NSIA’s $650m fresh capital to enable $8bn worth of projects

The Nigeria Sovereign Investment Authority (NSIA) will begin to deploy the newly approved $650m Presidential Infrastructure Development Fund (PIDF) next month, as it aggressively scales up infrastructure investments to 50 percent of its core resources.

Approved last month by President Buhari and later authorized by the National Economic Council NEC, the new injection raises total capital under the NSIA management to $1.95 billion excluding some third party money – $350m being managed on behalf of the Nigerian Bulk Electricity Trading (NBET) and $100 for the Debt Management Office (DMO).

Uche Orji, Chief Executive Officer, NSIA told BusinessDay that they project that the new fund would enable additional $8 billion worth of Projects.

The money is expected to remove those funding impediments to the completion of the country’s five critical infrastructure assets including the 2nd Niger Bridge, Lagos to Ibadan Expressway, East—West Road, Abuja to Kano Road, Mambilla Hydroelectric Power over the last few decades.

“These are five major projects which over 40 years have been in planning. Milla was frat awarded 43 years ago, we have been talking about Lagos Ibadan like forever, Second Niger Bridge since the end of the second civil war. So the only way to agtually get all these projects done is what the president is doing now through the presidential.devwlopment infrastructure fund,” Orji told BusinessDay.

With the fund, the NSIA, managers of the Nigeria’s Sovereign Wealth Fund anticipates increased investments in infrastructure as more projects come up to financial close in order to help government close huge gaps.

“NSIA will manage it and ensure that it is executed. We will Invest part of our own core finds also into it, and we will also help raise third party capital from other people- pension funds and the likes.”

“It is still early stages, but we are working very hard to start deploying those funds from next month. Our expectation is that based.on the way that fund is going to work, something like 2nd Nigeria bridge, you will see a bridge by he end of next year,” Orji told BusinessDay at the weekend.

The NSIA expects another $650m contribution into presidential infrastructure fund within the next twelve months, even though talks are on with the federal government on expectations from the anticipated injections.

Uche said the massive deployment of the sovereign wealth fund to infrastructure and social direct investments partly explains the slide in profit in 2017.

Though total assets held by NSIA rose by 27% in 2017 to N533.9 billion, there was a sharp and steep decline in profit after tax to N23 billion compared to N130 billion made in 2016.

“There were four things that led to that decline, the issue of exchange rate, heightened development of projects, the opportunity cost of cash being put in infrastructure that has long time to start to perform,” Orji told BusinessDay while explaining the drop in profits.

Total comprehensive income also moved downwards to about N28 billion.

But the Authority’s interest income doubled to N22 billion in 2017 compared to N11 billion in 2016 while investment was N2.6 billion up from N1.33 billion. The Fund’s holdings of investment securities almost doubled to N430 billion compared to about N250 billion in 2016.

“Other contributory factors to 2017 financial performance relative to the prior year included the lag in re-investment of matured funds whilst awaiting inauguration of the new Board.

“We lost time, we lost almost six months between the time the board was announced and the inauguration. So most of the returns you saw was scrambling in the second half of the year to try and make up lost grounds.”

Uche confirmed commitments to local investments which would take some time to mature and yield profitability. However, the Fund booked a N2.15 billion loss on ‘infrastructure subsidiaries investments.

“There was also the impact of rapid deployment of funds into infrastructure projects in the year, leading to higher Group operating expenses. These programmes included InfraCredit; set up to provide infrastructure credit guarantees, the Presidential Fertiliser Initiative, Healthcare Projects in Tertiary Medical Centres in Kano, Lagos and Umuahia and the acquisition of an Integrated Farm in Nassarawa State, which culminated in a significant rise in operational costs being consolidated into the Group accounts of the NSIA.

At a press conference where he announced Authority’s 2017 financial results, Uche explained that the decline of the Net Foreign Exchange Gains which accounted for the reduced Net Operating Income recorded in 2017 was as a result of Government’s currency management policies which were aimed at stabilizing and reflecting the Naira’s real value in 2016.

“To this effect, the Naira weakened in value from N196/$ to N305/$ in 2016. Considering that at the end of that year, about 80% of the Authority’s Assets Under Management (AUM) were denominated in United States Dollars (US$), the devaluation resulted in the recognition of significant exchange gains in the Authority’s Naira books at the close the year.

“The NSIA continues to translate its foreign balances at the CBN rate which has remained stable through 2017 thereby resulting in a more reflective income position as at year end 2017.”

Orji sees a challenging 2018 as rising interest rates in the USA continues to drive Global market volatility, coupled with an anticipated further decline in interest rate in the local market which would potentially discourage investors.

“This year has been a a very volatile year, January was very strong, we started off making so much money and then Trump started a the geopolitics and trade war and markets have started going down.

‘We are, however, very optimistic that we would still do well this second half of the year,” he stated assuring that the Authority would continue to maintain its diversified asset strategy to drive returns and mitigate market volatility.

Onyinye Nwachukwu, Abuja

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