Everyone in Norway became a theoretical millionaire on Wednesday in a milestone event for one of the world’s biggest sovereign wealth funds that has ballooned thanks to high oil and gas prices.
A preliminary counter on the website of the central bank, which manages the fund, rose to 5.11 trillion crowns ($828.66 billion), fractionally more than a million times Norway’s most recent official population estimate of 5,096,300.
Norway’s $710 billion wealth fund earned 13.4 percent last year.
Set up in 1990, the fund owns around 1 percent of the world’s stocks, as well as bonds and real estate from London to Boston, making the Nordic nation an exception when others are struggling under a mountain of debts.
Norway has sought to avoid the boom and bust cycle by investing the cash abroad, rather than at home. Governments can spend 4 per cent of the fund in Norway each year, slightly more than the annual return on investment.
Still, in Norway, oil wealth may have made the state reluctant to make reforms or cut subsidies unthinkable elsewhere. Farm subsidies allow farmers, for instance, to keep dairy cows in heated barns in the Arctic.
It may also have made some Norwegians reluctant to work. “One in five people of working age receive some kind of social insurance instead of working,” despite an official unemployment rate of 3.3 per cent.
When oil was discovered in the Norwegian continental shelf in 1969, Norway was very aware of the finite nature of petroleum, and didn’t waste any time legislating policies to manage the new-found resource in a way that would give Norwegians long-term wealth, benefit their entire society and make them competitive beyond just a commodities exporter.
John Calvert, a political science professor at Simon Fraser University posited that Norway got the basics right quite early on. “They understood what this was about and they put in place public policy that they have benefited so much from.”
This is in contrast to Canada’s free-market approach, he contends, where the Canadian government is discouraged from long-term public planning, in favour of allowing the market to determine the pace and scope of development.
Prof. Calvert argued quite strongly that the Norwegians have done “a much better job of managing their [petroleum] resource,”
While No. 15 on the World Economic Forum’s global competitiveness rankings, Norway is ranked third out of all countries on its macroeconomic environment (up from fourth last year), “driven by windfall oil revenues combined with prudent fiscal management,” according to the Forum.
Before oil was discovered, the Act of 21 June 1963 was already in place for managing the Norwegian continental shelf. This legislation has since been updated several times, most recently in 1996, now considered Norway’s Petroleum Act, which includes protection for fisheries, communities and the environment.
In 1972, the government founded the precursor of Statoil ASA, an integrated petroleum company. (In 2012, Statoil dividends from government shares was $2.4-billion). In the same year, the Norwegian Petroleum Directorate was also established, a government administrative body that has the objective of “creating the greatest possible values for society from the oil and gas activities by means of prudent resource management.”
In 1990, the precursor of the Government Pension Fund – Global (GPFG), a sovereign wealth fund, was established for surplus oil revenues. Today the GPFG is worth more than $700-billion and in 2013 the fund earned 13.4 percent.
So today it can be safely argued that there is not a single citizen of Norway who lives below the poverty level. It is simply unthinkable, thanks to astute and extremely prudent management of resources, borne out of patriotism and solid vision.
Nigeria on the other hand is another kettle of fish. Oil was discovered a few years earlier before NORWAY discovered theirs. The Nigerian economy was fueled then, by agriculture. Nigeria was a big exporter of cocoa, oil palm, groundnut, rubber etc. until oil was found and so began the demise of a once potentially great country.
While the Norwegian leaders avoided the temptation to splurge, diligently planning and ensuring they didn’t go on a spending spree, a Nigerian head of state was reported to have remarked that “money is not the problem but how to spend it.” That pointedly showed how myopic and visionless our rulers had always been. Mostly unprepared and uneducated men (educational here is not about paper qualification). Another former ruler was happy to be a senator but was prevailed upon to run for presidency. We have always had it rough.
While every Norwegian is theoretically a millionaire today, 70 percent of Nigerians are reportedly living below the poverty level i.e. living on less than two dollars daily.
By this write up, I am not attempting to argue that all Nigerians must be millionaires, no. Rather it is shameful that we have too many poor people, and we struggle with little or no infrastructure and power, extremely poor healthcare, shameful and constantly falling educational standard etc. Nigerian rulers past and present cannot justify nor explain how the trillions in petrodollars earned from crude have been spent over the years.
While Norway ensured their industries and economy wasn’t destroyed due to oil, Nigeria on the other hand abandoned everything for free oil money. The citizens are constantly divided by tribe and religion, but the thieving elites are united across all religion and region. Their binding force is greed, while they speak with one voice which is divide and rule, oppress the weak and sabotage the people. All is fair in looting and sharing. The only time they fight among themselves is when some feel cheated or they lose out in sharing of the proverbial national cake.
Norwegians are happy at home, while Nigerians are crying at home. Take a sample of the so called leaders and you will be shocked that most of their families live abroad. Their children school abroad, they go for medical, check-up/treatment in foreign lands. While the rest of us are left at home to die in ill equipped hospitals, bad roads, our children sit on the floor in public schools and our aged continue to die on long pension lines.
Nigeria is a conundrum. The leaders/rulers are publicly pious, urging the followers to pray and sacrifice for their nation, while they live in opulence, accompanied to any outing by a coterie of aides and an army of hangers-on, all in a bid to showcase Nigeria as the GIANT of Africa.
With so much poverty, you won’t believe that brent prices have been above $100 for a while. Nigeria happens to be the only OPEC country that currently imports refined oil for domestic usage. Rather than remedy such malaise, our brilliant technocrats have proposed a budget of 73 percent recurrent expenditure while the remaining 27% is supposed to be used for capital expenditure. That is wisdom, especially in a country that currently lacks infrastructure.
The panacea for development is not rocket science. Norway did what they ought to do by planning and developing policies that have beneficial effect on the generality of the people. And this they did from generation to generation. They didn’t need to rely on Brenton woods institutions to teach them free markets. Nigeria may be behind but it is never too late to start. While I have no problem with free markets, a country ought to do what a country ought to do for the benefit of her people and her people only.
Until we begin to look inward with sincerity of purpose, we won’t go anywhere no matter the number of “Harvard and MIT experts” we bring into government. Nigeria needs to develop her own homegrown framework of development laced with sincerity.
While Nigeria’s population far exceeds that of Norway, corruption in Nigeria is the biggest problem not population. Or how do you explain the budget for so called fuel subsidy jumping from N250b to over N3trillion in one year? How do you explain the fact that out of the four refineries in Nigeria, none is working up to 18% capacity. While India built the world largest refinery in 18months, Nigeria is still importing refined fuel after 15 years of pseudo-democracy and high crude oil prices. The National Assembly made it clear after several public sitting that N2.6 trillion was stolen by friends of the ruling party in the guise of subsidy, yet the federal government led by Goodluck Jonathan hasn’t deem it fit to do anything two years after.
Corruption is a debilitating cancer and where corruption is king, nothing CAN work. Nigeria has been cheated for years, we must make all corrupt public officials to face true justice. We don’t need a few billionaires manipulating trickle down economics in the manner of Reaganomics, we need a practical and honest economic policy that will be devoid of wuruwuru book system. All the imported text book economic plans have never worked partly due to insincerity.
Finally, the fight against corruption must be ruthless and total, with no sacred cows. The time to save our unborn generation is NOW. Remember we did not inherit the world from our parents, rather we borrowed it from our children. What will be our legacy to them?
I can be reached on twitter via @Ayourb
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