Finance Minister, Ngozi Okonjo-Iweala
By Yemi Adebowale, with agency reports
Nigeria's $1 billion sovereign-wealth fund is set to start operating in the next few months, so says Finance Minister, Ngozi Okonjo-Iweala.
Okonjo-Iweala in an interview with The Wall Street Journal on the sidelines of the World Economic Forum holding in Addis Ababa, Ethiopia said the $1 billion will be pulled from Nigeria's Excess Crude Account, which also funds the country's fuel subsidy.
She said the fund's management team would be selected in the next few weeks.
“The sovereign-wealth fund will be overseen by a governing council, made up of members of civil society including representatives from media and academics, that will review its decisions to ensure that the money is transparently invested,” she said.
The fund is a major component in the country’s attempt to hedge against budget volatility, build infrastructure, combat unemployment and provide economic growth.
"We want this growth to be inclusive and job creating because as of now, there are no enough jobs. We want to focus on the diversification of the economy," the minister said.
Separately, she said Nigeria's move to convert 10 per cent of its foreign currency reserves from U.S. dollars to Chinese yuan last year is "prudent and sensible" given the increasing trade with China.
Buoyed by low external debt of less than three per cent and high petroleum prices, Nigeria, sub-Saharan Africa's biggest crude oil exporter grew 7.4 per cent last year and is forecasting a growth of 7 per cent to 8 per cent in the budget for 2012.
Most of the growth took place in the non-oil sectors of agriculture, metal mining and retail services, which she said the government would continue to promote.
Nigeria has undertaken ambitious reforms, most notably a bank overhaul that strengthened bank capitalization and reduced non-performing loans. But the country still faces significant challenges, with violence flaring up due to regional tensions.
Lingering concerns about official corruption have caused scepticism among many Nigerians about fiscal reform.
Citing the bank clean up, Standard & Poor's upgraded Nigeria's credit rating last year from stable to positive. The upgrade was conditional on continued reforms and the peaceful resolution of tensions between the north and the south.
Tensions were also stoked earlier this year when President Goodluck Jonathan announced the immediate cessation of a government fuel subsidy in order to divert the funds to infrastructure investments. Following violent protests, the price breaks were partially reinstated.
Okonjo-Iweala said she recognizes that the government needs to address the Nigerian peoples' "trust deficit" because of the historic mismanagement of public resources.
"The fuel subsidy is a very emotional issue in Nigeria. People feel over the years that it's the one benefit that they have had," she said.
However, the government plans to push ahead with the phase-out of the subsidy, the minister said.
“The saved funds will go not only toward the sovereign-wealth fund, but also to help pay for a social-safety-net to combat maternal mortality, promote child immunization and create public transportation.”
Okonjo-Iweala said Nigeria's public-works plans are projected to lead to 370,000 new jobs for the next three years.