ABUJA (Reuters) - Nigeria’s House of Representatives passed a bill to create a sovereign wealth fund on Tuesday, paving the way for Africa’s biggest oil exporter to improve its management of often-squandered crude oil earnings.
The bill now needs to be signed by President Goodluck Jonathan to be enacted, after Nigeria’s Senate passed the legislation last week. Lawmakers said the process should be straightforward as the lower house of parliament made no major amendments.
“The bill originated from Jonathan’s office so there shouldn’t be any further obstacles and I‘m sure he will sign it very soon,” said Jide Solanke, Nigerian investment analyst at Lagos-based FSDH Securities.
The fund is meant to replace Nigeria’s excess crude account (ECA), a pillar of IMF-backed reforms launched in 2003 into which the OPEC member nation currently saves any oil revenue above a benchmark price set each year in the budget.
Critics of the ECA say there is no clear legal basis on which to determine how the windfall oil savings in the account should be shared between the tiers of government -- federal, state and local -- leading to constant political wrangling.
The account contained more than $20 billion when late President Umaru Yar‘Adua came to power in 2007 but by the end of last year it held less than $1 billion. The savings recovered again to around $6.9 billion by April due to high oil prices.
Nigeria is one of only three OPEC member states not to have a sovereign wealth fund. Finance Minister Olusegun Aganga has said the wealth fund will provide a firmer legal basis to ringfence Nigeria’s savings.
President Jonathan is due to be sworn in for a new term on May 29 and will name a new cabinet following presidential, parliamentary and state governorship elections last month.
Successful passage of the bill will arguably be Aganga’s biggest single achievement in his time as finance minister and would give his profile a boost as Jonathan decides which ministers to retain and which to replace in his new cabinet.
A wide-ranging energy reform bill is also before parliament but having been delayed for years there are fears it may not pass before the end of the current administration.
Oil executives have said billions of dollars of investment are on hold until there is clarity over the framework for working in Africa’s largest energy industry.
If it is delayed beyond the end of the current term new lawmakers may want to make amendments to the mammoth piece of legislation which could delay it by months. But the relatively smooth passage of the wealth fund bill should lift optimism.
“It is a good sign that legislators are moving quicker and hopefully we will see something similar with the Petroleum Industry Bill (PIB),” Solanke said.
The government hopes the PIB will tackle issues including funding shortfalls at its joint ventures with foreign firms, insecurity in the Niger Delta, increasing local involvement in the industry and production of more gas for domestic power.