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The creation of Sovereign Wealth Fund by the Nigeria’s government is underway to carter for some of the earnings from the foreign transactions to serve as another reserve for the country for future needs.
Already, the Nigeria’s National Economic Council (NEC) yesterday approved the creation of a National Sovereign Wealth Fund (NSWF) to replace the current Excess Crude Account (ECA).
NEC is a statutory body composed of the 36 state governors and some ministers overseeing economic portfolios such as Finance, National Planning. The Attorney-General of the Federation and Minister of Justice, the Inspector-General of Police and Governor of the Central Bank of Nigeria (CBN) are also statutory members of the Council.
The meeting which took place yesterday inside the Aso Rock Villa, Abuja was presided over by the Acting President, Dr Goodluck Jonathan.
Minister of Finance, Mr Olusegun Aganga, and his National Planning counterpart, Dr Shamsudeen Usman, who briefed newsmen at the end of the almost five hours meeting said the NSWF is meant to be a robust institutional framework and strong fiscal policy for managing excess crude earnings.
According to the ministers, the NSWF is expected to legally manage the nation’s extra earnings from higher prices of crude oil, adding that the fund would also serve almost like stabilization fund.
Aside the fact that the new fund would provide the country stronger institutional framework, the ministers stated that, “it will also support the development need of the country, as we will be able to invest part of that portfolio in critical infrastructure”.
“There will be another pool which will be a saving pool for future generations. The whole idea is that it is absolutely irresponsible for us to spend all the revenue we generate; we need to provide for the future. Basically, the idea is not to rely entirely on oil it will be presented to the council next week and we expect to be in the right position within the next two to three months”, the ministers disclosed
The current ECA, which has no legal backing, was a creation of the Olusegun Obasanjo administration aimed at saving some of the funds accruing to the nation as a result of the rise in the price of crude oil.
The ministers said though the NSWF is similar to the ECA, the new arrangement will have legitimacy rather than being a product of political and economic expediency.
They regretted that Nigeria is the only member of the Organization of Petroleum Exporting Countries (OPEC) without a Sovereign Wealth Fund, saying that the idea was discussed by the Council about two years ago but that inconsistency in government polices delayed its implementation.
“Already there was a presidential committee set up by the Acting President which has been looking at this”, Aganga said, hinting that the intention is for the NSWF to be funded by the current earnings in the excess crude oil account.
“The only difference”, according to him, “is that the money in the excess crude account today does not have legal framework and is not managed as the one I explained, adding, “By the way we are the only OPEC country that does not have the SWF. So, even if it is 1billion we start with, the idea, the institutional framework, the fiscal discipline is so important to the credibility of the country itself and the credit rating of the country.”
Usman, on his part, lamented that what has happened “was one of those things about our system here, our lack of continuity or lack of consistency. We missed an opportunity but it is never too late.”
It was resolved at the end of the meeting that the Fund should now be made available to commercial banks that will lend it to the states at single digit interest rate.
The creation of Sovereign Wealth Fund by the Nigeria’s government is underway to carter for some of the earnings from the foreign transactions to serve as another reserve for the country for future needs.
Already, the Nigeria’s National Economic Council (NEC) yesterday approved the creation of a National Sovereign Wealth Fund (NSWF) to replace the current Excess Crude Account (ECA).
NEC is a statutory body composed of the 36 state governors and some ministers overseeing economic portfolios such as Finance, National Planning. The Attorney-General of the Federation and Minister of Justice, the Inspector-General of Police and Governor of the Central Bank of Nigeria (CBN) are also statutory members of the Council.
The meeting which took place yesterday inside the Aso Rock Villa, Abuja was presided over by the Acting President, Dr Goodluck Jonathan.
Minister of Finance, Mr Olusegun Aganga, and his National Planning counterpart, Dr Shamsudeen Usman, who briefed newsmen at the end of the almost five hours meeting said the NSWF is meant to be a robust institutional framework and strong fiscal policy for managing excess crude earnings.
According to the ministers, the NSWF is expected to legally manage the nation’s extra earnings from higher prices of crude oil, adding that the fund would also serve almost like stabilization fund.
Aside the fact that the new fund would provide the country stronger institutional framework, the ministers stated that, “it will also support the development need of the country, as we will be able to invest part of that portfolio in critical infrastructure”.
“There will be another pool which will be a saving pool for future generations. The whole idea is that it is absolutely irresponsible for us to spend all the revenue we generate; we need to provide for the future. Basically, the idea is not to rely entirely on oil it will be presented to the council next week and we expect to be in the right position within the next two to three months”, the ministers disclosed
The current ECA, which has no legal backing, was a creation of the Olusegun Obasanjo administration aimed at saving some of the funds accruing to the nation as a result of the rise in the price of crude oil.
The ministers said though the NSWF is similar to the ECA, the new arrangement will have legitimacy rather than being a product of political and economic expediency.
They regretted that Nigeria is the only member of the Organization of Petroleum Exporting Countries (OPEC) without a Sovereign Wealth Fund, saying that the idea was discussed by the Council about two years ago but that inconsistency in government polices delayed its implementation.
“Already there was a presidential committee set up by the Acting President which has been looking at this”, Aganga said, hinting that the intention is for the NSWF to be funded by the current earnings in the excess crude oil account.
“The only difference”, according to him, “is that the money in the excess crude account today does not have legal framework and is not managed as the one I explained, adding, “By the way we are the only OPEC country that does not have the SWF. So, even if it is 1billion we start with, the idea, the institutional framework, the fiscal discipline is so important to the credibility of the country itself and the credit rating of the country.”
Usman, on his part, lamented that what has happened “was one of those things about our system here, our lack of continuity or lack of consistency. We missed an opportunity but it is never too late.”
It was resolved at the end of the meeting that the Fund should now be made available to commercial banks that will lend it to the states at single digit interest rate.
