NIGERIA’S SOVEREIGN WEALTH FUND INTIATIVE: A STEP IN THE RIGHT DIRECTION.

Filed under: National Issues |

About a month ago the Finance Minister,Dr.NgoziOkonji-Iwela, announced Federal Government’s intention to introduce Sovereign Wealth Fund,with Alhaji Mahey Rasheed and Mr Orji to lead the team. An excellent idea worthy of commendation. 60% of these fund will be channelled to the development of infrastructure, saving for the future generation and stabilizing the economy, while the remaining, 40% is left for the team to manage at there own discretion. An excellent idea worthy of commendation if well managed and supervised.

A Sovereign Wealth Fund is a pool of money derived from a country’s reserves, which are set aside for investment purposes that will benefit the country’s economy and citizens. The funding for a Sovereign Wealth Fund (SWF) comes from central bank reserves that accumulate as a result of budget and trade surpluses, and from revenue generated from the exports of natural resources. The types of acceptable investments included in each SWF vary from country to country, countries with liquidity concerns limit investments to only very liquid public debt instruments.

Some countries have created SWF’s to diversify their revenue streams. For example, the United Arab Emirates (UAE) relies on oil exports for its wealth. Therefore, it devotes a portion of its reserves to an SWF that invests in other types of assets that can act as a shield against oil-related risk.
The amount of money in these SWF is substantial. As of May 2007, the UAE’s fund was worth more than $875 billion. The estimated value of all SWF’s is pegged at $2.5 trillion.

The Finance Minister has said that “Nigeria have to save money for her future generation, save our economy and at the same time, fund infrastructural development”. But what I do not understand is why the governors in Nigeria should be fighting against the policy even after it has received all necessary legal backing, lets assume is only a thought from the Minister, I think it should be encouraged by every well meaning Nigerians. Our major concerns should be the proper usage of the fund and to have indicators in place to show that every penny is accounted for by those charged with the responsibility of managing it.

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