(May 13, 2011) On May 11, 2011, the 109-member Nigerian Senate approved the Nigeria Sovereign Investment Authority Bill, 2010, which seeks to establish a sovereign wealth fund to manage excess profits from the country’s sale of crude oil. (Nigerian Senate Passes Sovereign Wealth Fund Bill, REUTERS (May 11, 2011)). Before it can take effect, the bill will have to be adopted by the 360-member lower house of the Nigerian National Assembly and signed by the President.
Among the notable provisions of the bill is one which creates an independent authority, Nigerian Sovereign Investment Authority, with the mandate to create and manage specialized funds. The Authority's main objectives include building savings for the Nigerian people, enhancing the Nigerian infrastructure, and providing stabilization support in times of economic stress. (A Bill for an Act to Establish the Nigeria Sovereign Investment Authority to Build a Savings Base for Future Generations, Enhance Development of the Infrastructure Sector [hereinafter Bill], 2010, §§ 1& 2, [search or scroll down to H.B. 478].) To this end, the bill mandates that the Authority establish three funds: the Future Generations Fund, the Nigerian Infrastructure Fund, and the Stabilization Fund. (Id. at § 4.) The Authority is to receive, manage and invest on behalf of the Funds. (Id.)
Another notable provision in the bill prohibits the government from, among other things, borrowing against the funds. It expressly states:
The Federal, State, Federal Capital Territory and Local governments of the Federation shall not transfer, redeem, assign, dispose of, sell, mortgage, pledge or otherwise encumber any interest of any kind in the Authority. (Id. at § 32.)
Although the Authority will receive initial funding of US$1 billion that will come from the federal, state, and local governments, future funds will be raised from what is known as the “Federation Funding Above the Budgetary Smoothing Amount.” (Id. at §§ 29 & 30.) For instance, the 2011 Nigerian budget was based on the assumption that oil prices would be US$65 for the year, but crude oil has been selling at a price close to double that benchmark. (Emmanuel Ogala, Senate to Pass Sovereign Wealth Fund Bill, NEXT (Mar. 3, 2011).) Under the current arrangement, the difference between the benchmark price and the market price is credited into an account and subsequently distributed to Federal and state authorities. (Id.) If the bill takes effect, the excess amount would fund the three special funds instead of going to government general funds. (Bill, supra, § 31.)
It appears that the adoption of this type of framework for managing revenues accrued from natural resources is becoming commonplace in Africa. On March 2, 2011, the Ghanaian Parliament approved similar legislation, the Petroleum Management Bill, which seeks to create two funds, the Ghana Heritage Fund, for the purpose of generating a long-term, alternate stream of income to support public expenditures and as a means of saving for future generations, and the Stabilization Fund, for use as an emergency source of funds in times of budget shortfalls. (Hanibal Goitom, Ghana: Parliament Approves Petroleum Management Bill, GLOBAL LEGAL MONITOR (Mar. 7, 2011).) Similarly, a draft mining code under consideration in the Republic of Guinea envisages the establishment of a new development fund. (Hanibal Goitom, Guinea: New Law on Mining in the Offing, GLOBAL LEGAL MONITOR (Apr. 28, 2011).)