BETWEEN NORWAY AND NIGERIA
Norway is a nation of five million people and invests the revenues from its 1.64 million barrels daily oil production through its sovereign wealth fund which today is valued over $1 trillion, making it the largest and most profitable in the world.
By law, the Norwegian government is only allowed to spend 4% of the annual profits of its $1 trillion sovereign wealth fund in the country’s economy meaning the balance 96% profits is reinvested in the fund.
This means that the Norwegian government has to generate 96% of its annual spending from taxation and its tax system is so transparent that there is a website where annual taxes paid by the citizens are made public.
In return, Norway runs a pension scheme that guarantees its citizens 75% of their last working pay for the rest of their lives after retirement at the age of 65, ensuring only those who sow in taxes reap the pension dividends.
Norway is also able to provide free first class medical services to its five million population and free world class nursery to tertiary education for its young population ensuring the ready availability of top class qualified personnel.
Norway’s public infrastructure is world class even by first world standards and with life expectancy in the eighties, no doubt sustained by the generous pensions enjoyed by Norwegians for the duration of their retirement lives.
The trillion dollar sovereign wealth fund which has investments across the world, and which is run by the Norwegian central bank has now decided according to the Financial Times, that it will dump its investments in oil and gas stocks.
This means that the Norwegian sovereign wealth fund officially known as Government Pension Fund Global will be divesting shares it holds in such companies as BP, Royal Dutch Shell and ExxonMobil.
According to the Financial Times, the Norwegian central bank says this will make the country’s one trillion dollar wealth less vulnerable to a permanent drop in oil and gas prices.
This decision is most intriguing as Norway is not just only an oil producing nation but its one trillion dollar sovereign wealth fund was built over the last two decades from oil revenues.
Although the investment by the Norwegian sovereign wealth fund in oil stocks make up just 6% of its total portfolio, the central bank says this move is not about predicting the future oil prices or of the future of oil itself.
But when you view this divestment decision together with the earlier decision of Norway to phase out petrol driven cars for electric vehicles in the next eight years, that is by 2025, you have to agree that Norway is doing just that.
Through these two critical decisions, that is divesting from oil stocks and phasing out petrol powered vehicles, Norway is predicting that oil and gas prices in the future will remain low and the sector itself has no sustainable future.
Nigeria on the other hand is also an oil producing country like Norway but that is where the similarity ends. Unlike Norway which saves its oil revenues in a sovereign wealth fund, Nigeria shares its own oil revenues.
With a population of more than 170 million people, Nigeria shares on a monthly basis the revenues from its 1.8 million barrels of daily oil production, not even among its citizens but among the three tiers of government.
Among these three tiers of government, the federal gets 54%, the 36 states 26% and the 774 local governments 22%, and end up spending 80 - 90% of their annual budgets on recurrent expenditures.
This monthly sharing bazaar and misallocation of funds of course excludes Lagos State which generates 75% of annual revenues from taxes and is able to spend 65% of its annual budget on capital expenditure.
The end result is that Nigeria’s healthcare is substandard, its educational system is in a shambles and its public infrastructure very inadequate even by Third World standards, insecurity high and life expectancy in the mid-fifties.
Expected to be the third most populous country in the world by 2050 due to its high birth rate, Nigeria’s main revenue source and foreign exchange earner is likely to be a worthless commodity by then.
With Nigeria’s sovereign wealth fund having a paltry $1.5 billion and a population of 170 million compared to Norway’s $1 trillion sovereign wealth fund and a population of 5 million, which country out of the two has a future?