NSIA: Facilitating economic stability, promoting infrastructure development

THE Nigeria Sovereign Investment Authority (NSIA) was established to achieve three basic objectives. To preserve and grow the value of assets transferred into it by investing in a diversified portfolio, to invest in domestic infrastructure projects that meet targeted financial returns and to act as a buffer against short-term macro-economic instability. Right from inception, the NSIA has taken this three-prong mandate seriously and that is the plinth for the heartwarming results it has turned in over the years.

At the end of the 2019 financial year, NSIA acquitted itself creditably in the management of the nation’s assets entrusted to it by posting a profit after tax of N34.4 6 billion.

The authority also reported a total comprehensive income of N36.15 billion in 2019, which is 18 per cent lower than the N44.34 billion recorded in 2018. However, when the foreign exchange gain of N18 billion in 2018 and N1.28 billion in 2019 are excluded, the net income in 2019 was N34.87 billion, which is 32 per cent higher than the N26.28 billion figure of 2018.

Similarly, the authority’s earned interest income of N27.02 billion in 2019 was 13 per cent higher than the N23.82 billion earned in 2018. It also posted a five per cent growth in total assets from N617.70 billion in 2018 to N649.84 billion in 2019, albeit operating expenses rose to N4.2 billion in 2019 up from N3.8 billion in 2018.

On the whole, NSIA’s fund performed well by generating aggregate returns of 6.43 per cent. The authority’s performance for 2019 is a reflection of the strength of its strategy across all the funds as it outperformed its benchmarks on all the three funds within the period.

Fund management

NSIA’s strategy to invest in diversified products across the yield curve has been very rewarding as it provided cheering returns. Its stabilisation fund, which had been fully invested by the end of 2019, returned 5.81 per cent, outperforming its benchmark, the United States of America CPI, by 381 basis points. The stabilisation fund, managed on behalf of the Ministry of Finance, had a balance of N33.365 billion at the end of 2019, an improvement of more than 65 per cent over the 2018 balance of N20.814 billion.

In the same vein, the Future Generations Fund (FGF), which was deployed across multiple global equities, hedge funds and other diversifiers, returned 6.45 per cent at the end of the year under review. It outperformed its benchmark of 6.43 per cent. At the end of 2019, NSIA had deployed over 90 per cent of the capital in the Future Generations Fund.

NSIA also manages funds for third party funds, including the Debt Management Office (DMO). At the end of 2019, the value of assets managed by NSIA on behalf of the DMO was $124.03 million, an improvement over the $122.60 million at the end of 2018.

Infrastructure development

NSIA is as committed to developing infrastructure as it is to growing its assets. Its investments plan enables it to operate under strict cost management guidelines in its bid to change the nation’s infrastructure narrative. Its intervention is divided into four categories; healthcare, roads, power generation and agriculture.

Healthcare

Under its NSIA Healthcare Development and Investment Company (NHDIC), NSIA inaugurated the NSIA-LUTH Cancer Centre (NLCC) on May 29, 2019. The NLCC is a full-service out-patient cancer centre, aimed at supporting the eradication of the cancer disease burden in the country. Since coming on stream, the centre has increased access to quality oncology care and treatment in Nigeria as over 2000 patients have received treatment.

NSIA also completed the Advanced Diagnostic Centre located in Aminu Kano University Teaching Hospital in 2019. The centre was subsequently commissioned and operationalised in February 2020. In the same vein, NSIA completed civil and construction works at the Advanced Diagnostic Centre in Federal Medical Centre Umuahia (FMCU) by the end of 2019 although equipping and staffing the facility stretched into early 2020. On the two facilities, the Authority invested about $10.5 billion.

Agriculture

NSIA went into a joint venture agreement with the UFF Agri Investment Company, a Dutch-based agriculture investment firm, for the purpose of investing in the nation’s agricultural development. Called the UFF–NAIC Agricultural Fund, the joint venture is meant to facilitate rural development, food security, sustainable investments through the inclusion of smallholder farmers and directing investments towards import substitution cash crops.

