Finally, Nigeria, Africa’s largest oil producer, has decided to set up a Sovereign Wealth Fund, safeguarding some of its riches for future generations. Since the discovery of large petroleum deposits in the late 1950s, there have been several attempts to put aside some of the unexpected bounty that comes from rising oil prices. The most recent version of these initiatives was the aptly named the Excess Crude Account (ECA).
At the end of 2007, there was $20 billion in the ECA, but sadly it has dwindled down to barely $400 million in recent months. The depletion was due to state governments claiming their share of the account in order to stabilize their local economies, which were affected by the financial crisis. There was no constitutional barrier to prevent the raiding of the account.
Nigeria’s new Minister of Finance, Olusegun Aganga, a former Managing Director at Goldman Sachs, announced in September, 2010 that a Nigerian Sovereign Wealth Fund draft bill has been submitted to the National Assembly. The fund has already been seeded with $1 billion of capital. This is very good news for the future generations of Nigeria since little of the $1.6 trillion the country has earned from petroleum resources has been conserved. It is important that the bill be passed because this will give the fund the necessary legitimacy to protect its assets from getting into the wrong hands and from the vagaries of changing regimes.
Osahon Akpata was born and grew up in Lagos, Nigeria. After completing his undergraduate degree in Accounting & Finance in England, he moved to the US where he has had an extensive career in finance and marketing. He has written articles for NEXT newspaper, Black Star News, Saharareporters.com and the African Sun Times. Osahon is currently enrolled for an MBA at Columbia University in New York City. He is working on a project evaluating Nigeria’s proposed Sovereign Wealth Fund as part of his coursework. [/EXPAND]