Nigeria’s Economic Struggle Contrasted with Norway’s Tech-Driven Prosperity

Nigeria is currently grappling with a pressing need for foreign currency, particularly dollars, while Norway, a nation sharing a comparable oil production capacity, witnessed its oil wealth surge by an astounding $142.65 billion during the initial half of 2023.

In a remarkable turnaround, Norway’s sovereign wealth fund, established to safeguard the nation’s future beyond oil, has experienced a substantial infusion of $142.65 billion due to a surge in AI-driven technological advancements.

The leap of $142.65 billion by Norway dwarfs Nigeria’s 2023 budget of $49 billion (equivalent to N21.83 trillion), underscoring the striking divergence in their economic trajectories, as calculated by BusinessDay.

“In an era of scarce dollar reserves, Nigeria squandered opportunities to channel surplus oil revenue towards securing future generations’ prosperity,” stated Niyi Awoyemi, a prominent public finance expert and the Managing Director of Brightlve Capitals.

Awoyemi emphasized that Nigeria’s Excess Crude Account (ECA) had, regrettably, been at times diverted for political motives rather than being allocated for economic advancement or targeted projects.

“This juncture could have been the ideal opportunity for Nigeria to amass foreign currency to bolster its waning economy. However, challenges stemming from struggling oil production and an absence of clear guidelines governing deposits and withdrawals from the special account persist as major stumbling blocks,” lamented Awoyemi.

It was discovered that the holdings of the $1.4 trillion fund in tech companies had surged nearly 39 percent in the initial half of 2023. Notably, contributions from stocks such as Apple, Microsoft, and Nvidia played a pivotal role in propelling the fund’s overall return of 10 percent.

“The stock market has exhibited remarkable resilience throughout the first half of this year, marking a stark contrast from the previous lackluster performance in 2022,” observed Nicolai Tangen, CEO of Norges Bank Investment Management, the entity responsible for managing the fund.

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Tangen accentuated the role of technology stocks, particularly those linked to the burgeoning field of artificial intelligence, in driving this upswing. He noted that the upsurge is in response to the escalating demand for innovative solutions in the realm of AI.

In a pertinent statement on the significance of artificial intelligence, the fund highlighted its belief that responsible development and application of this technology are pivotal for maintaining well-functioning markets.

“The impact of artificial intelligence on our investments’ financial returns over time cannot be overlooked. We advocate for the establishment of a comprehensive and coherent regulatory framework for AI, fostering secure innovation and the mitigation of adverse consequences,” the fund expressed.

Norway, recognized as the world’s fifth-largest oil exporter, boasts a daily oil production capacity of 2.4 million barrels. As the nation propels itself towards a future beyond oil, Nigeria continues to grapple with the reality of transitioning from its heavy reliance on oil revenue.

This struggle is amplified by the persistent foreign currency shortages plaguing Nigeria, causing impediments for investors eager to engage with Africa’s largest economy.

Investigations by BusinessDay have shown that Nigeria’s ECA balance remained stagnant at approximately $474 million over the past two years. This, despite a remittance of N907 billion to the Federal Account Allocation Committee by the Nigerian National Petroleum Company Limited.

“Regrettably, apart from the administration led by Obasanjo, subsequent governments have recurrently mismanaged the ECA. It is deeply disconcerting that despite global oil prices consistently exceeding the federal budget benchmark, the Buhari administration failed to manage the account judiciously,” lamented Charles Akinbobola, a financial analyst at Creditville Limited.

Akinbobola attributed the squandering of extra oil proceeds to poor transparency levels exhibited by various government agencies and officials entrusted with fund management. He decried the penchant for diverting funds towards frivolous expenditures and rampant corruption.

“Such behavior is deeply regrettable. Utilizing the funds without informing the account holders signifies a disregard for creating a foundation for future generations,” criticized an authoritative source within Nigeria’s energy sector.

Merely two weeks ago, the House of Representatives embarked on an inquiry into the Central Bank of Nigeria (CBN), citing alleged fund mismanagement and the non-disclosure of investment interest details from the excess crude oil/petroleum profits tax/royalty account.

The motion was spearheaded by Esosa Iyawe, a legislator from Edo State, who underlined that the CBN serves as the federal government’s banker and guardian of investment conduits, encompassing the petroleum profits tax (PPT) and the ECA, among others.

Iyawe emphasized concerns over the CBN’s steadfast refusal to comply with the Auditor General for the Federation’s requests for divulging information regarding interest management from the Petroleum Profit tax (PPT)/Royalty and Foreign Excess Crude Account.

“The House is further perturbed by reports revealing unauthorized and indiscriminate withdrawals from the ECA, spanning current year expenditures, fuel subsidies, debt financing, and power projects—ventures that lie beyond the fund’s designated scope,” Iyawe asserted.

Experts underscore that the sustained demand by states to fund diverse programs, coupled with the federal government’s struggle to generate sufficient revenue for its operations, has compelled the ECA to be drawn down.