I just want to get your thoughts on this as Nigeria
has run down there account while Norways one is steadily rising,

This is in relation to the "Thread" by "Gbawe"

https://www.nairaland.com/nigeria/topic-614277.0.html

Here is an article below where Norway Invited Mike Hudson to advise this
on spending the account ithe current financial climate,

Norway’s Oil Fund: Is it Realizing its Full Potential?

March 7, 2011

By Michael Hudson

A speech given at the House of Literaturhus, Oslo, recently


I have been invited to visit Oslo to provide an international perspective on the management philosophy guiding Norway’s $500+ billion Oil Fund. In particular, I’ve been asked to compare it to other sovereign wealth funds. With regard to the nation’s economic development over the long run, how does Norway’s approach compare with those of China, Singapore and other countries that have accumulated enormous amounts in financial form?

Despite the large size of Norway’s fund (second only to that of Abu Dhabi), its managers treat it in much the same way that a Norwegian family would treat its own personal savings account.The money is consigned to fund managers to invest in a wide array of stocks and bonds so as to minimize risk. In effect, Norway has a big set of mutual funds. The aim is to avoid converting oil export proceeds into domestic currency and thus pushing up the exchange rate (the Dutch Disease), while using the revenue for future generations to use as best they can.

To my mind, the problem is the limited scope of how to go about doing this. Mutual funds invest in minority shares of companies. Spreading their money around is a widespread strategy for families and small investors to avoid risk. Their basic question is simply one of which stocks and bonds will yield the highest rate of return or rise most quickly in price. This is basically a short-term decision, given the ebb and flow of financial markets. And because stock pickers own only marginal amounts, their actions have no effect on the existing economic and political environment, productivity, employment and economic structures.

China and Singapore pursue a different strategy. Being concerned mainly with their national development, they start by asking what their economies will need to import over the next half-century, and how foreign investment can best serve their long-term diplomatic aims. Singapore invests heavily in Australia, partly to help political as well as economic reciprocity. China has bought up majority shares of mineral resources (including silica mines in Norway and Iceland) and bought into the partnerships of major U.S. hedge funds. Both countries use their sovereign wealth funds to upgrade their long-term economic productivity, living standards, technology and educational levels.

So here is quite a contrast. Norway is using its savings to buy minority stock ownership abroad, without linking its purchases to its own future development – except by receiving foreign exchange returns. It also is selling off ownership of its minerals and other natural resources, bringing in more foreign exchange on top of its oil exports. Most notably, it is selling these resources to nations that are seeking to dispose of their surplus dollars like a hot potato.

I do not mean this figure of speech as a joke. The financial climate has changed radically from when Norway’s Oil Fund was established in 1990. Norway has built up its savings since then by selling enormous quantities of oil and gas, and employing many thousands of workers. By coincidence, an even larger sum of $600 billion recently has been created overnight – electronically on computer keyboards, by the U.S. Federal Reserve Board as part of Chairman Ben Bernanke’s Quantitative Easing policy (QE2). This money has been provided to spur bank liquidity, in hope that they can earn their way out of the losses they suffer from their bad mortgage loans and other gambles.

The aim of these banks is the same as that of Norway’s Oil Fund: to make money. As the financial press has noticed, nearly the entire $600 billion has been sent abroad – to the BRIC countries and raw materials exporters in strong balance-of-payments positions, whose economies are not as “loaned up” as those of the United States and Europe, where Norway invests most of its money. So while Norway is putting its money into these countries, their financial managers are jumping ship – sending electronic dollars and euros to the economies that use their own sovereign wealth funds in the opposite way from what Norway is doing.

Here is the real problem: Money is not what it used to be back when it was backed by gold bullion or anything tangible, earned by labor and enterprise. Banks create credit almost freely on computer keyboards, and entail little cost in making huge gambles on derivatives based on which way foreign exchange rates, interest rates, bond prices and even defaults will move. This cost-free credit is flooding the global economy. This makes Norway’s foreign exchange savings (i.e., the Oil Fund) much less valuable in terms of how much it actually costs to buy $600 billion worth of stocks and bonds. The cost is almost zero for the U.S. banking system. And that is what Norway’s Oil Fund is competing with when it puts its money into the U.S. and European financial markets.

Matters also have changed radically in another respect. The stock market no longer serves mainly as a vehicle to raise funds for tangible capital investment. Since the 1980s it has become a vehicle for debt-leveraged buyouts (LBOs), financed by corporate raiders or ambitious financial empire-builders using high-interest “junk” bonds to “take companies private” by debt-for-equity swaps. Corporate managers at the remaining companies have gone into debt increasingly to finance stock buy-backs simply to bid up their price (and hence, the value of stock options that managers and venture capitalists give themselves), and even just to pay out as dividends.

