Sept. 21 (Bloomberg) -- Nigeria’s 36 states will go ahead with a law suit challenging fund transfers by the federal government, including that for the country’s sovereign wealth fund, their governors said.
The Nigerian Governors’ Forum “unanimously decided to head back to court to enforce” the federal government’s “adherence to the constitution,” according to their statement e-mailed today and dated Sept. 19. The constitution of Africa’s top oil producer requires that all government revenue must be shared among the local, state and federal governments. If the suit by the governors succeeds, it could halt transfers to the sovereign wealth fund.
The governors had given their approval in June for the appointment of a board and management for the Nigerian Sovereign Wealth Investment Authority and the initial withdrawal of $1 billion to start the fund. They made no comment at the time on the status of the suit pending before the Supreme Court, seeking to halt federal government withdrawals from the joint account shared by all tiers of government.
The suit by the state governors won’t affect the $1 billion already set aside for the wealth fund, Finance Minister Ngozi Okonjo-Iweala told reporters today in Abuja.“No one is saying that it cannot go on with the $1 billion” already agreed.
Nigeria currently saves oil revenue above the benchmark budgeted price in the excess crude account. The governors agreed in June to boost savings in the account to $10 billion.
Nigerian state governors allege errant federal accounting for revenue and want the Supreme Court to compel the government to provide “a full and proper account” of income and disbursements, alleging arbitrary withholding of funds and illegal deductions. An alternative would be to order an audit of income and payments made from the “federation account” jointly owned by the federal, state and local governments from 2004, according to court documents.
The governors and Vice President Namadi Sambo agreed yesterday at the National Economic Council to continue their dialogue outside the court, said A.B. Okauru, director-general of the Nigeria Governors’ Forum. “Once an agreement is reached, the case will be withdrawn from the Supreme Court,” he said by phone from Abuja, today. He added that the court case will not affect the setting up of the sovereign wealth fund.
Nigeria’s sovereign wealth law requires the creation of funds for infrastructure, future generation and fiscal stability, with each representing at least 20 percent of the total. It conflicts with the provision of the constitution that all revenue accruing to the country should be shared by the tiers of the government, leaving the constitution supreme, lawyers representing the states said.
The West African country relies on crude exports for about 95 percent of its foreign-currency earnings and about 80 percent of government revenue, according to the Finance Ministry.
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