Sovereign Investment Authority Swings into Action

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The consensus of investment analysts last week was that with the recent approval of an investment allocation of $850 million for the three investment windows of the Sovereign Investment Fund, the management of the Sovereign Investment Authority has demonstrated its resolve not only to provide a buffer for the economy but also to bridge the infrastructure gap in Nigeria, reports Festus Akanbi

The Federal Government may have scored a big point with the recent inauguration of the board of the Sovereign Wealth Authority, the investment arm of the Sovereign Wealth Fund, which last week expressed its readiness to go anywhere in the world to get the best deals for the country to justify the investment of the Nigerian people.

The Sovereign Wealth Fund, inaugurated in October, was set up to invest savings made from the difference between budgeted oil prices and actual market prices.

According to its vision statement, NSIA was established as world-class sovereign wealth fund manager to become the premier infrastructure investor/co-investor partner of choice for all commercially viable projects of size in Nigeria. Its mission include the need to build a savings base for future generations of Nigerians, enhance the development of Nigerian infrastructure and to promote fiscal stability for the country in times of economic stress.

The build-up to the establishment of the SIA was characterised by glaring deficit in infrastructure with the attendant strains on economic and business activities.

Economic affairs commentators had argued that unless there was a conscious effort to save for the raining day, it might be practically difficult for the government to meet up with the rising demand for critical infrastructure needed for the nation’s development, especially given the regular depletion of the excess crude account savings.

NSIA Swings into Action
With the declaration that the board of the Nigeria Sovereign Investment Authority (NSIA) has approved an investment allocation of $850 million for the three investment windows of the SWF, informed financial analysts said the coast is now clear for the management of the fund to deliver on its promise.

Speaking last week at a session with journalists in Abuja to signal the commencement of the operation by the new management, which he heads, the Managing Director/CEO of NSIA, Mr. Uche Orji, said the Future Generations Fund and the Nigeria Infrastructure Fund would each get $325 million or 32.5 per cent while the Stabilisation Fund would receive $200 million or 20 per cent.

The remaining 15 per cent of $150 million, he said, “will be kept as unallocated for now, and used to top up each of the ring-fenced funds, as opportunities arise.”

Orji said the plan “aims to balance the infrastructure need of the current generation and the need for savings for the future generation of Nigerians.”

Investment in the Stabilisation Fund will start next month, as the Future Generation Fund will continue till end of 2013 “because it is a more diversified portfolio with a more complicated process.”

On Infrastructure Fund, Orji said: “A very detailed and thorough review of possible investment areas and projects is ongoing. The investments being considered with the infrastructure fund are housing, agriculture, power, water resources, transportation, sports, aviation and health care.”

He stated further that the objective of the NSIA was to build returns above inflation, and the reporting currency would be the dollar.
He said the Nigeria infrastructure fund had geographical restrictions while the other two funds did not have geographical restrictions. The Nigeria infrastructure fund will focus only on Nigeria. These funds, according to Orji “will be managed in-house and the idea is to earn commercial returns and a sub set of the fund should be devoted to social infrastructure.”

The management of the SIA did not hide its resolve to maintain a lean organisation with total staff strength of 25 people including professional and administrative staff. A source explained that the institution opted for a lean organisation in order to avoid unnecessary bureaucracy, which could distract it from its goals.

One factor, which is working for the management of the SIA, is the growing popularity among its peers from other parts of the world. For instance, the International Forum of Sovereign Wealth Funds (IFSWF) has invited the NSIA to apply for observer status, an interim step before full membership. NSIA is expected to present credentials in Oslo, Norway in October 2013.

As a mark of its readiness to make its impact felt, the NSIA is currently engaged in in-depth discussions with a few strategic partners, which include private equity firms, investment managers, and OEMs interested in making capital investments.
The initiatives are coming at a time of strong indications that the Sovereign Investment Authority is receiving positive considerations from relevant international institutions and stakeholders.

The favourable signals include messages of support and interest in co-investment with the Nigeria Sovereign Investment Authority’s Infrastructure Fund from global firms and sovereign wealth funds of other countries.

A statement signed by the Special Adviser to NSIA Chief Executive, Obinna Ihedioha, said the governance structure of the NSIA had received strong endorsement from a cross section of participants who attended the just-concluded Institutional Investors Roundtable of Global Sovereign Wealth Funds in Banff, Canada.

“The participants at the event praised the governance structure for its fidelity to best practices and relevance to the peculiar challenges facing the Nigerian economy and commended the vision of MD/CEO, Mr. Uche Orji,” the statement said.

In his reaction to these developments, Orji commended the vision of President Goodluck Jonathan for prioritising the establishment of the NSIA and the leadership of the Coordinating Minister and Minister of Finance, Dr. Ngozi Okonjo-Iweala. He also praised the board of directors being led by Alhaji Mahey Rasheed for a strong leadership and guidance especially in this initial phase.

Growing International Support
“The international support we have received is a reflection of the potential opportunity in Nigeria, the benefit of the NSIA, and the capability of the NSIA to be a catalyst for significant international investment. More importantly, our invitation to a group like this is a reflection of the credible governance of the NSIA and a commendation of the Federal Government’s vision,” the statement added.
In its bid to register its presence on international scene, the Nigeria Sovereign Investment Authority led by its chairman, Alhaji Mahey Rasheed, paid a courtesy visit to the secretariat of the International Forum of Sovereign Wealth Funds (IFSWF), housed at the International Monetary Fund (IMF) in Washington DC to discuss the imminent membership of the NSIA on April 21.

The delegation also met with potential partners including a high-level delegation of the World Bank, International Finance Corporation (IFC), US-Export Import Bank (EXIM) and US Overseas Private Investment Company (OPIC) as well as private sector players such as Goldman Sachs, Union Bank of Switzerland (UBS), JP Morgan, and Acumen Funds – a world-class social infrastructure investment company.

These meetings were in keeping with a key mandate of the NSIA to serve as a channel to attract foreign investments into Nigeria and the discussions centered on NSIA’s pipeline of investment projects in Nigeria.

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