From Uche Usim, Abuja
Mr. Uche Orji, managing director and chief executive officer of the Nigeria Sovereign Investment Authority (NSIA), is battling a global tempest to stabilise and sail Nigeria’s investment ship into calmer waters.
He was the pioneer CEO of the NSIA in 2012 and was reappointed in 2017 for a second and final five-year 
term, having led the operationalization and growth strategy since 2012. On his watch, the agency has literally become Nigeria’s infrastructure renewal driver, serving as a vehicle for implementing key infrastructure projects, among other fruitful investments.
However, Orji reckons that 2022 will be a very challenging investment year for the NSIA and its likes due to a cocktail of factors, including the Russia-Ukraine war, roaring global inflation and China’s continued battle against the COVID-19 pandemic, which has affected global supply chains because China is more or less the global manufacturing capital, among others.
Regardless of the aforementioned headwinds, he has assured Nigerians that the NSIA has developed a strategy to wade through the waters to remain successful.
The NSIA CEO has over three decades of global experience spanning banking, asset management and financial services to the leadership of the authority.
In addition to his role as MD/CEO, he serves on the boards of the Infrastructure Credit Guarantee Company Limited (InfraCredit) as chairman, and non-executive director at the Development Bank of Nigeria, Family Homes Funds Limited, NG Clearing Limited and Nigeria Mortgage Refinance Company.
He studied chemical engineering at the University of Port Harcourt, Rivers State, graduating in 1990, and obtained an MBA from Harvard Business School in 1998.
In this virtual interview held on the sidelines of the NSIA’s 2021 earnings report presentation, the NSIA CEO talked about the agency’s challenges, growth plans and other issues.
2021 financial year
It was quite a challenging year but, despite the challenging environment, NSIA delivered impressive financial results, underscoring the resilience of our strategy. For nine years in a row, the NSIA has consistently remained profitable, closing the 2021 financial year with a core income of N100.8 billion in 2021, down 8.0 per cent compared to N109.6 billion in 2020. The core income excludes foreign exchange gains of N45.8 billion in 2021 and N51.2 billion in 2020.
We also recorded a profit after tax of N153.6 billion, slightly down 1.9 per cent from 2020, being N156.5 billion.
Our total comprehensive income declined marginally in 2021 by 8.2 per cent to close the year at N147.0 billion. In 2020, it was N160.1 billion, while net asset grew 19.0 per cent to N919.73 billion in 2021. In 2020, it was N772.75 billion.
Suffice it to say that all the three funds closed the year positive, beating their individual benchmarks.
2022 and beyond
Looking ahead to 2022 and beyond, we believe inflationary pressures will persist for much of this year, affecting the performance of all asset classes.
In fact, it will be the most challenging; 2022 worries me more than the 2008 US housing crisis.
Just the US, the housing crisis caused a major global upset in 2008, but now we have more global issues to deal with. The global supply chain is entangled. You have to aggressively fight it because we’re going into a liquidity squeeze. Let’s just hope that China finds a solution to the ravaging COVID-19 pandemic and the Russia-Ukraine war ebbs. I am waiting to see how things play out. If the US Federal Reserve does not address the issues on ground, the inflation will drag into a stagflation.
All these notwithstanding, the NSIA remains committed to strengthening its performance by strengthening our risk management teams.
In addition to expanding our direct investment footprint in innovation and technology in Nigeria, we have also designated ESG as an investment focus area. We will remain unrelenting in our quest to deliver the authority’s clear threefold mandate. I am confident that the actions we are taking will create value for all our stakeholders in the medium to long term.
Moving away from dollar-denominated investments
Moving away from dollar-denominated investments won’t be an immediate consideration because it means the world will have to find a complicated way to wind down to something else (another reserve currency). The US dollar remains resilient because it is a currency of trust for most people across the globe.
Dividend payment
There are conversations around paying dividends. We are in discussions with the owners, the governor’s forum and the ministry of finance, to decide whether they want to take from the profit made as dividend. But, if you ask me, I would say let’s invest more and expand our portfolios.
Nonetheless, we are in a position to pay dividends, having made profit over the years.
With regard to your question on partnering with the states, I would like to say that we are providing the same access to states. We are actively engaged with the states on various projects like the trailer parks, plantations, etcetera.
Second Niger Bridge
The Second Niger Bridge is 95 per cent completed. As it stands today, by December, we will make it usable. There’s still phase two and phase three of it, which are mainly for roads. There’s a bypass road to make it usable. October will mark formal completion and, latest, by December, it will be used. It will be a remarkable milestone: 11km of bridge and road will be completed by year end.
Finishing touches will take some time and the roads, too. But we’re on track. Many people may wonder why it looks like the project has slowed down but finishing touches and testing must be done thoroughly.
Most challenging sector investment for NSIA
As you already know, the NSIA has three separate and ring-fenced investment funds, which are the Stabilisation Funds, Future Generations Funds and Infrastructure Funds, and, in answering your question directly, all of them were challenging in the year under review. It has been a tough year, really. I thought the electricity project would have been done. Fertilizer was also challenging. Restructuring of the fertilizer project was fine. However, smuggling remains a huge problem for the fertilizer project. We understand the product is now being smuggled out and sold in Mali, Niger, etcetera, to the detriment of Nigerian farmers. There are huge shenanigans going on there. That is huge sabotage and it is most unfortunate. I believe, with time, we will build the muscles to tackle these challenges. No sector is easy, actually.
With the restructuring of the Presidential Fertilizer Initiative, our efforts now stop at the ports. We have done extremely well in that area. We had excess materials. This year, there was a problem of potash, which we solved. Belarus and Russia used to supply us potash but we know what is going on in those areas. Now, we looked towards Canada and we have two vessels laden with potash coming in June. It will be enough to last for a long time.
