A savings account for the state governments

The news that the Akwa Ibom state government is considering creating a savings account in the 2025 fiscal year to put away money for rainy days is perhaps the most heartwarming report that I have heard this year. According to Governor Umo Eno, who was speaking at the state executive council session, the idea of the savings scheme is to progressively build “compulsory savings for projects that we may not foresee immediately and for the next generation’’.

It would be the first time a state government would create a savings plan in Nigeria, and is coming 14 years after the federal government established the Nigerian Sovereign Investment Authority in 2011 to manage the nation’s sovereign wealth fund. The benefits of savings for individuals, households and businesses are well known, but for a government, it ensures long-term financial stability and enhances development.

By building reserves, avoiding debt, attracting investment and providing stability to the economy, the state government will be able to meet its obligations and provide for the needs of its citizens over the long term. A savings programme also encourages the government to be frugal, prudent and wise in managing our resources. I commend the governor for this and I encourage him to go ahead with the plan, irrespective of contrary suggestions that he might receive from ‘’stakeholders’’.

I have been very critical of past administrations in the state for their wastefulness and reckless spending. Previous governors spent billions of our resources to buy houses, cars and expensive gifts for their friends and political associates. They wasted our resources on sponsorships of pilgrimages and leisure trips. Many emirs from the north have benefitted from the reckless generosities of the past. I know of one of our former governors who built a ranch in Kaduna state for his friend from that state. Yes, a big cattle ranch.

This same governor also gave a whopping £1 million to the sitting president that time as his own contribution to the president to furnish his new London apartment. The governor had heard that the president had just acquired a new residence in London, and our governor, in his typical outrageousness, felt compelled to make the donation.

The president did not ask for it, but he did not decline the offer either. I would have expected that a responsible president would not accept such a gift from a governor! There are many other cases of past gubernatorial indiscretions in our state. Other state governors are no less frivolous. Even in these hard times, offensive displays of luxurious lifestyle are going on in the state capitals at the expense of the people.

A governor in a poverty-stricken north-west has just purchased a 2025 BMW! There seems to be a widely held notion that state governments are not supposed to save money. It’s the reason many governors indulge in flagrant abuses of resources which, in turn, lead to widespread borrowings to fund budget deficits. I ask Gov. Eno not to go on that route. It’s time to turn the page from the thoughtlessness of the past.

While we are still waiting for the details of Eno’s savings scheme, here are a few suggestions that may be helpful. The scheme should be christened ‘’Akwa Ibom State Wealth Fund’’, backed by law and designed in a somewhat similar fashion to the sovereign wealth fund of the federal government. It would be funded by the state government and managed by people of integrity and a wealth of experience in finance and investment. It should operate independently of the bureaucracy and be insulated from political interference.

The enabling law should stipulate where the fund could invest and under what conditions it can exit such areas. The law shall also specify the proportion of the fund’s resources that would be held in current and capital assets; and indicate under what conditions the governor may access monies therein to meet difficult and unexpected challenges. There are many investment avenues in the money and capital markets as well as the property subsector that the fund may consider investing in. So, why can’t every state government take up a long-term savings programme for their people?

A lot of countries, especially the oil-rich nations, have since created wealth funds to save for their future generations. They had long known that crude oil is a diminishing resource. Saudi Arabia’s sovereign wealth fund is worth $925 billion, with its assets jumping by 29% last year – and domestic investment being a major driver.

Another oil-rich nation, Norway is renowned for the huge reserves in its wealth fund. It was worth $1.715 trillion in August. A tiny country of less than six million people, Norway provides a generous welfare scheme for its people, yet its leaders have been wise and prudent to save for the future. The fund was created in the 1990s by an act of parliament, and today the fund has become one of the world’s largest investors, and to date, it has put money in 8,700 in over 70 countries around the world.

The Nigerian Wealth Fund was created with a $1 billion seed capital in 2011. In 2023, it’s grown to $2.3 billion in assets, the third largest in sub-Saharan Africa, after Botswana and Angola. I thank President Jonathan for his foresight. If Gov. Umo Eno starts the Akwa Ibom Wealth Fund next year, we can expect its portfolio to grow above N300 billion in the next few decades. Future generations of Akwa Ibom citizens will look back with pride and say: ‘’There was a governor’’!