Nigeria moved closer on Tuesday to joining most of its OPEC partners
in steering oil revenues into longer-term investment, announcing a top
management team for its new sovereign wealth fund.
Finance
Minister Ngozi Okonjo-Iweala said the fund would start with a cash hoard
of around $1-billion. The top team will come from First Bank and UBS.
The West African oil producer is one of only three OPEC member states
that do not have an SWF, and the new fund is being keenly watched by
global markets and investors in Africa’s second-biggest economy.
The
government hopes the fund will provide a firmer legal basis to
ring-fence Nigeria’s savings from competing demands so it can better
save when oil prices are high.
Sovereign wealth funds are
essentially government-run investment portfolios that buy into anything
from mainstream assets such as stocks and bonds to direct foreign
investment.
Auditor and consultancy firm KPMG helped hire the SWF board.
Alhaji
Mahey Rasheed, a member of the board of First Bank, was chosen as the
chairman of the fund team with UBS executive and former JPMorgan head
Uche Orji chosen as the managing director and chief executive officer.
Ms.
Okonjo-Iweala said she hoped by the end of the year the team would lay
out plans for the $1-billion but did not say when investments would
start.
The SWF has three main aims: saving money for future
generations, funding infrastructure and defending the economy against
commodity price shocks.
“I think the sovereign wealth fund will make Nigeria more attractive for investors,” Ms. Okonjo-Iweala told reporters.
She
said she hoped more money would be paid in later, adding that 20 per
cent of the fund would go to each of its three targets and the board
would decide how to invest the other 40 per cent.
President
Goodluck Jonathan signed a bill into law in May last year authorizing
the SWF, but powerful state governors originally blocked the fund,
saying it was unconstitutional.
They later agreed to it going
ahead, albeit with an initial limit of $1-billion, a fraction of the
$7-billion savings that are in Nigeria’s Excess Crude Account (ECA).
Many state governors fear the SWF will mean less money for them to spend than the current ECA system for saving oil cash.
“The battle was long but I think the country stands to gain and I think it was worth it,” Ms. Okonjo-Iweala said on Tuesday.
The
SWF is meant to replace the ECA eventually but Ms. Okonjo-Iweala told
Reuters last week the two will run side-by-side until people get
comfortable with the SWF. Critics say the ECA is opaque and can be too
easily used.
The account contained $20-billion in 2007 but fell to
$3-billion after a presidential election last year, despite five years
of high oil prices. It has since risen to $7-billion.
Source: The Globe and Mail
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