By Chinwendu Obienyi
The year 2020 will not be forgotten in a hurry as it saw global economies on lockdown following the outbreak of COVID-19 pandemic.
This resulted to galloping inflation, high cost of oil and slow implementation of national budgets among others.
It would therefore be safe to state that the pandemic may not have given some economies a chance to recover as they eventually almost slipped into recession.
Added to these interuptions was the Russia-Ukraine crisis last year that came with unprecedented fiscal shocks like food and energy crises, supply-chain disruptions, soaring inflation, and monetary policy tightening, which precipitously impacted the financial markets.
Like other emerging and frontier markets, the Nigerian economy faced theses challenges during the year. The uncertainties saw multilateral institutions such as the International Monetary Fund (IMF) and World Bank cutting back their projections for 2023.
Despite the gloomy economic projection and slowdown in economic activities in Nigeria due to the heated polity in the build-up to the 2023 elections, the Nigeria Sovereign Investment Authority (NSIA), manager of Nigeria’s sovereign wealth fund, surprisingly defied these odds by recording impressive earnings for the 2022 financial year.
Highlights of NSIA’s activities and performance during the period showed that it posted its 10th year of continuous positive earnings in spite of volatility and headwinds across markets.
For instance, the Authority’s Total Assets grew 10.5 per cent to N1.02 trillion in 2022 up from the N919.73 billion recorded in 2021. Other non-volatile revenue such as interest income, revenue from infrastructure business and management fees earned from fiduciary activities, increased by 34.5 per cent (N15.7 billion) year-over-year.
However, its total comprehensive income declined by 34 per cent to N96 billion in 2022 as against N147 billion recorded in 2021 due largely to strong macroeconomic headwinds. According to the NSIA, This decline was primarily attributable to the performance of its Future Generations and Stabilization portfolios that are invested in emerging and developed financial market instruments.
Nonetheless, the agency was able to outperform most global investment benchmarks and indices to deliver a respectable performance. This meant that the NSIA’s well-diversified portfolio continues to provide the resilience to withstand market challenges as evidenced by the results.
Commenting on the results, the Chief Executive Officer, NSIA, Aminu Umar-Sadiq, said the performance was recorded despite the challenges in the operating environment.
He said, “Against market expectations and internal forecast, NSIA closed the 2022 financial year with a respectable performance. This result underscores the robustness of our diversified portfolio, and the excellent commitment of the team”.
Umar-Sadiq said, “As we look to the future, NSIA is resolute in its commitment to delivering increased investments in critical sectors of the economy, driving growth across its funds, and attracting third-party capital into Nigeria’s infrastructure sector.
In 2023, we will be resourcing our various platforms targeted at emerging sectors – renewable energy, sustainability, innovation, and healthcare – which will ensure the Authority achieves its dual objectives of delivering financial returns and impactful social outcomes.”
Although the Group’s earnings are lower than that of 2021, the NSIA Group said it remains confident in its investment strategy and will continue to explore opportunities to mitigate risks and achieve its investment objectives.
To deliver its development objectives, the NSIA either sponsors or invests in projects and programmes which afford long-term socio-economic benefits to the nation and invests in high-priority developments to drive Nigeria’s economic goals.
NSIA programmes: Nigeria Infrastructure Fund (NIF)
In 2022, NSIA reached a significant milestone in implementing its infrastructure strategy by delivering key projects. These projects cut across our core sectors of focus and the implementation of specialized federal government initiatives:
Agriculture
Presidential Fertiliser Initiative (PFI): As of year-end 2022, 72 blending plants have been included in the programme starting from 11 in 2017. In 2021, NSIA divested its interest in NAIC-NPK (now PFI-NPK), ceding its interest to the Ministry of Finance Incorporated (MOFI) while the management of the programme remains with the Authority. The PFI-NPK reported a profit in 2022, the second year in a row, signaling a departure from prior import substitution programmes for fertiliser.
Pandagric Novum
After roughly three years of development and construction work, the Pandagric Novum farm, a joint venture between NSIA and Signature Agri Investment, was commissioned in September of 2022 by His Excellency, the Vice President of Nigeria, Prof. Yemi Osinbajo. The fully operational, integrated farm is cited on 3,500 ha of land for the cultivation of maize and soybeans and connected to a 147,000 metric tons per annum capacity poultry feed mill. It has 75,000 tons of storage infrastructure consisting of two silos and six bunkers, as well as 35,000 tons of raw material and finished goods storage.
