Demonstrate resilience despite the global economy
Indeed, the global economy is facing a great test. The test, which International Monetary Fund Managing Director Kristalina Georgieva described as “the world’s greatest test since World War II,” is an ill wind.
According to analysts, by all indications, the global economy is currently grappling with the forces of recession and a weak economic outlook. Russia’s invasion of Ukraine has compounded the residual economic effects of the Covid-19 crisis, depressing growth and pushing inflation to multi-decade highs. As soaring food and energy prices squeeze households around the world, central banks are tightening monetary policy to contain inflation, putting additional pressure on indebted countries, businesses and families.
But amid these economic headwinds, the Nigerian Sovereign Investment Authority has continued to show resilience, a feat evidenced by the Authority’s financial performance in 2021.
The NSIA is a federation investment institution established in 2012 to manage funds in excess of budgeted hydrocarbon revenues. It was launched to invest in infrastructure, build a savings pot for future generations and protect Nigeria’s fragile oil economy from commodity price shocks.
Its mission is to play a leading role in driving sustained economic development for the benefit of all Nigerians by creating a savings base for the Nigerian people, enhancing the development of Nigeria’s infrastructure and providing support stabilization in times of economic crisis. The NSIA manages three mandated funds. These are the Stabilization Fund, the Fund for Future Generations and the Nigerian Infrastructure Fund.
The NSIA, analysts say, has, in a challenging operating environment that has tested the resilience of institutions and businesses around the world, continued to weather the storm posting its 9 straight year profit of 153.56 billion naira in the financial year 2021.
For stakeholders, the recently released result of NSIA, manager of Nigeria’s sovereign wealth fund, is commendable as it recorded the 9th year of continuous profits. Despite a difficult and volatile market, NSIA’s investment strategy has proven resilient, which has enabled the Authority to deliver favorable results as shown in the 2021 financial statement.
For example, the Authority which was established in 2012 to manage the Sovereign Wealth Fund of Nigeria achieved a basic income of N100.8 billion in 2021 compared to N109.6 billion in 2020. This excludes foreign exchange gains 45.8 billion naira in 2021 and 51.2 billion naira in 2021. 2020.
The NSIA also achieved a 19.02% growth in net assets to N919.73 billion in 2021 from the N772.75 billion recorded in the previous period of 2020. Total assets increased rose 25% to close at N1.228 trillion, from a position of N981.78 billion in 2020.
The funds performed strongly on an individual basis, with the Future Generation Fund (FGF) growing by 11.98% to reach N976.868 billion in 2021, while the Stabilization Fund (SF) and the Nigeria Infrastructure Fund (NIF) increased by 1.60% and 4.64%. to reach N278.827 billion and N962.778 billion respectively.
NSIA has achieved significant milestones in national infrastructure projects, particularly in highways, agriculture, health, technology, gas industrialization, among others.
Speaking on the financial performance, NSIA Managing Director Uche Orji said that despite the difficult year, the Fund was able to end strong with a strong financial result for its contributors.
In terms of details, he said that the President’s Fertilizer Initiative was successfully completed in 2021 and further eliminated the need for government subsidies. He further noted that as a strategy of backward integration, the Authority has made significant progress in the joint development of the US$1.4 billion ammonia and di-ammonium phosphate production plants. to be built at Ikot-Abasi in partnership with OCP as part of the Authority’s gas industrialization programme. On completion, this will enhance food security and enable full domestic production of fertilizer, which is a major input into Nigeria’s food production value chain.
Orji spoke about the 2022 investment year, saying rising global inflation will require careful central bank management and alluded to the ongoing conflict between Ukraine and Russia as an additional catalyst for the sustained surge. world commodity prices.
According to Orji, “2021 marked the end of another strong year at NSIA. During the period, the Authority achieved a solid performance. Although the results were in line with the AMF’s expectations, the solid performance of our investments in developed markets was offset by the difficulties of our asset allocation in emerging markets, in particular in Chinese equities, which recorded a significant underperformance of shares of technology companies.
“Looking to 2022 and beyond, we believe inflationary pressures will persist for much of this year, affecting the performance of all asset classes. We remain committed to bolstering the Authority’s yield 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 a priority area for investment. We will remain relentless in our quest to achieve the company’s clear triple mandate. ‘Authority I am convinced that the actions we are taking will create value for all our stakeholders in the medium and long term.
Orji said the NSIA was transforming from a fund manager to an asset manager. To achieve this, he said the Authority is being positioned to take charge, manage and create value in critical federal and state government assets.
For example, he said that the NSIA has entered into discussions with the federal government to manage some of its assets in the power sector, real estate and industrial sector, among others. Some of these assets, he said, have been underutilized for many years without bringing any economic value to Nigeria.
According to him, asset transfers will be an important part of the NSIA’s medium to long-term growth strategy, as the Authority sees significant opportunities in the federal government’s energy and real estate asset portfolio.
He said: “NSIA is in the process of transitioning from a fund management company to an asset management company. We’re hoping to engage with the government to look at some assets that we can manage on their behalf, and we think we’ve shown a lot of skill in asset management, because that’s one of the things we’ve done with some of the chair programs that we have run.
The NSIA boss also said abandoned power plants will be reviewed so that more profits can be maximized for the government.
He said NSIA is positioning itself as an asset management company in line with one of Singapore’s sovereign wealth funds Temasek Holdings, which manages around $405 billion in assets.
Nigeria has idle assets scattered in various parts of the country, which the government can take advantage of to increase its revenue stream and meet its financial obligations.
He added: “So there are a number of things that appear to be an opportunity for NSIA to expand its footprint and grow its assets as opposed to its cash. Power for example, watch the space and there are one or two power plants that are almost complete but abandoned. So we’re hoping to take back those power plants, get them finished, run them, create value, and that value will come back to NSIA.
“Real estate is another area where we will be very active. The federal government owns a lot of real estate in many parts of the world and many of it is underutilized, undermanaged, and even mismanaged locally. So we approach them to execute it. These are assets that need to be managed. And then the industrial assets that are left to rot, many of them are still in a decent position.
“So there are things that can be done in asset management and I think that remains something for us to pursue.
“Singapore has two sovereign wealth funds. One is GIC and the other is Temasec who manage their assets and this is the model that many of us want to copy. So instead of asking for money, we are asking you to give us your assets, attract capital and repair those assets.
He also said that the NSIA, as an asset manager, will be open to managing the assets of state governments, as they hold almost the same ownership of the Authority as the federal government.
Orji added, “We are willing to provide the same type of access to state governments as they own equal shares of the Fund. So any state that has an asset, we are open to it. We have already actively engaged some states in this area. We know we don’t have huge sums of money ourselves and we will work with states, attract capital and make it viable.
According to a financial analyst, Alex Ojo, the performance was despite the volatility and cyclical risks in the markets his audited results for the financial year 2021. He said: “The strong financial performance underlines the resilience of the investment strategy of NSIA and the quality of its earnings given the challenging macroeconomic environment.
Dr. Timothy Odey also praised the intervention of NSIA in the health sector in Nigeria. He said concerns over the current slow pace of investment in health infrastructure, poor condition of existing infrastructure, poor management of existing facilities and insufficient equipment, among others, prompted the NSIA to prioritize to the health sector among its strategic investment plans.
According to him, NSIA’s investment strategy in the sector is to partner with public and private institutions to create centers of excellence in health care delivery in Nigeria, focusing on diagnostics, tertiary healthcare targeting non-communicable diseases and medical and pharmaceutical manufacturing.
He also praised NSIA’s role in the delivery of the second Niger Bridge which cost the Federal Government over N150 billion.