a banknote cannot guarantee value, people will always convert it to currencies that do so. The primary reason individuals or institutions resort to dollarization is because, as the reserve currency of the world, it offers the greatest store of value, not for ease of carriage or portability.”

“Lastly, from a cost perspective, it remains to be seen if the CBN will be reducing the cost of cash by restructuring the currency. The central bank, last week, in paid advertorials, showed that the cost of printing and minting currency notes and coins had fallen between 2009 and 2011 from N47.141 billion to N32.627 billion. But what it forgot to add was that in that same period, it did not undertake a wholesale restructuring exercise entailing the introduction of new banknotes and coins with new security features using the latest technology – an exercise, it must be acknowledged, is legitimate, yet is a lot more expensive to implement than printing and circulating existing currency notes and coins.”