Amechi Ogbonna
Although last week’s announcement by the board of Nigeria Sovereign Investment Authority (NSIA) that it registered a five per cent growth in total assets, from N617.7 billion in 2018, to N649.84 billion as of the end of 2019 may look not too impressive to average Nigerians who are used to double digit profitability in the financial services industry, even when the underlying parameters are weak, those at home with current global market dynamics across various sectors of the economy indeed believe it could be one of the best to come out of an environment challenged with much headwinds.
In their overall assessment, NSIA’s modest growth in both assets and profit at a time it is shifting focus towards infrastructure and direct investments in Nigeria’s economoy, returns are bound to incubate over a longer period with cash available for market driven investments likely to decline in the short term ahead of future bumper yields.
That logic can better be appreciated when one realises that at the inception of 2019 financial year, Managing Director of the NSIA, Uche Orji, did highlight that some challenges arising from weak performances across its actively managed portfolios, including ongoing trade disputes and political instability in key markets, may count among key risk factors that might escalate within the year.
In the light of these exigencies, Orji noted that NSIA’s key markets would remain volatile, while being cautiously optimistic its asset allocation strategy would help it whether downside risks and optimise market gains.
“Throughout 2019, we shall continue to focus on executing our Infrastructure Investment strategy in our core focus areas of Power, Toll Roads, Agriculture, Healthcare and most recently gas industrialisation” Orji said.
Indeed in line with management’s expectations, details in the 2019 audited financial statement of the Federal Government’s sovereign wealth manager currently transiting into an infrastructure finance agency released in Abuja, showed it also ended the year with a profit after tax of N34.4 6 billion, as against the N46.50 billion (including FX translation gains) it posted in 2018.
A closer insight into the financial statement however showed NSIA recorded total comprehensive income of N36.15 billion in 2019 as against the N44.34 billion, in 2018.
But when the foreign exchange gain of N18 billion in 2018 and N1.28 in 2019 are excluded, its net income for the year comes to N34.87 billion compared to N26.28 billion in 2018.
But beyond these numbers, what perhaps could be of interest to most Nigerians is the development impetus the Authority is creating for an infrastructure challenged economy like Nigeria having put the conclusion of key transactions and increasing capital deployment on domestic infrastructure projects specifically in strategic sectors like agriculture, healthcare, and infrastructure enabling financial institutions on the front burner.
For many who had followed the agency from inception in 2012, the latest numbers even in the face of globally acknowledged headwinds is a continuation of a culture of profitability considering that it had reported six straight years of growth in all its funds (2012 -2018) with core profits (excluding FX translation gains) of N28.45 billion ($87.5 million) for 2018.
As a Sovereign Wealth Manager actively involved in national economic and infrastructural development to complement government and the citizens’ efforts at mitigating the nation’s huge infrastructure gap, the recent forays into the health, agriculture and infrastructure financing have continued to impact lives of citizens through jobs and wealth creation in the midst of yawning infrastructure deficits across sectors.
But for NSIA’s recent intervention in the healthcare sector, in helping to operationalise an ultramodern Cancer Centre at the Lagos University Teaching Hospital in May 2019, that dream project would still have been in the pipeline several years after its ground breaking ceremony was done.
The completion of that facility stands at the threshold of Nigeria’s development finance history considering its estimated record of 12,000 Federal Government’s abandoned projects scattered across the 36 states of the Federation. The LUTH cancer in addition to the significant progress recorded on the civil and construction works at the Advanced Diagnostic Centres at both the Federal Medical Centre Umuahia and Aminu Kano Teaching Hospital both of which were completed in 2020 facilitated by NSIA are a good reminder to the fact that with the commitment of government and support of patriotic Nigerians, the country can become a Centre of Excellence in several areas including medicine and technology.
Today, following the agency’s involvement, these top line medical facilities have been completed and are now in use thereby saving the nation billions of dollars that would have been wasted on medical tourism overseas.
Another signature project that the Nigeria Sovereign Wealth Authority had pursued with vigour in the year under review was the Presidential Fertiliser Initiative, which the 2019 financial statement indicated it delivered 6.5 million of 50kg bags of NPK 20:10:10, to help raise the number of accredited participating blending plants from 18 to 31 at the close of the financial year.
