The Federal Government on Tuesday moved closer 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 (SWF).
Addressing journalists in Abuja, the Coordinating Minister of the Economy and Minister of Finance, Ngozi Okonjo-Iweala said the Federal Government has approved the appointment of Mahey Rasheed, a member of the board of First Bank, as the board chairman of the Nigerian Sovereign Investment Authority while Uche Orji, UBS executive and former JP Morgan head is to serve as the managing director of the institution.
Other members of the board, according to the Minister include: Arnold Ekpe, Jide Zeitlin, Bili Awosika and Bisi Soyebo, Hassan Usman and Stella Onyejeli who is to serve as the Chief Risk Officer.
Mrs Okonjo-Iweala said that the institution has three main aims: saving money for future generations, funding infrastructure and defending the economy against commodity price shocks.
She said the fund would start with a cash hoard of around $1 billion.
Nigeria 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 the country.
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.
Nigeria, pumps over 2 million barrels of oil a day but has frittered much of it away over the years on government wages, other recurrent spending and corruption, ills that Mrs Okonjo-Iweala quit her World Bank job to come back and tackle.
Auditor and consultancy firm KPMG helped hire the SWF board.
Mrs 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.
“I think the sovereign wealth fund will make Nigeria more attractive for investors,” she said.
She said she hoped more money would be paid in later, adding that 20 percent of the fund would go to each of its three targets and the board would decide how to invest the other 40 percent.
President Goodluck Jonathan signed a bill into law in May last year authorising 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,” Mrs Okonjo-Iweala said on Tuesday.
The SWF is meant to replace the ECA eventually but the Minister of Finance 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.