Business Edge | Mozambique to Start $96 billion Wealth Fund

If all goes to plan, the Southern African country of Mozambique will commence commercial export of natural gas by the end of this year. In order to maximize earnings and revenue from the envisaged returns estimated at $96 billion, the country is planning to launch a wealth fund to manage the resources. According to Mozambique’s finance minister Max Tonela who announced this, the country is targeting a kick-off date before the first consignment of liquified natural gas is lifted out of the country by October 2022. In October 2020, Banco de Mozambique, the country’s central bank, published a proposed model for the fund which it said will build up savings and contribute to financial stability when the prices of commodities fluctuate. As of now, the legislation for the wealth fund is being drafted by lawmakers and the country is eager to see inflow from the natural resource. Business Edge looks at the expected returns from the first-ever gas export from Mozambique, the proposed wealth fund as well as implications of the much-needed revenue accruing to the country. Lekan Onabanjo is joined by Ekos Akpokabayen, Chief Investment Officer at Ovid Capita.

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For a country that has been improvised, the prospects of gas dollars is great news for Mozambique. Hitherto, it has been the third poorest country in the world and has struggled to find economic growth and development. The discovery of gas in commercial quantities is a boon to the country and brings with it an opportunity to earn and create wealth for its citizens. “Mozambique has had a difficult time with rebels… and the height of this conflict was this gas exploration,” Akpokanayen says.

He adds also that the expected revenue to be generated from its gas exploration is multiple times higher than its gross development product. “Mozambique’s GDP is around $14 billion dollars. $96 billion is a lot and for the government to plan a sovereign wealth fund, it is welcome and wonderful news.”

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