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By Amechi Ogbonna
The Nigeria Sovereign Investment Authority (NSIA) managers of Nigeria’s sovereign wealth fund, last week released its audited results for the 2021 financial year with strong financial performances that underscored its resilient investment strategy and earnings quality amidst a challenging global macro- economic environment.
Highlights of its financial activities in the period under review as unveiled by NSIA’s Managing Director and Chief Executive, Mr Uche Orji, at a virtual press conference on Monday, May 23,2022, gave its stakeholders some cause to celebrate in a difficult but successful year.
Rising from a devastating COVID-19-induced recession and its attendant global supply chain disruptions of 2020-21, NSIA said it was able to post a profit of N153.56 billion in the 2021 financial year.
At the briefing, Orji explained that 2021 marked NSIA’s 9th year of continuous earnings in the midst of volatile and cyclical shocks witnessed across the global marketplace last year.
Details of the Fund’s performance showed it made a Total Comprehensive Income of N147.0 billion in 2021, a decline of 8.2 percent relative to 2020 at N160.1 billion; inclusive of FX gains of (N45.8 billion in 2021 and N51.2 billion in 2020).
Similarly, NSIA’s Total operating income – Core income (exclusive of FX gains) of N100.8 billion in 2021, down 8.0 percent compared to N109.6 billion in 2020.
But it’s Net Assets grew 19.0percent to N919.73 billion in 2021 from N772.75 billion in 2020.
The Authority set up in 2012 to manage Nigeria’s Sovereign Wealth Fund, amid the global headwinds in its trading activities last year, returned positive trends across its three managed fund classes.
According to Mr. Orji, “2021 marked the end of another solid fiscal year at NSIA.
While the results are in line with the Authority’s expectations, strong performance of our developed market investments were offset by challenges in our emerging market asset allocation, particularly in China equities, which saw significant underperformance by technology company stocks. ”
“Looking ahead 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 strengthening the Authority’s performance by upgrading our risk management teams. In addition to expanding our direct investment footprint in innovation and technology in Nigeria, we have also designated an ESG as an investment focus area. We will remain unrelenting in our quest to deliver the Authority’s clear 3-fold mandate. I am confident that the actions we are taking will create value for all our stakeholders in the medium to long term.”
It is imperative to realise that much of improvements recorded during the year were seen in the various funds under management.
In the year under review for instance, Nigeria Infrastructure Fund (NIF), NSIA reached major milestones across domestic infrastructure projects specifically in motorways, agriculture, healthcare, technology, and gas industrialisation among others.
In the Agriculture space, its Presidential Fertiliser Infrastructure (PFI), turned out to be one of the Authority’s most successful intervention programmes.
As at the end of 2021, for instance, NSIA had upgraded its fertiliser blending plants from 11 in 2017 to 51 included in the programme.
The operating entity of the programme NAIC-NPK (now PFI-NPK) was divested to the Ministry of Finance Incorporated (MOFI) and now being managed by the Authority as a third-party asset.
This restructured entity has indeed turned a profit for the first time in a development considered remarkable for an asset class that had been a subsidised programme.
To further entrench its agricultural footprints across the country, the Uche Orji-led NSIA management said it would be commissioning its Panda Agric initiative in mid-to-late 2022. Panda Agric is an investee company under the NSIA-UFF US$200million Agriculture Fund set up in 2016.
Available report has it that the project is engaging in 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 Nasarawa State (“Project Panda”).
According to Orji, approximately 96 percent (720ha) of the targeted 750ha of centre pivot irrigation coverage has been achieved in the year under review, thus setting the stage for replication of the project in other pilot locations across the country.
Technology
In line with the Fund’s objective, it successfully invested in a hyperscale cloud data company – Kasi Cloud Limited. Kasi Cloud is the next-generation interconnection and data center platform for hyperscale and enterprise cloud solutions. The company focuses on enabling cloud and digital transformation in Africa starting in Lagos, Nigeria. Kasi has commenced the construction of a “Tier IV” data centre worth US$250 million in Lagos.
Gas Industrialisation
Under its gas industrialisation initiative, the Authority made significant progress in conceptualising the development of the Ammonia and Di-Ammonium Phosphate production plants in partnership with OCP.
It had since secured a site for the plant with studies on-going, including the early stages of selecting an EPC company.
Toll Roads
The three road projects being implemented by the NSIA under the Presidential Infrastructure Development Fund (PIDF) namely the Lagos-Ibadan Expressway, Second Niger Bridge, and Abuja-Kaduna-Kano Highway have reached advanced stages of construction.
The target completion date for the first two projects is 2022/2023 with 2025 set as the delivery date for the revised scope on Abuja-Kaduna-Kano Highway.
“The funds performed well on an individual basis with the Future Generation Fund (FGF) growing by 11.98 per cent to N976.868 billion in 2021 while the Stabilization Fund (SF) and Nigeria Infrastructure Fund (NIF) grew by 1.60 per cent and N4.64 per cent to hit N278.827billion and N962.778 billion respectively.
