Sovereign Wealth Fund: Federalism Please

At last, the governments in the 36 states of the federation are up in
arms with the federal government over the constitutionally contentious
imposition of the Sovereign Wealth Fund (SWF) on them. Of course, the
surprise is that Nigeria Governors Forum is only just waking up late
in the day to grasp the implication of a development which, apart from
further extending the frontiers of the fiscal powers of the federal
behemoth, is clearly in practice, antithetical to the principles of
fiscal federalism.
Like the excess crude account which preceded it – a federal
imposition and a constitutional anomaly at that, the federal
government obviously assumes that it can make the extant bad fiscal
practice good, by fiat of legislation – while ignoring the grave
matter of its constitutionality.
The point about the Sovereign Wealth Fund is not so much about the
merit of the idea or even the principle underlying it. The beef its
complete disregard of the law which establishes the autonomy of states
as fiscal entities in the Nigerian federation.
We are certainly not opposed to the idea that federal and state
governments should set aside something for the rainy day. For a
wasting asset such as oil to which generations unborn are equally
entitled, a trust fund such as the SWF ordinarily recommends itself as
a moral imperative as well as a practical, fiscal necessity.
But then we say that good intentions are not enough. Clearly, the SWF
idea, as currently propounded ignores the fundamental truth that the
constitution is unambiguous in its provision that all monies accruing
into the federation account should be shared in accordance with the
existing revenue formula. The 1999 Constitution, as Amended is
unequivocal about where the powers of appropriation for each tier of
government in the federation lay and grants no exceptions whatsoever:
for the federal government, it is the National Assembly while the
state houses of assembly are the prescribed authority for the states.
The SWF Act, by implication, purports to impose the savings on the
states while also effectively ousting the powers of state parliaments
to appropriate monies belonging to them.
The SWF Act, as it is presents an example of legislative overreach by
the National Assembly. It is not hard to see that the law flows from
the seed sown and nurtured during the administration of President
Olusegun Obasanjo that the 36 states are no more than appendages of
the federal government. It feeds on the same mindset that the central
government is all-knowing, infallible, and like a powerful
unchallengeable principal, has the monopoly of knowledge on what is
best both for itself but also for the states.
That is clearly nonsense. Our constitution is unpretentiously federal
and hence must be nurtured to remain so in practice. The federal
government is at liberty to save its monies in whatever instruments it
desires. What it cannot do is impose any savings on the states in
flagrant disobedience of the constitution. Much as the idea of savings
seems “good”, SWF as it is – is incurably defective on constitutional
The bottom-line is that each state has its own peculiarities and
priorities. Why should the federal government impose the burden of
extortionate savings on Osun State for instance, which has crying
needs for funds for development? Isn’t today’s capital investment
laying the foundations for tomorrow’s prosperity?
Why should the federal government – after keeping its own – also seek
to keep what belongs to Osun simply because it thinks it knows what is
best for the people?
We have no problems with states being encouraged to subscribe to the
SWF; our contention is that it must be strictly on their own terms and
in accordance with the constitution. The federal government should
perish the notion that it alone is fiscally responsible when the
reality is that it is far more culpable in fiscal recklessness than
the states whom it often accuses.
We endorse the position of the Nigeria Governors Forum on the
workability of the SWF as presently designed. The governors have the
support of the people hence they should stand firm on the federal
principle. Their capitulation can only be at the cost of further
eroding the sacred precincts of our federalism.

It’s well!

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