It is important to appreciate and commend Botswana for setting up The Pula Fund in 1993. She depends on her mineral wealth (diamond) for growth and development and has shown strong economic management which has made it impossible for the country to face the economic crisis that has characterized many post-colonial states.
Botswana, planning for the future generation, created the Pula Fund that holds long term investment and keeps savings from revenue gotten from her raw minerals export and diamond. The Bank of Botswana manages the fund, at the moment; the Pula Fund has over $6.9 billion. Botswana has transformed the Pula Fund into a sovereign wealth fund that is regarded as a benchmark for good governance all over Sub-Saharan Africa.
Botswana survived the 2008 global financial crisis mainly by using funds from the Pula Fund to plug into the nation’s trade deficit. The deficit was as a result of the drop in the country’s exports. The global financial crisis was a mammoth validation for the establishment of the Pula Fund. Without it, Botswana would have experienced enormous trade deficit that would have caused pervasive economic hardship.
In Botswana, the mining sector represents about 40% of the Gross Domestic Product (GDP), using the Pula Fund; she exclusively invests in foreign assets, public equity and fixed income instruments. Although the future of diamond earnings is becoming uncertain going by the huge exploration, the state is taking steps to diversify her economy from being fully reliant on the diamond trade. The state is prepared for the eventual decline in mineral exports and is putting measures in place to prevent her from becoming a reniter state. However, with $6.9 billion sovereign wealth fund, Botswana is in an excellent state to maintain its development and diversity its economy.
Just like Botswana, Timor has a Fund designed to safeguard its oil wealth for future generations. The Fund has an Estimated Sustainable Income threshold, beyond which policy-makers cannot withdraw funds without parliamentary approval.
Comparing Nigeria with Botswana, Nigeria put in place The Sovereign Wealth Fund that commenced operation in October 2012 and is legally backed by the Nigeria Sovereign Investment Authority Act. It is intended to invest the savings gained from the difference between the budgeted and actual market prices for oil to earn returns that would benefit future generations.
The fund was allocated an initial $1 billion USD in seed capital. The Nigerian political elite, not believing the importance of savings for the future, through the Nigeria Governors Forum led by Bukola Saraki in 2008 sued the Federal Government challenging the legality of the Sovereign Wealth Fund and demanded the sharing of the $15billion Excess Crude Account. The government made efforts to settle out of court.
Three years after, the Governors Forum led by Mr. Rotimi Amaechi, the former Rivers State Governor, went to Supreme Court in October 2011 demanding that the $1billion saved in Sovereign Wealth Fund be shared along with the billions in Excess Crude Account.
Nigeria and Botswana experiences show direct opposite narrative, while Botswana works hard to keep proceeds from her natural resources for future generation, Nigeria elites fight over the sharing of her proceeds to be squandered.
Nigeria needs a sincere debate on what needs to be done to safeguard the future generation. And in that debate, we need to have a comprehensive review of what has happened since the exploration of crude started and come up with new ways of thinking about how to save our oil earnings for the future.
In spite oil exploration in a commercial quantity for over 48 years, we have not made any reasonable investment in education and health, promoted inclusive growth, created sustainable employment, established firm socio-economic substructure, create a functional industrial foundation, and a stable self-regulatory policy. At the moment, Nigeria’s industrialization discourse no longer holds, in spite of the huge monies we have made from crude, we failed to have industrialization as an integral part of our development planning process.
Botswana reduced poverty because she grew her economy out of practical strategies that created sustainable jobs and provided decent incomes based on industrial growth, which is a key missing link in Nigeria. Nigeria bases her natural resource governance on the intensification of her past colonial way of commodity export which is not sustainable for her growth and development.
Having seen the Botswana model, we must begin to rethink our past, re-examine our democracy and the nature of our politics which is now our development framework. And we must ask where we went wrong, how and where we failed and what to do in future to have a better Nigeria. We must have alternative crop of elite with alternative perspectives.
We must admit, although we are rich in mineral resources, in the prevailing circumstances of poverty, unemployment, and inequality, we must make the citizens benefit from the natural resources (oil, gas and solid minerals).