A well-structured SWF is not just a financial instrument; it is a vehicle for national transformation. Nigeria’s NSIA must not just be maintained — it must be aggressively expanded, and the principles it was setup around should be adhered to and vigorously protected. With disciplined governance, strategic investment, and a clear long-term vision, Nigeria can turn its sovereign wealth fund into a powerhouse for economic resilience and national development.
Economies, much like ecosystems, are governed by forces both visible and invisible, balancing stability and disruption. In this way, sovereign wealth funds (SWFs) are not just financial instruments; they have the potential to be the deep roots of an economy, storing and redistributing resources across time. Done right, they enable countries to weather economic droughts, foster long-term growth, and cultivate resilience.
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The Rain That Comes and Goes
Imagine an arid landscape. Rain comes in short bursts — torrential downpours that flood the land before quickly disappearing. Without deep-rooted trees or reservoirs to capture it, the water runs off, leaving little behind for the dry seasons. Many economies, especially those dependent on natural resources, function in much the same way. Commodity prices surge, filling government coffers, but when they inevitably collapse, the funds dry up, leaving economic instability in their wake. Nigeria’s economy, like most of the world economy, went through an economic dry season in 2020, with the collapse in the global price oil, leading to the worst recession in 40 years. Nigeria still feels the impact through its public finances, five years on.
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The United Kingdom, despite benefiting significantly from North Sea oil revenues in the 1970s and 1980s, did not establish a sovereign wealth fund, instead using its oil windfall for immediate fiscal policies such as tax reductions and current expenditures. As a result, the UK has little to show today as a legacy from its oil boom. In contrast, Norway, often hailed as the gold standard of sovereign wealth management, saw the draught coming. Instead of spending every oil boom windfall, it planted deep financial roots through the Government Pension Fund, which now stands at a staggering $1.7 trillion.
To put this into perspective, Norway’s sovereign wealth fund is larger than the entire GDP of Canada. This means that a nation of just 5.5 million people, similar in size to the population of Akwa Ibom State, has saved more than the total annual economic output of a country of nearly eight times its size. This fund allows Norway to support future generations, stabilise economic fluctuations, and invest in global opportunities that sustain national prosperity. It is, in many ways, an ecological model applied to finance — capturing and storing value during times of abundance to sustain life when scarcity arrives.
Nigeria has an immense opportunity to do the same. In 2004, the country established the Excess Crude Account (ECA), which peaked at nearly $20 billion and played a stabilising role during the 2008 global financial crisis. However, due to weak governance and political withdrawals, the fund dwindled over time. Recognising the need for a more structured approach, Nigeria created the Nigerian Sovereign Investment Authority (NSIA) in 2011. As of recent reports, the NSIA manages approximately $2.4 billion, far less than the country’s potential, but a step in the right direction.
Why Economies Need Deep Roots
Economies are living, breathing ecosystems. They thrive when diversity, resilience, and regenerative processes are embedded in their designs. SWFs, when properly structured, act as economic stabilisers, much like forests that anchor the soil and prevent erosion. Without them, resource-rich nations become victims of boom-and-bust cycles, unable to sustain long-term prosperity.
Nigeria’s population exceeds 200 million — far greater than Norway’s 5.5 million. Yet, Norway has saved nearly two hundred times more in its sovereign wealth fund than Nigeria has. If Nigeria had consistently saved and invested its oil revenues over the past few decades, its fund could hold hundreds of billions of dollars today. This is not a criticism, Nigeria is not alone in this, the UK did the same. But it is an illustration of what is possible with the right policies in place.
The Flywheel Effect: A New Way to Think About SWFs
Resilience is built through self-reinforcing cycles. Strong economic systems generate growth that begets more growth, much like a flywheel gaining momentum over time. Sovereign wealth funds, when designed effectively, function as the anchor of this process.
Instead of only spending resource wealth on short-term needs, governments must treat SWFs as flywheels —mechanisms that convert volatile revenue into stable, long-term investment. These funds should:
- Balance stability and growth: A portion should be set aside for stabilisation, ensuring governments can maintain essential services during downturns.
- Invest in future industries and infrastructure: Rather than solely relying on bonds or equities, SWFs can invest in emerging technologies, renewable energy, important infrastructure projects and human capital to ensure future relevance.
- Ensure intergenerational equity: Every dollar extracted today should be viewed through the lens of future generations.
If a country’s resources belong to its people, then unborn citizens deserve their share, too.
The NSIA is set-up appropriately along these lines and therefore has the potential to be transformational. It has already made promising progress with some of its infrastructure investments.
Conclusion: A Call to Aggressively Grow the NSIA
A well-structured SWF is not just a financial instrument; it is a vehicle for national transformation. Nigeria’s NSIA must not just be maintained — it must be aggressively expanded, and the principles it was setup around should be adhered to and vigorously protected. With disciplined governance, strategic investment, and a clear long-term vision, Nigeria can turn its sovereign wealth fund into a powerhouse for economic resilience and national development. It can stabilise the economy, seed new industries, provide the next generation of infrastructure and ensure wealth does not evaporate with shifting oil and gas prices.
Nigeria should act decisively. It should see the NSIA as much more than a bolted-on element of its public financial management. Every dollar placed in the fund today is a step towards a stronger, more secure future. The goal should not be modest expansion but an ambitious drive to grow the fund to tens, if not hundreds, of billions of dollars over the next decade.
By doing so, it can unlock economic opportunities, drive infrastructure development, and ensure lasting prosperity for generations to come. We cannot control the rain. But we can control how we capture it. The opportunity is here — plant deep, grow strong, and ensure that when the economic storms come, the roots hold firm.
Richard Ough is the managing director and chief economist at Flywheel Economics; a boutique economic consulting company and policy think tank.
