Publications

April 13, 2010

Should Nigeria Establish A Sovereign Wealth Fund?

This paper explores the issues relating to the establishment of a Sovereign WealthFund (SWF) in Nigeria consistent with best practices. Experience with established SWFssuggests that successful oil- based funds tend to be underpinned by a sound oil revenuemanagement framework. The paper thus discusses the underlying issues of oil revenuemanagement, the policy choices and SWF implementation issues.

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Author:Menachem Katz&Cijeyu Ojong

Publication Date: Novvember 2009

Document Size: 53 Pages

SWF are investment vehicles created and owned by governments or sovereignswith the strategic aim of leveraging current account surpluses and temporarily highrevenues to invest in income-producing assets that promise high risk-adjusted returns inthe financial markets. They offer economic and financial benefits. SWFs, under soundoil revenue management frameworks, can help to mitigate boom-bust cycles in the homecountries, and facilitate the saving and transfer across generations of proceeds from fiscalsurpluses emanating primarily from oil. By allowing for greater portfolio diversification,they reduce the opportunity cost of reserve holding, but at the same time increase the risk.



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