Nigerian Oil Savings Fund Requires Strong Protections, Revenue Watch Advises Leaders

NEW YORK, July 1, 2010 - To promote sustainable economic development, the government of Nigeria is
considering the creation of a Sovereign Wealth Fund, a savings tool that
could protect against the volatility of the country's main revenue source:
oil. But, according to new analysis by the Revenue Watch Institute (RWI),
Nigeria risks repeating patterns of weak economic governance and volatile
spending unless its new Fund features certain safeguards.

Sovereign Wealth Funds enable resource rich countries to save windfall
profits when commodity prices are high, and soften the negative impact of
price volatility. As researcher and Nigeria expert Alexandra Gillies explains
in the Revenue Watch analysis, if Nigeria's leaders are to create a Fund that
is more effective than existing fiscal policies, the Fund needs a solid legal
standing, binding rules regarding the inflow and outflow of funds, and strict
transparency requirements.

"The politics of Nigeria call for a carefully safeguarded Fund," said
Gillies. "Without strong and transparent governance, a new fund will end up
as depleted as the current Excess Crude Account."

Nigeria's Excess Crude Account (ECA) was created to save windfall profits
from periods of high oil prices. However, permissive governance structures
have allowed extensive ad hoc withdrawals, reducing the ECA balance by almost
85%, or 16 billion dollars, in just 18 months. The account's depletion is
among the reasons why Nigeria's National Economic Council and Ministry of
Finance are considering alternative stabilization programs such as an SWF.

"If the Fund has a clearly-defined relationship to the constitution and
operates transparently, Nigeria can avoid the longstanding challenges to
savings that arise from competition for resources among the federal, state
and local governments," said Gillies.

The RWI analysis was released today in partnership with Nigeria-based
think tank Centre for the Study of Economies of Africa (CSEA). Menachem Katz,
Director of CSEA said, "Stabilization of Nigeria's economy against oil price
volatility remains a crucial priority and a precursor for development and
economic diversification."

"Nigerians understand that we must diversify our economy and move past
our unenviable legacy of oil dependence," said RWI Nigeria Program
Coordinator Dauda Garuba. "This Fund can help us build a stronger economic
future, but it will only succeed if it is aligned with the constitution and
accompanied by a sound policy framework."

Learn more and download the briefing paper at
www.revenuewatch.org.

Jed Miller of Revenue Watch Institute, +1-917-257-0670, jmiller at revenuewatch.org