Nigeria leader wants sovereign wealth fund in months


Nigeria’s Acting President Goodluck Jonathan wants a sovereign wealth fund for sub-Saharan Africa’s biggest energy producer established within months, the country’s new finance minister said.

At a meeting in Abuja, Jonathan told the National Economic Council — made up of ministers, economic advisers, the central bank governor and the governors of Nigeria’s 36 states — to establish a framework for the fund within three months.

The fund could allow a percentage of Nigeria’s oil revenues to be invested in international capital markets, shielding the OPEC member’s economy from the impact of any sharp falls in global oil prices.

Finance Minister Olusegun Aganga said the fund would eventually replace the country’s excess crude account (ECA), a pillar of IMF-backed reforms launched in 2003 into which Nigeria currently saves any oil revenue above a benchmark oil price.

Critics of the ECA say there is no clear legal basis on which to determine how the windfall oil savings in the account should be shared between the tiers of government — federal, state and local — leading to constant political wrangling.
“The intention is that the (sovereign wealth) fund will be funded by what we have in the excess crude oil account,” Aganga told reporters after the economic council meeting.
“The present arrangement is just an administrative arrangement, it has no legal basis.

What we have to begin now is to give it a legal basis so the excess crude account will be replaced by a legal arrangement … in line with international best practice,” he said.

Aganga, a former London-based executive at US investment bank Goldman Sachs, was appointed finance minister in a reshuffle two weeks ago. He said the sovereign wealth fund would include a stabilisation fund to shield Nigeria against volatile oil prices and a fund for future generations.

The excess crude account has protected the Nigerian economy against the sort of boom and bust cycles it saw during the oil shocks of the 1970s but windfall savings have dwindled since President Umaru Yar’Adua took office in 2007.

The ECA contained more than $20 billion when Yar’Adua came to power but his administration regularly dipped into the account, raising concern about Nigeria’s commitment to fiscal discipline. The account currently contains around $3 billion.

Yar’Adua returned from three months in a Saudi hospital two months ago, where he was being treated for a heart ailment, but remains too sick to govern. Jonathan has since consolidated power as acting leader, appointing his own cabinet and advisers.

Sceptics say a Nigerian sovereign wealth fund is likely to suffer the same fate as the ECA, with squabbling over who controls the funds and how they are managed.

Other African oil nations including Angola, which rivals Nigeria as the continent’s biggest producer, and Ghana, which is expected to start producing oil this year, have also said they are considering establishing sovereign wealth funds.

Ghanaian officials privately say they want to avoid the mistakes of Nigeria, where endemic corruption has meant billions of dollars of oil revenues have been squandered by the elite while the majority live in poverty.

Pic: Nigeria’s Acting President -Jonathan Goodluck