Okonjo-Iweala - $1bn Sovereign Fund operation begins soon
bn Sovereign Fund operation begins soon
Nigeria’s $1 billion sovereign-wealth Fund (SWF) is set to start operating in the next few months, said the finance minister Ngozi Okonjo-Iweala, in what would mark a crucial step to help the government finance the revamping of its ramshackle roads and power grids.
Ms. Okonjo-Iweala, in an interview with The Wall Street Journal on the sidelines of the World Economic Forum, said the $1 billion will be pulled from Nigeria’s Excess Crude Account (ECA), which also funds the country’s fuel subsidy.
Ms. Okonjo-Iweala, was recently in the spotlight for her unsuccessful bid for the World Bank presidency.
SWF is a state-owned investment Fund composed of financial assets such as stocks, bonds, property, precious metals or other financial instruments. SWFs invest globally. Some of them have grabbed attention making bad investments in several Wall Street financial firms including Citigroup, Morgan Stanley, and Merrill Lynch. These firms needed a cash infusion due to losses resulting from mismanagement and the subprime mortgage crisis.
The Minister of Finance, Olusegun Aganga said in Lagos recently that the government was working towards giving early legal backing to the SWF.
The Federal Government plans the establishment of the Fund to divert more of the country’s revenues towards the badly-needed infrastructure development. The Fund would save a part of the nation’s income for future generations, and also provide financial reserve for the country to weather any economic downturns in the future.
It is antcipated that the Fund would eventually replace the current system by which Nigeria is meant to save oil revenues above a benchmark price into an excess crude account (ECA), which was a product of reforms launched in 2003 and backed by the International Monetary Fund (IMF) at the time.
“The Sovereign wealth Fund will have three main parts - savings for future generations, an economic stabilisation Fund and an infrastructure Fund for co-investment with other investors, the latter being the largest,” Aganga had said recently.
Analysts said the SWF is currently constrained by lack of a legal framework or basis for its funding. That is what the bill is meant to address among others.
The current ECA Fund is shared among the federal, state and local governments. But the savings have fallen from $20 billion in 2007 to about than $3.2billion last month, amid political wrangling by the authorities over its disbursements.
Okonjo-Iweala - bn Sovereign Fund operation begins soon
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