Nigeria’s controversial sovereign wealth fund is set to go into operation in the next few months, finance minister Dr. NgoziOkonjo-Iweala said yesterday in Ethiopia.
Governors of the 36 states are however still opposed to the use of the country’s Excess Crude Account to finance the SWF operations and have challenged the federal government in court to put the implementation on hold pending the determination of the suit.
The minister, who spoke in an interview with The Wall Street Journal on the sidelines of the World Economic Forum, said the $1 billion would be pulled from Nigeria’s Excess Crude Account, which also funds the country’s fuel subsidy.
According to the coordinating minister for the economy, the sovereign wealth fund will be overseen by a governing council made up of members of civil society including representatives from media and academics, that will review its decisions to ensure that the money is transparently invested, she said.
The fund is a major component in Nigeria’s attempt to hedge against budget volatility, build infrastructure, combat unemployment and provide economic growth.
“We want this growth to be inclusive and job-creating because, as of now, there are not going to be enough jobs. We want to focus on the diversification of the economy,” Ms. Okonjo-Iweala said.
In another development, she said Nigeria’s move to convert 10% of its foreign currency reserves from U.S. dollars to Chinese yuan last year is “prudent and sensible” given the increasing trade with China.
Most of the growth took place in the non-oil sectors of agriculture, metal mining and retail services, which she said the government will continue to promote.
Nigeria has undertaken ambitious reforms, most notably a bank overhaul that strengthened bank capitalization and reduced non-performing loans. But the country still faces significant challenges, with violence flaring up due to regional tensions.
Lingering concerns about official corruption have caused skepticism among many Nigerians about fiscal reform.
Citing the bank clean-up, Standard & Poor’s upgraded Nigeria’s credit rating last year from stable to positive.
Tensions were also stoked earlier this year when President Goodluck Jonathan announced the immediate cessation of a government fuel subsidy in order to divert the funds to infrastructure investments. Following violent protests, the price breaks were partially reinstated.
However, the government plans to push ahead with the phase-out of the subsidy, the minister said. The saved funds will go not only toward the sovereign wealth fund, but also to help pay for a social-safety-net to combat maternal mortality, promote child immunization and create public transportation.
Ms. Okonjo-Iweala said Nigeria’s public-works plans are projected to lead to 370,000 new jobs for the next three years.