Lagos — The Federal Government has submitted the bill to give legal backing to the Sovereign Wealth Fund (SWF) to the National Assembly.
President Goodluck Jonathan said yesterday in Abuja at a meeting with honorary foreign investment advisers that the government was committed to creating the environment for the take-off of the Fund.
"I have forwarded a bill to the National Assembly to create a national sovereign fund to ensure that we have the legal underpinning for national savings," Jonathan said.
A SWF is a state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals or other financial instruments.
The Minister of Finance, Olusegun Aganga said in Lagos recently that the government was working towards giving early legal backing to the SWF. He said that the Federal and state governments had already set aside $1 billion in seed capital for its take off.
The Federal Government plans the establishment of the Fund to divert more of the country's revenues towards the badly-needed infrastructure development. It said 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 said recently.
CBN Governor Sanusi Lamido Sanusi also said last July that most of the state governors that were opposed to the establishment of the Fund had shifted their position after a meeting with government officials, adding that the creation of the SWF would be fast-tracked.
However, 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 less than $500 million at present, amid political wrangling by the authorities over its disbursements.
On the country's macroeconomic development, Jonathan told the honorary foreign investment advisers yesterday that the government was "committed to a stable macroeconomic framework based on sustainable public debt levels and fiscal deficits".
Aganga announced recently that government's spending for the next fiscal year would be capped at N4.56 trillion as it seeks to reduce expenditure over the next three years.
The National Assembly has approved spending of more than N4.8 trillion this year, up more than 50 per cent on last year, meaning that the nation's budget deficit is set to widen to more than 5 per cent, analysts said.
As part of measures to jump-start the economy, the government last month unveiled its strategy to end chronic power shortages, seen by investors as the major brake on economic growth. Jonathan launched the programme for multi-billion dollar privatisation of the power sector.
The president told the visiting foreign investors that "current estimates indicate that we require about N31 trillion or approximately $200 billion in investments to realise the economic transformation that we envision".
He said: "One of the ways we can fill this gap is through increased international investment and we are taking all the steps necessary to improve Nigeria as an investment destination."