In 2019, UFF-NAIC acquired a fully integrated farm located in Panda, Nasarawa State. Known as Panda Farms, it acquired state of the art farming, irrigation, and feed production equipment, which strengthened its capacity to cultivate the over 2,300 hectares of arable land available within the facility and enabled the expansion of farming operation with notable reduction in input costs. When completed, the Pandagric project will involve the farming of maize and soybeans under irrigation on 2,300 hectares of arable land and a 147KMT per annum capacity feed mill.

Presidential Fertiliser Initiative (PFI)

NSIA is saddled with the responsibility of managing the fund for the Presidential Fertiliser Initiative, which was established by the government with the mandate to ensure the availability of affordable and adequate quantities of fertiliser for Nigerian farmers ahead of the farming seasons.

Consequently, NSIA has been instrumental to increasing domestic fertiliser production capacity by over 300 per cent between 2017 when the initiative took off and the end of 2019. PFI delivered about 6.5 million 50kg bags of NPK 20:10:10 in 2019 and plans to deliver between 10 million to 12 million bags in 2020.

Similarly, NSIA has commenced the development of the basic chemicals platform with OCP of Morocco to produce ammonia and other fertiliser products. When completed, the plant would catalyse the re-introduction of a basic chemicals industry in Nigeria.

Presidential Infrastructure Development Fund (PIDF)

As part of efforts by the administration of President Muhammadu Buhari to improve the state of the nation’s infrastructure, the government, in 2018, established the Presidential Infrastructure Development Fund (PIDF), to be managed by the Nigeria Sovereign Investment Authority (NSIA), and invested specifically in critical road and power projects across the country. To achieve this objective, the National Economic Council (NEC) authorised the transfer of $650 million to the NSIA from the Nigeria Liquefied Natural Gas (NLNG) Dividend Account, as seed funding for PIDF.

In line with its mandate, NSIA, in 2019, released ?181.9 billion for the construction of the Second Niger Bridge, Lagos–Ibadan expressway and the Abuja-Zaria-Kaduna-Kano Road, three of the projects under the PIDF. According to the Authority, significant progress had been made on the projects in terms of civil and construction works and they are on course for completion in 2022 “as construction milestones are outpacing project calendar despite the impact of COVID-19.”

NSIA is currently working on building a 10MW solar power plant in Kumbotso Local Government Area of Kano State. When completed, the project will contribute to the growing trend of investments in renewable energy in Nigeria.

Outlook for 2020

Speaking on the outlook for the current year, NSIA Managing Director, Mr Uche Orji, said the outlook for the Authority remained promising.

His words:  “The onset of the COVID-19 pandemic has caused an unprecedented human and health crisis with significant impact on global markets. As such, it may be difficult to predict the markets overall reaction to development.

“It is predictable that the volatility introduced by the onset of the pandemic may linger. However, the Authority continues to monitor the market conditions with the view to leverage the upside risks that avail themselves in the market.

“We expect that our investment strategy will continue to deliver positive returns in the long term in 2020 as the markets normalise and new opportunities emerge.”

He added that NSIA would continue to focus on agriculture, healthcare (including pharmaceuticals), toll roads, gas industrialization and power in its infrastructure funds.

“Operationalising several subsidiaries of the NSIA will be a key focus especially in the healthcare sector where we have several projects in the pipeline.

“NSIA has invested in several financial companies that help develop the capital markets including NMRC, InfraCredit, NG Clearing, Development Bank of Nigeria, and Family Homes Funds.  We will continue to work on strengthening these entities and making new investments in companies that strengthen financial market infrastructure.

“The authority will continue to deploy capital into vital sectors of the economy with increased focus on sectors that will engineer real growth,” he said.

Conclusion

According to Andrew Bauer, an economic analyst at the Natural Resource Governance Institute, a critical success factor for all sovereign wealth funds is the avoidance of investment in high risk assets.

The Nigeria Sovereign Investment Authority understands this very well and is doing all in its power to avoid toxic investments. According to Orji, the Authority is guided by the Santiago Principles, which is a set of 24 guidelines incorporating best practices agreed and adopted by a group of the world’s leading Sovereign Wealth Funds (SWF).

For as long as the Authority upholds the Santiago Principles, not only would it grow the nation’s assets, it would also ensure infrastructure development and provide a buffer against instability for the economy.

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