Technology
During the year, NSIA introduced the NSIA Prize for Innovation (NPI) as a measure to stimulate the ingenuity of Nigerian innovators and technopreneurs to develop solutions that address real-world challenges with global application. The NPI program is a business enhancement initiative to support early-stage, growth-driven tech solutions through education, mentorship, and financing. The program aims to catalyse the growth of the Nigerian technology ecosystem by identifying budding innovators, enhancing their capabilities, and providing a platform to scale their solutions globally.
Gas Industrialisation
Multi-Purpose Industrial Platforms Project: Under its gas industrialization initiative, the Authority and its partner OCP Group of Morocco, made significant progress in the development of the 1.5MMT Ammonia and Di-Ammonium Phosphate production plants due to be cited in Akwa Ibom State. The development of the project has reached an advanced stage, with all preliminary studies concluded. The Gas Supply and Aggregation Agreement is being finalised with relevant parties, and financing is largely in place to ensure the delivery of the project.
Toll roads
In the 2022 financial year, NSIA continued its development of various projects under the Presidential Infrastructure Development Fund (PIDF), namely the Lagos-Ibadan Expressway (“LIE”), Second Niger Bridge (“2NB”), and Abuja-Kaduna-Kano Highway (“AKR”). These projects have reached advanced stages of construction, building on the successes of the 2021 financial year. The initial scope of the AKR was completed, and significant progress was achieved on the 2NB and LIE.
Healthcare
NSIA has kicked off the roll-out of phase 2 of its healthcare projects on the successes of the LUTH Cancer Centre and its two diagnostic centres in Kano and Umuahia. During the year, the Authority secured approval and began developing 23 new modern medical diagnostic centers of excellence which will span across all six geopolitical zones in the country.
Presently, two Oncology centres to be located in Enugu and Kaduna states, and six Cath Labs have advanced to the project execution stage. On another note, NSIA has incorporated an equipment leasing company, Equilease. This is in fulfilment of NSIA’s commitment to bridge notable voids in the domestic healthcare value chain. Equilease was conceived to stimulate the proliferation of high-quality medical infrastructure in Nigeria by providing alternative financing options for acquiring critical medical equipment via equipment leasing.
Power
NSIA completed the 10MW Haske solar power plant in Kano in 2022 as its flagship renewable energy sector project. The power plant was developed on behalf of the Federal government and its subnational co-investors to provide off-grid electricity in the Kumbotso Local Government of Kano State.
Future Generations Fund (FGF)
For the FGF NSIA’s stated that its approach was centered on generating healthy risk-adjusted returns, cautiously increasing market exposure, and growing the tactical allocation portfolio (ETFs) within the year. Overall, the Authority’s portfolio delivered a return of 1.87 per cent (in US$ terms) for the year ended 2022. The Future Generations Fund outperformed its sovereign wealth funds peers by 10 per cent on average, with Private Equity being the top-performing sector. Developed Equity, Hedge Funds, and Emerging Long Only Equity posted a decline in the year due to prevailing macroeconomic market conditions.
Stabilisation Fund (SF)
For this SF, the Authority stated that it is largely invested in the U.S.’s sovereign debt instruments and Investment Grade Corporate Credit. It noted that at the end of December 2022, approximately 30 per cent of the fund was invested in a portfolio of U.S. treasury bonds tracking the Bloomberg Barclays U.S. Treasury bond 1–3-year index. The fund returned 4.08 per cent (in US$ terms) for the year.
Governance
In the 2022 financial year, the pioneer MD & CEO, Mr. Uche Orji, completed his second and final tenure on September 30, 2022, and a new Executive Management team led by Mr. Aminu Umar-Sadiq was appointed by President Muhammadu Buhari in October of 2022. Two other Executive Directors, Kola Owodunni and Olubisi Makoju, were appointed to the Board of NSIA.
This internal sourcing of the new executives underscores the depth of the succession plan and the bench strength of NSIA.
Goals and objectives
Looking forward, the Authority said it remains committed to managing Nigeria’s sovereign wealth fund in a transparent, accountable, and competent manner. The Authority’s solid foundation, seasoned staff, and diverse portfolio will enable it to overcome any obstacles and provide long-term value to its stakeholders.
It stated that 2023 will be an equally challenging investment period due to the lingering effects of the Russia-Ukraine conflict, the activities of central banks of developed economies in curtailing inflation, and deglobalisation challenges. It added that the focus on ESG, Sustainability and Climate finance will play a vital role in its investment approach and strategy going forward.
The NSIA said it will continue to drive direct investments in its core areas of healthcare, toll roads, gas industrialisation, technology, ESG, Financial markets infrastructure, toll-roads, power and agriculture.