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The senate on Wednesday, passed the Nigeria Sovereign Investment
Authority bill, with an approval that it be jump started with the Naira
equivalence of $1 billion.

The start-up capital is to be contributed by the three tiers of
government including the federal capital territory, each contributing a
percentage of the initial fund equal to such government’s share of the
federation revenue in accordance with the subsisting formula.

Subsequent funding for the fund will be derived from residual
funds from the federation account which shall be transferred to the authority.
The derivation portion of the revenue allocation formula is excluded from the
subsequent funding source.

60 percent of both the start-up capital and subsequent funds
will be allocated equally to the authorities’ three main investment options:
The Future Generation Funds, the Infrastructure fund and the Stabilization
Fund.

The fund, when established, would replace the country’s excess
crude account (ECA) that banks Nigeria oil revenue above a benchmark oil price.

Critics of the excess crude account, created by the
administration of Olusegun Obasanjo, says it lacks a legal framework. The
account was set-up in 2004 following a fiscal policy decision to check the
negative impact of the swings in crude oil prices at the international oil
market on government expenditure, and to help create savings from excess crude
earnings for the country.

The incumbent administration in March 2011, revealed plans to
abolish the excess crude account as the minister of finance Olusegun Aganga,
told NEXT in an interview that the government resolved to abolish the account
not only because its existence was illegal and unconstitutional, but also that
management of the ECA has in recent times been subjected to abuses that tend to
defeat the objective for which it was established.

He noted that the process for accessing the ECA is not
transparent and clear to the Nigerians, therefore there is a general perception
that there is some level of mismanagement.

“The intention is that the (sovereign wealth) fund will be
funded by what we have in the excess crude oil account,” Olusegun Aganga told
reporters after the economic council meeting last month.

“The present arrangement is just an administrative arrangement,
it has no legal basis”, he said. “What we have to begin now is to give it a
legal basis so the excess crude account will be replaced by a legal
arrangement.”

The authority is expected to invest the funds in a diversified
portfolio of medium and long term investments for the benefit of future
generation of Nigerian citizens.

Mr Aganga said the fund adds to fiscal discipline of government
and is capable of attracting investment in infrastructure development from
sovereign wealth funds of other countries. According to him, accruals to the
fund would be put to work to intervene in critical sectors of the economy.

“The fund will have the ability to attract both local and
international investors. So even if they have $1 billion, it will be capable of
attracting more than $5 or $6 billion from other funds. Already we have had
interest from other sovereign wealth funds. It will be managed in a very
transparent way because we will have better control.”

The finance minister said the setting up of the sovereign wealth
fund will improve Nigeria’s rating in the international financial market. The estimated
value of global sovereign wealth funds is currently put at $2.5 trillion.

“Creation of the fund will ensure that the present and future
generations of Nigeria will still have a country to call their own,” Teslim
Folarin, leader of the senate said in his lead debate.

In exceptional circumstances set out in the act, the authority
will utilize certain liquid assets in the stabilization fund to supplement
other available fiscal stabilization funds to temporarily sustain duly budgeted
public expenditure in the interest of macroeconomic stability in Nigeria.

Bribery allegation denied

The Senate also denied media allegations that its members
demanded N25 million in bribes to hasten the passage of the Sovereign Wealth
Fund and Petroleum Industry bills.

The Senate President, David Mark, described the allegations as
“sheer blackmail.” The denial followed complaints by Dahiru Kuta, a member of
the committee that reviewed the bills, about a Monday publication in Punch
Newspaper claiming the senators demanded bribes to pass the bills.

“This blackmail is totally unnecessary and uncalled for. It is
not a very good thing by Punch Newspapers. I think they owe this hallowed
chamber an apology,” the senate president said.

“We will investigate this and the ethics committee should take it up live on
TV. No senator has demanded for anything. It is totally uncalled.”