27 October 2010

Nigeria: Sovereign Wealth Fund Bill Faces Hitches

The enactment of a law seeking to establish the National Sovereign Wealth Fund of the Federation to replace the Excess Crude Account (ECA) is suffering a major delay in the National Assembly, Daily Trust can reveal.

President Goodluck Jonathan had on September 26, this year disclosed that he had forwarded the bill to the National Assembly to create a sovereign wealth fund and that federal and state governments had set aside $1 billion in seed capital for the fund. However, since the two chambers of the National Assembly resumed from their two-month recess late and early this month, the bill was never mentioned in either the Senate or House of Representatives order paper for it to be legislated upon.

This is happening at a time when the Excess Crude Account of the Federation was depleted from $7 billion USD as at November last year to $460 million USD this month.

Both Senate and House Committees on Rules and Business which prepare bills and motions for consideration on the floor of the two chambers could not lay their hands on the said bill not to talk of it being slated for consideration.

Chairman House committee on Finance Rep. John Enoh (PDP, Cross Rivers) had told Journalists two weeks ago that, they had a meeting with the Speaker of the House Dimeji Bankole on the bill and lamented that in 5 years, more than $3 billion USD have been withdrawn from the account and spent illegally.

It is not however, clear if the President had forwarded the said bill to the lawmakers as he said.

The Federal Government is seeking to establish the fund to divert more revenues towards infrastructure development, save for future generations, and set aside a financial reserve to weather any economic downturns.

The wealth fund would replace the current system by which Nigeria is meant to save oil revenues above a benchmark price into an excess crude account, a pillar of reforms backed by the International Monetary Fund and launched in 2003 by former President Olusegun Obasanjo. At the moment there is no legal basis to determine how ECA funds should be shared between the federal, state and local governments and the savings have fallen from $20 billion in 2007 to less than $460 million now, amid political wrangling.

"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. The Federal Government, in concert with state governments, has already set aside the sum of $1 billion as seed money for the national sovereign wealth fund," Jonathan said at a meeting with honorary foreign investment advisers last month.

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