MANAGING Director, Nigeria Sovereign Investment Authority (NSIA), Mr Uche Orji said with the $1.75 billion investment funds from the federation, the agency was determined to intensify its focus on infrastructure development.
He has, however, advised that the country should take a cue from other oil-dependent countries to divert revenues from the commodity to strengthen infrastructure.
At a leadership development forum in Abuja on Monday, Orji urged authorities to expedite exploitation of its crude oil resource and massively invest part accruing revenue to hedge against a future of a collapsed oil demand.
According to him, Sovereign Wealth Funds (WSFs) of other countries were fully conscious of this fact and that Nigeria should take advantage of the nation’s massive hydrocarbon resources to prepare for a future where oil would be less important.
“Personally I am very surprised that after the Saudi Arabia incident, oil price didn’t stay high for a very long time. It rose up and came down. I am not an oil analyst but it speaks to the fact that there is a lot of supply.
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“If the oil price does not stay high and continue to rise, it will have implications, obviously, for our funding.
“Right now, the oil price is about $62 and our oil benchmark is about $60 per barrel so the spread within which we can get value into the NSIA is in itself very challenging and it is the same for the other SWFs most of whom are oil-based.
“Many SWFs are very conscious of the fact that in the next 20 to 30 years, demand for oil will begin to slow down fundamentally and so they are in a hurry to take as much oil from the ground and sell.”
He warned that electric vehicles would have consequences for oil demand in the next two to three decades and that oil would suffer the fate of coal, in the near future.
“And the challenge is that if we don’t hurry up and you get caught up with the next 20 to 30 years, you may not be able to use the oil as much as you should, just like coal. In the 1960s, coal was everything, but not anymore. People still use coal but it is no more as important as it used to be.
“So the new challenge for us is to encourage investment, take as much oil as you can, save as much as you can and invest as much as you can. With electric vehicles, with excess supply, in years to come, the demand for oil is going to be challenged and we have to take this into account.”
The MD disclosed that NSIA would, henceforth, give priority to funding critical infrastructure across the country, which he explained, was the reason for the new allocation of 50 per cent of its funds to that sector.
Consequently, the Stabilisation Fund and the Future Generation Fund would now receive 20 per cent and 30 per cent, respectively.
He disclosed that the NSIA, which received an additional $250 million capital from its shareholders last week, was elated by the development, which came at a time the government was undergoing fiscal constraints.
According to Orji, the $1.75 billion capital would strengthen its operations and increase its confidence to approach foreign and local co-investors to entrust more funds in the hands of the organisation.
Although infrastructure usually needed more time to yield profits, Orji said it remained one of the most profitable sectors in which to invest.
“What we plan to do with the infrastructure fund is to do more co-investments. So for every naira we invest, for every dollar we invest, we want to attract more partners to co-invest with us.
“In our discussions with our partners, many of them want to co-invest with us in Nigeria.”