This is not how textbooks describe stock markets as working. It was not what was expected half a century ago when Peter Drucker coined the term “pension-fund socialism.” He expected the stock market to mediate these inflows to finance new investment and hiring, so the economy would expand. But instead, the stock market has been loading companies down with debt for the past thirty years. Many are threatening bankruptcy – ironically, as a way to wipe out their pension obligations, so as to leave more for the large financial backers of the debt leveraging largely responsible for their insolvency.

Asian economists view the West as entering a dead end – one of corporate as well as individual debt peonage. They see Iceland, Ireland and Greece as a normal result of current policies, not as anomalies. From their perspective – and from that of many of my economic colleagues at UMKC – the world has entered an era of “debt pollution.” Tax reform has favored debt leveraging and speculation (e.g., low capital gains taxes, and a tax shift off finance and property onto labor). The upshot is that savings and credit have not been invested in expanding the means of production or to alleviate the global economy’s debt overhead, but simply to bid up real estate and stock prices on credit.

This is not a formula for long-term growth. It is a financial distortion of real development. I believe that it is as serious as that of the environmental pollution associated with global warming and other problems. I have spoken to Asian officials and can attest to the fact that this is their perspective. They do not see stock or bond markets offering the same promise that existed back in 1990, when the most recent takeoff got underway – and coincidentally, when Norway’s Oil Fund took its present form.

The long stock market rise may be over. Markets are shrinking as economies buckle under their debt overhead. Families and companies, cities and states, and even national governments now find themselves obliged to divert their spending away from the purchase of goods and services to pay down debts, effectively reducing investment and growth.

Governments of mixed economies such as China and Singapore are engaged in long-term planning to improve economic well-being. Toward this end they are investing in themselves, specifically in core resources that future generations will need to control and import in decades to come. They therefore are converting their holdings of currency and financial securities into long-term control over natural resources and technology.

Norway’s best choice also is to invest in its own economy. That means improving domestic infrastructure such as roads, communications, health, research and education. And to elevate its international position and destiny, this calls for direct investment in Norway’s neighbors, starting with the closest, Iceland and Scandinavia.

Source - http://michael-hudson.com/2011/03/norway%E2%80%99s-oil-fund-is-it-realizing-its-full-potential/

Nigeria is just starting up a Sovereign Wealth Fund, the legislation is not fully in place even, so how can it be drawn down? How can what doesn't yet exist be compared to Norways and Abu Dhabi, China, Singapore etc? How?

Up till now, oil money has been kept in accounts that aren't governed by any laws, they are mere adhoc arrangements started by the military who have at best, a donkeys understanding of economics and how civil society can be planned.

Jonathan is the first to attempt to bring oil under a fully accountable framework, and that process is still ungoing. It flls on every youth to give unalloyed support to the plan, because it is about siezing back your life and the lives of your kids yet unborn from the monsters and cabals that have ruled Nigeria before now. That GEJ is quiet does not mean robust and revolutionary actions are not going on. These things are for you to really understand, so that you do not get caught by lies, political rumours and innuendo, by the very lions that are out to devour you. This thread betrays a deep lack of understanding of our country.

For you information our External Reserves are actually growing, in the last 7 weeks, a whopping $2billion was deposited: http://www.businessdayonline.com/NG/index.php/news/76-hot-topic/18777-21bn-accrues-to-excess-crude-account-in-seven-weeks

Another of GEJ's pet project's we should be ready to spill our blood defending and promoting is the Petroleum Industrialisation Bill (PIB). It is a bill that would see Nigeria's income multiply by 7 times in due course, from the current $102billion to $687billion. Shell and the enemies of Nigeria are fighting tooth and nail for that bill never to see light of day and right now, the senate is playing cat and mouse with it. GEJ is determined to see it passed this month (March) and all levers are being pulled to make it happen.

Lets keep our ears to the ground, because there is a quiet revolution taking place; it is employing guile, wisdom and tact, rather than open confrontation. If you want my opinion, thats really the best way to defeat the old forces and change the country forever; anyone in open confrontation with the old forces is bound to fail, because they control all the instruments of violence (army, police etc), they are deeply embedded in the controlling areas of our economy and have bottomless pockets.

It isn't a revolution of violence, but one of intelligence, out-flanking and triangulation; sometimes the means are clean and sometimes they are greasy, but the one goal is clear. Emancipation!

U de vex?:



For you information our External Reserves are actually growing, in the last 7 weeks, a whopping $2billion was deposited: http://www.businessdayonline.com/NG/index.php/news/76-hot-topic/18777-21bn-accrues-to-excess-crude-account-in-seven-weeks

I stand to be corrected, so what is the rough total now plus the $2.1 billion

U de vex?:

Nigeria is just starting up a Sovereign Wealth Fund, the legislation is not fully in place even, so how can it be drawn down? How can what doesn't yet exist be compared to Norways and Abu Dhabi, China, Singapore etc? How?