Commenting on the Nigeria Infrastructure Fund, Orji said NSIA reached major milestones across domestic infrastructure projects especially in motorways, agriculture, healthcare, technology, gas industrialisation among others”.
He also revealed that the second Niger Bridge was now 94 percent completed, as the facility will become usable by December 2022 even as ancillary works continue on other phases of the project.
Under the Presidential Fertiliser Initiative (PFI), Orji said it produced over 12 million 50kg bags of NPK 20:10:10 equivalent in 2020, bringing total production since inception to over 30 million 50kg bags equivalent.
The number of participating blending plants increased to 51 from 11 at inception in 2017.
In the health care sub sector, NSIA’s management reported that it’s pilot healthcare centres have continued to deliver value. With the operationalisation of all its three centres, in Lagos, Umuahia and Kano, it reported a record 60,000 patients that had received care in the year being reviewed.
According to Orji, NSIA-Kano Diagnostic Centre and NSIA-Umuahia Diagnostic Centre have provided services to over 50,000 patients while the Cancer Centre attended to over 10,000 patients.
He said the Authority was in the process of developing an Active Pharmaceutical Ingredient Manufacturing Plant (API) Company in Nigeria, having secured approval for the development, construction and operationalisation of 23 new modern medical diagnostic centres of excellence covering all the six geopolitical zones in the country.
This was even as it is working towards the building of two Oncology centres in Enugu and Kaduna states, in addition to six Cath Labs.
NSIA’s healthcare investments will further help to create access to quality healthcare for at least one million patients per annum.
Future Generations Fund
In world perplexed by so much socioeconomic uncertainties, perhaps the Future Generations Fund could be the way out.
For 2021, Nigeria’s Future Generations Fund, returned 12 percent in USD terms, with Private Equity, Developed Equity, and Hedge funds being the best performers in 2021.
The Hedge Funds composite for instance returned 12.75 percent for the year, while
Developed Equity assets returned 17.46 percent for the year.
On the other hand, Emerging market equities posted a decline in the year of -1.92 percent while Private equity, venture capital and other diversifiers had a strong showing for the year at a combined +23 percent for the year.
Stabilisation Fund
The Stabilisation Fund is invested in the United States sovereign debt instruments and Investment Grade Corporate Credit. At the end of December 2021, 21 percent 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 percent for the year, with the structured products sub-set returning 3.69 percent for the year.
Commenting on the outlook for the future the NSIA boss said “We believe 2022 will be the most challenging investment environment in the last 15 years as a combined effect of Inflation, Russia-Ukraine and covid related supply chain challenges combine to create a tough environment for most asset classes.
NSIA will continue to drive direct investments in its core areas of: healthecare, toll roads, gas industralisation, technology, ESG, Financial markets infrastructure, toll-roads, power and agriculture.”
He further stated that asset transfers will be an important component of the Authority’s growth strategy in the medium to long term as it sees significant opportunities in power and real estate in the Federal Government portfolio of assets.
We are hoping to engage with the government to look at certain assets that we can manage on their behalf, and we believe that we have shown a lot of competence in asset management because that is some of the things we have done with some of the presidential programmes that we have run.”
The NSIA boss also stated that abandoned power plants would be looked into so that more profit can be maximis ed for the government.
He said the NSIA is being positioned as an Asset Management Company in line with one of Singaporean Sovereign Wealth Fund Temasek Holdings, which manages about $405billion worth of assets.
Nigeria has unproductive assets scattered across various parts of the country, which the government can leverage to grow its revenue stream and fulfil its financial obligations.
He added, “So, there are quite a number of things that looks like opportunity for the NSIA to do to expand its footprints and grow its assets as opposed to its cash. Power for example, watch the space and there is one or two power plants that is almost near completion but abandoned. So, we hope to take over those power plants, finish it, run it, create value and that value comes back to the NSIA.
“Real estate is another area where we are going to be very active going forward.
The federal government owns a lot of real estates in many parts of the world and many of them under-utilised, under managed and even locally not well managed. So, we are approaching them to run it. These are assets that should be managed. And then industrial assets that are just allowed to rot away, many of them are still in decent position.
“So, there are things that can be done with regard to asset management and I think this for us remain something to pursue.
The Nigeria Sovereign Investment Authority is an investment institution of the Federation set up to manage funds in excess of budgeted hydrocarbon revenues. Its mission is to play a leading role in driving sustained economic development for the benefit of all Nigerians through building a savings base for the Nigerian people, enhancing the development of Nigeria’s infrastructure, and providing stabilisation support in times of economic stress. This it seeks to achieve through the instrumentality of three mandate funds: The Stabilisation Fund, the Future Generations Fund, and the Nigeria Infrastructure Fund.
