By Stanley Opara with agency report

Friday, 11 Feb 2011

Nigeria’s sovereign wealth fund, currently under debate in the National Assembly, will set aside at least 20 per cent of its assets accrued from crude oil exports for future generations.

The Nigeria Sovereign Investment Authority will be split into the Nigeria Infrastructure Fund, the Future Generations Fund and the Stabilisation Fund, Bloomberg quoted a draft of the bill in a report on Thursday.

Each component, it added, would represent at least 20 per cent of the total fund.

The fund is designed to ensure that some of the country’s oil wealth is saved and that it could not be tapped on a regular basis to finance the government’s running costs. The Federal Government had pledged an initial sum of $1bn for the fund.

In a related development, the Central Bank of Nigeria sold N109.27bn ($720m) in 91-182- and 364-day treasury bills on Wednesday as part of measures to curb inflation and help banks manage their liquidity.

The regulator, according to Reuters, sold N39.27bn in 91-day bills at a marginal rate of 7.09 per cent, N40bn in 182-day bills at nine per cent and N30bn in 364-day bonds at 9.6 per cent.

Total subscription for the papers, it added, was in excess of N315bn, “but the CBN stuck to its initial offer.”

On the sovereign wealth fund, each of the three components will create a “ring-fenced portfolio of investments,” the document said.

The finance minister could only withdraw money from the stabilisation segment, “upon a proper demonstration of urgency,” in order to shore up the economy whenever lower crude prices curb government revenue, the document further explained.

Nigeria relies on crude exports for about 95 per cent of its foreign currency earnings. It’s the only member of the Organisation of Petroleum Exporting Countries without a sovereign fund, according to a former Minister of Information, Prof. Dora Akunyili.

The creation of the sovereign wealth fund, however, came after the country depleted its current excess crude account from more than $20bn in 2007 to less than $1bn last year, according to a recent report.

Fitch Ratings lowered its outlook on Nigeria’s BB- credit rating to “negative” from “stable” on October 22, saying it was concerned by withdrawals from the account and a drop in foreign currency reserves.

The sovereign fund, to be based in the capital, Abuja, will have a governing board headed by the President. Other members include governors of the 36 states, the ministers of finance, justice and planning, the CBN Governor and the chief economic adviser.

 

Source: Punch