^^^^^^^

What have they done with the Excess Dollar from the crude account is the Question,

The main aim of my post directed at CAP28 is to analyse what Norway, China and
Singapore are doing with the Excess Dollars compared to Nigeria,

If you have any concrete pointers on this let us know,

The point isn't to do something with the excess crude but to have it there to ensure investor confidence that the country can weather an economic meltdown and ensure them safety. Its also an asset nations use to aquire loans and sell bonds

martinosi:

I stand to be corrected, so what is the rough total now plus the $2.1 billion

What have they done with the Excess Dollar from the crude account is the Question,

The main aim of my post directed at CAP28 is to analyse what Norway, China and
Singapore are doing with the Excess Dollars compared to Nigeria,

If you have any concrete pointers on this let us know,

The total is now $36.4billion: http://www.thisdaylive.com/articles/naira-depreciates-amid-increase-in-reserves/87601/
It is actually not $2.1 billion, but about $2.9billion that was added in the last 7 weeks.

Like I said above, you cannot compare China, Singapore etc with Nigeria; they all run Sovereign Wealth funds like any responsible country will. Our oil sector has been totally anarchic up till now, with all sorts of hoodlums, underhand deals and raw theft. We are taking the first baby steps and those who our anarchic system benefits are not happy with it, hence the rumours, lies and obfuscation.

Ikengawo:

The point isn't to do something with the excess crude but to have it there to ensure investor confidence that the country can weather an economic meltdown and ensure them safety. Its also an asset nations use to aquire loans and sell bonds

Well in comparison to Norway that has an Excess Crude account and even china
with is surplus dollar account for export, the aim is not to acquire loans
and sale bonds or to insure oneself in the event of a economic melt-down.

the way the Chinese are going about to ensure themself against an
economic meltdown is to get rid of the dollars they have by purchasing raw
materials and acquiring land rights to minerals and energy abroad.

Please do read the article i posted again.

The whole bottomline aim is to invest in infrastruture to support
industry, commerce and social development and to create a sustainable
economy. Thats the only gurantee against economic crises not surplus
paper-dollars in your account that you have no definite use for.

If the govt had done this it will reduce the import dependancy that it
finds itself in, and if a crises was to erupt economically nigeria will just
find itself more import dependant and that excess crude account would just
dwindle very quickly.

U de vex?:

The total is now $36.4billion: http://www.thisdaylive.com/articles/naira-depreciates-amid-increase-in-reserves/87601/
It is actually not $2.1 billion, but about $2.9billion that was added in the last 7 weeks.

Like I said above, you cannot compare China, Singapore etc with Nigeria; [/b]they all run Sovereign Wealth funds like any responsible country will. Our oil sector has been totally anarchic up till now, with all sorts of hoodlums, underhand deals and raw theft. [b]We are taking the first baby steps and those who our anarchic system benefits are not happy with it, hence the rumours, lies and obfuscation.

I believe this is really a "cop-out" and a "lame excuse" that has run it course.
We have to make comparisions when we are looking at our own
basic development and when countries that are developing more quickly than
us do not even have the raw materials we have.

The advise that the economist Micheal Hudson give is very sound in this
article.

We are in a very deep mess, Norway in my opinion is not a good case when discussing Nigeria. We should not resort to social order just because we have oil . . . we should forget about this oil and even stop the idea of excess crude account . . . my opinion. To do that we should first sign the resources to the owners and create a resource tax system where we can systematically regulate and impose a resource tax of say, 70%. This will not only stop the ND crisis but kick start a virile capitalist model , . forget oil. Peasants should be farmers - traders should be traders and forget about those oil nonsense. Then we can start a real tax system and there would be an incentive structure to enforce policies that helps small business and exporters - because we need their tax.

The oil has been a curse thus far.

We need to create an active "middle class" that can hold the govt in account. . . .

yeswecan:

We are in a very deep mess, Norway in my opinion is not a good case when discussing Nigeria. We should not resort to social order just because we have oil . . . we should forget about this oil and even stop the idea of excess crude account . . . my opinion. To do that we should first sign the resources to the owners and create a resource tax system where we can systematically regulate and impose a resource tax of say, 70%. This will not only stop the ND crisis but kick start a virile capitalist model , . forget oil. Peasants should be farmers - traders should be traders and forget about those oil nonsense. Then we can start a real tax system and there would be an incentive structure to enforce policies that helps small business and exporters - because we need their tax.

The oil has been a curse thus far.

We need to create an active "middle class" that can hold the govt in account. . . .

CO-SIGN, I agree with the Bold,