Beside demystifying and breaking an unholy fertiliser cabal that had exploited Nigerian farmers over many years, the NSIA PFI has also created thousands of jobs with activation of the agriculture and fertiliser value chains that had been dormant across the country for many years.
Meanwhile, out of the N90billion approved for it under the Presidential Infrastructure Development Fund, the Authority said it had successfully deployed capital across three of the major road projects under the PIDF, including the Second Niger Bridge, Lagos – Ibadan Expressway and Abuja-Zaria-Kaduna-Kano Road, with a total of N181.9 billion already deployed across all three projects.
Speaking on the financial performance, the Managing Director, NSIA, Mr Uche Orji, said the outlook for the Fund remains promising despite the COVID-19 pandemic.
He explained: “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.”
The NSIA boss said asset allocation strategy remains stable across the various funds adding that Future generations fund remains 25 per cent public equities, 25 per cent private equity, 25 per cent Absolute Returns and 25 per cent Other diversifiers.
He gave the areas of focus for the Nigeria Infrastructure Fund to include agriculture, healthcare, power, toll roads and gas industrialisation.
Orji said the NSIA closed key transactions and increased capital deployment on domestic infrastructure projects specifically in motorways, agriculture, healthcare, and power:
He said, “Operationalising several subsidiaries of the NSIA will be a key focus especially in the healthcare sector where we have several projects in the pipeline.
Despite the widespread global challenges, NSIA said has continued to ride the storm of economic adversity that have driven many Fund managers underground with its diversified investment portfolio in several financial companies to help develop the capital markets including Nigeria Mortgage Refinancing Company, InfraCredit, NG Clearing, Development Bank of Nigeria, and Family Homes Funds.
For instance, NSIA remains the largest shareholder in Nigeria Mortgage Refinance Company (NMRC) and the third-largest shareholder in Development Bank of Nigeria (DBN) by holding shares in trust for the Federal Government.
“We will continue to work on strengthening these entities and making new investments in companies that strengthen financial market infrastructure,” he said.
The NSIA boss also said the agency would continue to deploy capital into vital sectors of the economy with increased focus on sectors that will engineer real growth.
A historical analysis of returns in 2018 by funds for example showed that Stabilisation Fund (11.50%); Future Generations Fund (3.30%); Nigeria Infrastructure Fund (13.80%) against projected benchmark of 2per cent 6 percent and 3-5 percent respectively.
According to the account, the Nigeria Infrastructure Fund (NIF) is implemented through three key pillars; direct investment, co- investments and investment/creation of enabling financial institutions; with the focus being Agriculture, Roads, Power, Gas Industrialisation and Healthcare:
Direct Investment: Implemented the Presidential Fertiliser Initiative (PFI) in 2018, commenced construction of the three healthcare projects in Lagos (concluded and operational), Kano and Umuahia respectively, continued capital deployment across the three priority road projects namely; 2nd Niger Bridge, Lagos – Ibadan Express and Abuja – Kano Expressway under the PIDF.
Co-Investments Funds: NSIA/UFF-Old Mutual $200 million agriculture co-investment fund made its first investment in Nasarawa State with the acquisition and expansion of Novum Farms (~$25 million investment). Other potential investments are being appraised across the country.
Enabling Financial Institutions: NSIA in conjunction with GuarantCo (UK) created the Infrastructure Credit Guarantee Company Limited (InfraCredit) which enables Pension Funds to invest in infrastructure. In 2018, InfraCredit was able to raise US$60 million of additional capital from KfW – German state-owned development bank (€31 million) and Africa Finance Corporation (US$25 million). This is in addition to driving the pre-privatisation initiative of the Nigeria Commodities Exchange alongside BPE. percent in Naira terms for the year.
The Nigeria Sovereign Investment Authority (NSIA) was created by an Act of the National Assembly as the Nigeria Sovereign Investment Authority (Establishment) Act, 2011; and signed into law by the President on May 26, 2011. Its shares are owned by Federal Govt. (45.8%), State Govts. (36.2%), Local Govts. (17.8%) & FCT (0.16%). Today, it is Signatory to the Santiago Principles of the International Monetary Fund (IMF) / International Forum of Sovereign Wealth.