September 13, 2010 / 12:33 PM / 7 years ago

UPDATE 2-Nigeria president submits bill to create wealth fund

* Fund to help finance infrastructure development

* $1 billion set aside in seed capital

* Jonathan eyes increased foreign investment

(Adds details throughout)

By Felix Onuah

ABUJA, Sept 13 (Reuters) - Nigerian President Goodluck Jonathan said on Monday he had sent a bill to parliament to create a sovereign wealth fund and that federal and state governments had set aside $1 billion in seed capital.

Africa’s biggest oil producer wants to establish the fund to divert more of its revenues towards badly-needed infrastructure development, save for future generations, and set aside a financial reserve to weather any economic downturns.

The wealth fund would replace the current system by which the OPEC member is meant to save oil revenues above a benchmark price into an excess crude account (ECA), a pillar of reforms backed by the International Monetary Fund and launched in 2003.

But there is no clear legal basis to determine how ECA funds should be shared between the federal, state and local governments and the savings have fallen from $20 billion in 2007 to less than $500 million now, amid political wrangling.

“I have forwarded a bill to the National Assembly to create a national sovereign fund to ensure that we have the legal underpinning for national savings,” Jonathan said at a meeting with honorary foreign investment advisers.

“The federal government, in concert with state governments, has already set aside the sum of $1 billion as seed money for the national sovereign wealth fund,” he said.

Nigeria is due to hold presidential, parliamentary and state governorship elections in January.

Jonathan has not yet said whether he plans to take part in the presidential race, but many of his administration’s recent policy announcements have looked more like campaign pledges.

He told the meeting in the capital Abuja that the government in sub-Saharan Africa’s second-largest economy was “committed to a stable macroeconomic framework” based on sustainable public debt levels and fiscal deficits.

Finance Minister Olusegun Aganga said last week that spending for next year would be capped at 4.56 trillion naira ($30 billion) as government seeks to reduce expenditure over the next three years. [ID:nLDE6871EF]

Nigeria’s parliament has approved spending of more than 4.8 trillion naira this year, up more than 50 percent on last year, meaning the budget deficit is set to widen to more than 5 pct.

PLEDGE TO INVESTORS

Jonathan last month unveiled his strategy to end chronic power shortages, seen by investors as the major brake on economic growth, launching a planned multi-billion dollar privatisation of the domestic power sector.

He pledged on Monday to make Africa’s most populous nation more attractive for foreign investors.

“Current estimates indicate that we require about 31 trillion naira or approximately $200 billion in investments to realize the economic transformation that we envision,” Jonathan told the meeting in the presidential villa.

“One of the ways we can fill this gap is through increased international investment and we are taking all the steps necessary to improve Nigeria as an investment destination.”

Aganga has said the sovereign wealth fund will have three main parts -- savings for future generations, an economic stabilisation fund and an infrastructure fund for co-investment with other investors, the latter being the largest.

Aganga, a former Goldman Sachs (GS.N) executive appointed in March, told an investor conference in London this month he hoped the fund would have a positive impact on Nigeria’s sovereign credit ratings. [ID:nLDE682162]

Nigeria’s powerful state governors -- among the main beneficiaries of disbursals from the ECA -- initially opposed the plan for a sovereign wealth fund, saying the ECA should not be used as capital for it. [ID:nLDE65E2GS]

Central Bank Governor Lamido Sanusi said in July most of the governors had shifted their position on the establishment of a fund after meeting with government officials and that its creation would be fast-tracked. [ID:nLDE66C23X] (For more Reuters Africa coverage and to have your say on the top issues, visit: af.reuters.com/ ) (Writing by Nick Tattersall; Editing by Ron Askew)

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