‘Oil Money’ in Norway and Nigeria : the Law and the Reality on Sovereign Wealth Fund

On the management of revenues derived from petroleum resources (casually referred to as ‘oil money’), Nigeria and Norway present two extreme paradigms of prudence. On one of the extreme sides, the debate in Norway revolves around whether the state has saved and is saving too much in sovereign wealth fund (SWF) for future generation. On the other extreme side, Nigeria has never saved enough from the windfall it has experienced in the petroleum industry over the years. It has failed to build critical infrastructure for economic development. The poor revenue management and economic woes are attributable to ‘unfavourable political environment,’ and the inability to ‘implement prudent fiscal and macroeconomic policies which proactively…facilitate the productive investment and judicious saving of oil revenues.’ It is for the foregoing reasons, that the situations in Norway and Nigeria provide perfect examples of what to do and what not to do with ‘oil money’. Following the controversies that greeted Nigeria’s attempt at saving through the Excess Crude Account and the subsequent depletion of the account, it enacted the Nigerian Sovereign Investment Authority (Establishment etc) Act 2011. The Act established the Nigerian Sovereign Investment Authority (NSIA) to manage Nigeria’s SWFs and the Act sets out certain ambitious objectives to be achieved by the NSIA. However, the size of the SWF is so particularly small that the ambitious objectives are not realisable in the peculiar circumstances of Nigeria, unless there is a drastic change of approach over the next decades. This essay considers the challenges facing the implementation of the NSIA Act, with particular reference to the size of the fund, in comparison with the situation in Norway