Let me also say that fertilizers may not have gone round to all farmers as they should and there are reasons for that. Where there is insurgency, fertilizer cannot get there. Again, there is the issue of pricing. The vital components of making fertilizers are expensive but we are doing our best to succeed and sustain the success.
Ajaokuta steel complex
The Ajaokuta steel complex is a huge facility. But we don’t bid for government assets. We can’t bid against ourselves, being a government agency. If a private sector bidder wins and comes to us, we can partner. The Ajaokuta steel complex, like I said, is a huge place. Very huge. We can break it down and invest into some sections of it with private sector players.
Nigeria Infrastructure Fund
The Nigeria Infrastructure Fund (NIF) reached major milestones across domestic infrastructure projects, specifically, in motorways, agriculture, healthcare, technology, gas industrialisation and others.
In agriculture, the Presidential Fertiliser Initiative (PFI) made profit in 2021, eliminating the need for government subsidy.
The number of local blending plants that participated in the PFI programme increased from 11 at the end of 2017, the first year of the programme, to 51 in 2021. The programme produced 12 million 50kg bags of NPK 20:10:10 equivalent in 2021, bringing total production since inception to over 30 million 50kg bags equivalent.
Similarly, over 19 million bags of fertilizer have been delivered to farmers at 40 per cent below market prices.
The NSIA-UFF $200 million agriculture fund (“the Fund”) is engaged in the two-phase development of an animal feed processing business with backward integration through the farming of maize and soybean on about 3,500ha of land in Panda, Nasarawa State (“Project Panda”).
Again, approximately 96 per cent (720ha) of the targeted 750ha of centre pivot irrigation coverage has been achieved.
Technology
In line with the Fund’s objective, we successfully invested in a hyperscale cloud data company – Kasi Cloud Limited. The NSIA has invested about $12 million in early-stage venture capital fund managers focused on the African technology space.
Gas industrialization
Under the gas industrialization initiative, the NSIA made significant progress on developing the ammonia and di-ammonium phosphate production plants in partnership with OCP. Selected Ikot-Abasi in Akwa Ibom State as the project site after extensive review of several other locations.
Toll roads
The three road projects being implemented by the NSIA under the Presidential Infrastructure Development Fund, namely, the Lagos-Ibadan expressway, Second Niger Bridge and Abuja-Kaduna-Kano highway, have reached 66 per cent, 53 per cent and 66 per cent completion, respectively.
The target completion date for the first two projects is 2022, with 2025 set as the target date for the original scope on Abuja-Kaduna-Kano highway.
Healthcare
The authority also commenced operations at both the NSIA-Kano Diagnostic Centre and NSIA-Umuahia Diagnostic Centre in March and August of 2020, respectively.
It has also developed an active pharmaceutical ingredient manufacturing plant company in Nigeria as well as commenced the development, construction and operationalization of 23 new modern medical diagnostic centres of excellence across all six geopolitical zones in the country, two oncology centres in Enugu and Kaduna states and six CAT labs.
This has helped to create access to quality healthcare for at least one million patients per annum.
The authority has also expanded its footprint of diagnostic and single specialty centres and delivered $0.6m worth of COVID-19 relief equipment to federal tertiary medical institutions across all six geo-political zones in response to efforts to combat and prevent resurgence of COVID-19 virus.
Future Generations Fund
The Future Generations Fund returned 11.98 per cent for the year, with private equity, developed equity and hedge funds being the best performers in 2021.
The hedge funds composite returned 12.75 per cent for the year. Returns ranged from -6.51 per cent (Palestra Capital) to 26.18 per cent (Naya fund).
The Naya fund has a 21.3 per cent allocation within the hedge fund composite as at the end of December and was the top contributor to performance. Palestra was the only fund to have a negative year and accounts for an allocation of 5.92 per cent.
On the equity funds, the MSCI Developed Markets Index far outperformed the MSCI Emerging Markets Index in 2021, returning 21.82 per cent and -2.54 per cent, respectively. The Emerging Markets Composite outperformed its benchmark, while the Developed Markets Composite underperformed its benchmarks.
The Developed Equity Composite returned 17.46 per cent for the year, underperforming the MSCI World Index by 4.36 per cent. The “Other ETFs” portfolio ended the year 13.93 per cent lower in dollar terms and the US had the top passive ETF portfolio, returning 28.20 per cent. The top performing fund was the Cevian Capital Fund, returning 23.84 per cent for the year.
Private equity returned 32.14 per cent for the year. This composite return includes a diverse range of returns from the different private equity investments.
Stabilisation Fund
The Stabilisation Fund is invested in United States sovereign debt instruments and Investment Grade Corporate Credit. At the end of December 2021, 21 per cent of the fund was invested in a portfolio of US treasury bonds tracking the Bloomberg Barclays US Treasury bond 1–3-year index.
The fund returned 1.60 per cent for the year. The Nigeria treasury bills hedged to the US dollar was the best performing component, returning 3.69 per cent for the year.
The NSIA manages the Nigeria Sovereign Wealth Fund into which the surplus income produced from Nigeria’s excess oil reserves is deposited.
This fund was founded for the purpose of managing and investing these funds on behalf of the government of Nigeria. The fund was established by the Nigeria Sovereign Investment Authority Establishment Act, 2011, signed in May 2011, and commenced operations in October 2012.
Divestment
The Finance Ministry incorporated is now in charge of the fertilizer programme.
Let me explain clearer. The operating entity of the programme NAIC-NPK (now PFI-NPK) has been divested to the Ministry of Finance Incorporated (MOFI) and is being managed by the authority as a third-party asset. The restructured entity also turned a profit for the first time, which is remarkable for what has been perenially a subsidized programme.
Total assets decline
It did not decline but it grew. On the liability side, there is growth too.