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Nigeria’s finance minister Ngozi Okonjo-Iweala has tried unsuccessfully to convince the nation’s governors of the merits of a sovereign wealth fund.

ARBEN CELI/REUTERS

Nigeria's state governors vowed on Thursday to go to court to stop the government putting oil revenues into a sovereign wealth fund.

Africa's top crude producer has been moving closer to joining its OPEC partners in creating a sovereign wealth fund for long-term investment of its oil cash.

The governors, who enjoy luxurious lifestyles and wield huge patronage, had been opposed to the fund because they feared it would reduce their share of the oil money.

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The country pumps more than two million barrels of oil a day but economists say revenue over the decades has been wasted on bloated government wages, a vast patronage network that gets costlier closer to election time, or plain embezzlement.

The sovereign wealth fund aims to tie up a portion of the oil cash in a government-run investment portfolio, buying anything from mainstream assets such as stocks and bonds to direct foreign investment. Nigeria is one of only three OPEC members that does not have such a fund.

Nigeria's oil earnings over a benchmark price are currently paid into the Excess Crude Account (ECA), which is meant to be for the benefit of future generations or cushion against oil price shocks.

But there is little oversight and it is often raided even when oil prices are high. It now contains around $8-billion and is distributed between the three tiers of government, including the 36 states.

Last year, the governors went to court to try to block the fund's creation, arguing it was unconstitutional for the federal government to control all excess oil funds, instead of distributing them. The 36 governors have said they do not trust central authorities to manage the fund.

Nigeria's finance minister Ngozi Okonjo-Iweala seemed to have talked them around in June, and they agreed to it.

As a compromise the sovereign wealth fund is supposed to start with just $1-billion. But Ms. Okonjo-Iweala made it clear last month she wants it to replace the ECA.

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"On the Excess Crude Account, the forum unanimously decided to head back to court to enforce the federal government's adherence to the constitution," a joint statement by the governors said.

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