Nigeria’s new infrastructure fund faces legal hurdles

Nigeria’s newly created Infrastructure Support Fund (ISF), a government initiative targeted at cushioning the effects of the country’s petrol subsidy removal, is now being questioned by lawyers and analysts who say the framework of the Fund is not backed by law.

President Bola Tinubu on Thursday approved the establishment of the Fund which will help the 36 states of the federation to revamp transportation as well as fund agriculture, healthcare, education, power and water projects in order to improve the economic competitiveness of the states and create jobs for Nigerians.

The ISF will be funded through savings from monthly federal allocations, according to Dele Alake, Special Adviser to the President, Special Duties, Communications and Strategy, who said N790 billion was set aside for the Fund out of the N1.9 trillion federation revenue for June. It’s unclear if the President will directly manage the Fund.

The Fund, which has been created with little recourse to the law and awarded N790 billion by presidential fiat, has however now come under scrutiny.

“There’s no legal basis for the creation of this illegal fund,” Kalu Aja, an analyst, said.

“Why not transfer this Fund to the legal agency set up to manage windfall revenues which is the Nigeria Sovereign Investment Authority (NSIA),” Aja said.

Aja’s views have been roundly supported by lawyers who confirmed that the new Fund could indeed be described as illegal as it does not draw its roots from the constitution.

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“Any credit in the Federation account is required to be allocated in a manner prescribed by the National Assembly. The creation and the purported financing of the ISF without any statutory enactment of the National Assembly would contravene extant legal provisions,” a lawyer told BusinessDay.

“I would like to believe that the FG has simply started the conversation about the ISF and will act on completing the process. As it stands it would appear inchoate,” the lawyer said.

The lawyers agreed that the NSIA was the only institution with legal backing to manage excess government revenues.

The NSIA derives its mandate from the NSIA Act which was signed into law in May 2011.

It empowers the Authority to receive, manage and invest funds in a diversified portfolio of medium and long term assets on behalf of the Federal Government, State Governments, Federal Capital Territory, and Local Governments Area Councils in preparation for the eventual depletion of Nigeria’s hydrocarbon resources.

To give effect to the mandates, the NSIA established three main funds: the Stabilisation Fund, the Future Generations Fund, and the Nigeria Infrastructure Fund.

The role of the Stabilisation Fund is to provide budget support in times of economic stress; the Future Generations Fund is an inter-generational savings fund for future generations of Nigerians while the Nigeria Infrastructure Fund is to invest in domestic infrastructure.

The NSIA had total assets worth N1.02 trillion as at the end of 2022, a 10.5 percent growth from the previous year, according to its financial books.

The Authority’s total comprehensive income however fell 34 percent to N96.96 billion in 2022 from N147. 98 billion in 2021.