Nigeria ranks the least country among 9 countries in Sub- Saharan Africa with the worst managed Sovereign Wealth Fund based on accountability, transparency and oversight.
The countries examined in the report include Nigeria, Botswana, Ghana, Uganda, Angola, Equatorial Guinea, Sudan, Gabon and Chad.
This was revealed in a report titled “Strong laws, Poor implementation characterize African resource sector” released on Monday by the Natural Resource Governance Institute, NRGI, Africa office based on data analysis from the 2017 Resource Governance Index.
The ranking was done based on three major indicators – oversight, transparency and accountability. These indicators are critical areas necessary to reduce opacity and secrecy in the oil and gas sector.
The NRGI report stated that the Nigerian government had failed to regularly disclose, publicly, the government officials’ financial interests in the extractive sector or the identities of beneficial owners of extractive companies, despite making commitments to do so as well as making public deposits and withdrawals from the Excess Crude Account.
The Excess Crude Account (ECA) is a special account kept by the Nigerian government where revenues realised from the sale of crude oil above established crude oil benchmark price, set annually in the federal budget, are saved.
The 2017 RGI index, assessed 33 countries with the sovereign wealth funds that collectively manage at least $3.3 trillion dollars in assets.
Nigeria was placed in the joint bottom position alongside the Qatari Investment Authority as a country whose government discloses almost none of the rules or practices governing deposits, withdrawals or investment of the ECA.
The Nigerian Sovereign Fund weakest scores are associated with excessive risk-taking, high management fees and politically motivated investments, according to the report.
“With a glut in oil prices, this means dwindling revenues which constitutes a critical challenge for the Nigerian government which depends on 90 per cent of revenues from oil,” the report states.
Silas Olan’g, Africa Co-Director for the Natural Resource Governance Institute said “If countries in sub-Saharan Africa closed the ‘implementation gap’ and fully implemented their own laws, they could generate greater income from natural resources. They could also better combat the negative human and environmental impacts of extraction,” he said.
He also blamed the failure of obeying legal frameworks as a “gap” that has allowed opacity to thrive in the sector.
“Trust in government and companies erodes when legal reform is not followed and citizens are left in the dark. Closing the ‘implementation gap’ is in everyone’s interests because ultimately it enables countries to reap the benefits that their mineral wealth should offer,”
Sovereign funds from six countries examined in the list when pooled together manage over $8 billion in resource revenues, but attain failing scores according to the report.
The index is topped by Ghana with a score of 93, based on its clear rules and advanced oversight mechanisms instituted by their parliament.
Among the African countries with well-managed sovereign funds include, Botswana ranked 2nd with a score of 63, Uganda 3rd and Angola 4th respectively.
Sarah Muyango, Director NGRI, Nigeria, told The ICIR that setting up a legislative framework to support the existence of the Excess Crude Account would reduce the gap in oil and gas management in the country.
“The ECA is not fully enshrined in the law which is a gap, there was an attempt to do that using the Fiscal Responsibility Act with regards to clarity of funding, withdrawals, handling disbursements there were no clear rules on how the funds should be managed,” she said.
Nigeria is an exception to other African countries where they have strong legislative regulations to protect their policies in oil and gas though they struggle with implementation.
“The Sovereign Wealth Fund in Nigeria has some form of legal backings, If you look at other African countries they have established constitutionally sovereign wealth funding mechanisms making it an act of law. In the case, of Nigeria, there are challenges with the ECA as there is no strong legislation to support it,” she said.
The report recommended that ministries should ensure sovereign wealth funds are subject to oversight independent of the fund’s management and executive.
Also, parliamentary approvals for withdrawals, and a rules-based deposit, withdrawal and investment framework audited by a supreme audit institution or external auditor would help to achieve accountability