How Norway has grown richer by prudent oil resources management
The production of oil in the Scandinavian country of Norway began on June 15,1971 and Norway’s Sovereign Wealth Fund was established in 1997 to invest in the country’s surplus oil revenue.
The fund raked in $131 billion in 2017 - the largest amount in the fund’s 20-year history, surpassing $1 trillion in market value in September last year, according to the fund’s annual report.
This is after its stock value was boosted by soaring stock markets around the world.
The fund is 2.7 times bigger than the Norwegian economy. Norway's economy relies heavily on the oceans, with its major industries - oil and gas, shipping, fish farming and fishing - all based offshore.
The fund is worth 140,000 pounds for every man, woman and child in Norway.
The fund's ambitions as an investor significantly overlaps with the United Nations' goals of achieving sustainable economic, social and environmental development by 2030.
Carine Smith Ihenacho, the fund's Chief Corporate Governance Officer, said in September 2018, "That is why we are looking at long-term sustainability ...
We find the UN Sustainable Development Goals are a good framework to look at because they go across many indicators."
The fund currently invests 67 per cent of its money in equities, but last year, it decided to increase this allocation to 70 per cent.
It is not to be underestimated how many stocks this fund already owns: 1.4 per cent of all listed stocks in the world.
The Fund’s Chief Executive, Yngve Slyngstad, said in 2017, “I don’t think anyone expected the fund to reach $1 trillion, when the first transfer of oil revenue was made in May, 1996”.
The fund, the world’s largest piggy bank, has around 60 billion pounds tied up in Britain, making the UK its second biggest market after the US.
Commonly known as the Oil Fund, it is managed by Norges Bank Investment Management and was set up to save money for future generations of Norwegians.
The fund invests in shares, bonds and property in 77 countries around the world.
It is invested in 9,146 companies around the world but its biggest boost last year came from Apple.
It has a 0.9 per cent stake in the US tech company which has a market value of more than $8 billion.
Last year, Apple’s share price rose to 46 per cent.
The next largest contributions to the fund’s return came from Tencent, a Chinese tech company, and Microsoft.
Other holdings are Nestle, Google owner Alphabet, Royal Dutch Shell and Microsoft.The worst-performing investments were GE, Exxon Mobil, and Israeli health care company, Teva Pharmaceutical Industries.
Ethical rules mean it does not invest in companies that produce tobacco, nuclear weapons or landmines.
The fund’s biggest country holding is the US, where 37.2 per cent is invested and where the stock market has been good, particularly in the second half of 2017, with benchmarks such as the Dow Jones Industrial Average and S&P 500 index setting repeated all-time highs.
Norway’s sovereign wealth fund increased its U.S. equity holdings every year since the 1990s, rising to $249.7 billion last year.
Ghana and the Norwegian model
Ghana can follow the Norwegian model. The current regime is investing the country’s oil resources in funding its flagship free senior high school policy.
This is a laudable policy. But the country can do more.
A more sustainable approach would be to invest the county’s oil resources in global equities. Investing in the educational sector is the second best approach because this is also an investment in the country’s future.
Norway – already one of the richest countries in the world – is conscious of attaining the UN’s Sustainable Development Goals.
Ghana - a country that is yet to achieve middle income status - should then be a country more determined to achieve these goals.
The writer is a young man interested in the administration of oil revenues in Ghana.