Orji: Expect More Investments on Infrastructure from NSIA

The Managing Director of the Nigeria Sovereign Investment Authority (NSIA), Mr. Uche Orji, in this interview on Arise News Channels spoke about the newly inaugurated board of the agency. He also said with the charge by President Muhammadu Buhari for the NSIA to support economic diversification, there would be increased investments in infrastructure. Excerpts:

Can you give us some insights into the operations of the NSIA under the immediate past board of directors?

I will probably like to remind you that the last board was the second board of the NSIA. And to contextualise my answer I will go back to speak to the role of the first board, the second board and how I think the third board picks up the baton and run with it. The first board spent some time putting together the core foundation of the NSIA and made sure we lived through the principles of accountability, transparency and kick started the investment programme of the NSIA. They also laid the foundation of investing 20 per cent of the Stabilisation Fund; 40 per cent in Future Generations fund and 40 per cent in the Nigeria Infrastructure Fund. The second board drove more into infrastructure, they left 20 per cent in Stabilisation and 30 per cent in Future Generation, but shifted to 50 per cent in Infrastructure Fund.

The reason was we wanted to spend more time looking at domestic infrastructure of the country. And this led us into quite a number things. You saw us getting involved in healthcare, roads, agriculture and other aspects of investments. Secondly, on the second board, we split our investment committee into two – one investment committee looking after the Future Generations Fund and the Stabilisation Fund and another committee looking after the direct investment and Infrastructure Fund. As we looked at that, we saw that the reflection of that was more in seeing us get very deep into domestic infrastructure. And I think that is really the effect of part of the role of the second board. And I think as we go into the third one, the president has given us a mandate to drive more economic diversification and make sure that there is more impact. So you will expect to see more in investments in infrastructure. That has also been the strategy of the organisation anyway, I think we have talked to that many times on this show. You are going to see us drive more and more into different aspects of infrastructure and direct investments in the country that will benefit Nigerians.

What is the key mandate of each of the two boards?

I think the mandate is the mandate of the NSIA. The NSIA was set up with the objective of providing stabilisation support in times of economic stress; it was set up with the objective of saving funds for future generations of Nigerians and then the third mandate is to enhance domestic infrastructure. This is the mandate as established in the law that set up the NSIA. And I think every alteration of the governance and leadership works towards that mandate. I mean and of course the organisation started with really nothing, there was nothing, it was built from scratch. And so as time evolves and different boards come on, we are all striving to fulfill that mandate that was set by the law. And that is what really the law says. So, it as about driving returns, it is about balancing impact and making sure you are making impact in the economy, balancing social impact and commercial returns and ensuring that investments are of national importance, ensuring that you are performing and earnings are not just on track with market, but also above the market where we can make them better. So, these are the things that I think board after board at the NSIA is working towards. So there is really no difference between the second board and the third board. We have an overall mandate by the law of NSIA, but it is just about the evolution of NSIA as it grows, as it invests and as it makes more impact.

So the agency has to make investments in various areas home and broad and in various asset classes. How does the board arrive at making those decisions that are in the best interest of Nigeria?

When you think about the NSIA, it is important to understand that that there are three different and distinct funds in the NSIA, each of them with a different investment policy statement and each of them with a different objective. So, I will give you an example, let’s start with the Stabilisation Fund. What is the essence of the Stabilisation Fund? It is to provide funds for the government when it is needed during times of economic stress. Last year, during the COVID crisis, the NSIA had to withdraw $150 million from that fund to give to the government. The government made a call as stipulated by the law and you have to make that fund available within seven days. That is the process we run within the NSIA. So, that fund is invested in short-term liquid instruments. The investment policy statement was defined through management, working with investment advisers and presented to the board and the board approved it. And that was to invest in short-term liquid instruments, investments grade instruments and treasury bills but mostly kept in US dollars.

So that is the essence of that Stabilisation Fund – it has very little risk. Then for the Future Generation Fund, the board decided that we needed not to take as much risk as our peers are taking. So we split it into four equal parts across the four asset classes that we invest in. We invest in private equity – 25 per cent of the fund; we invest in public equity, again 25 per cent of the fund, and we invest in what we call other alternatives and hedge funds. We tweak these things around within a certain strategic asset and location range depending on how we see the market. So, for example, last year, when market opportunity came up and things were not as strong in the market, we took advantage to invest. So, we increased our location into public equities and that paid off handsomely last year. And so the decision process is very intricate, I mean management meets three times a week and them of course it goes to the board if you want to make any changes. One more thing you need to know is that we tend to run this also by an investment international adviser who we work with. So these are some of the processes we undertake.

Within the tenure of the last board, you have done investments in agriculture, healthcare, diagnostic centres in LUTH and elsewhere. These are some of the areas that seem interesting that should interest Nigerians. Can you speak more about that?

So, let me speak to the infrastructure fund. The Infrastructure Fund, we have process wise, you make sure the investments are of national importance. It is very important to us that investment benefits is not privatised, but that it is something that benefits the country. And we make sure that we can get commercial and social returns balanced, make sure that we can attract other investors with us and then make sure that there are conducive legal and regulatory environment. These are the four tests that we must pass. Because of the size of the fund, we decided to start with a handful of sectors. We added some sector later on, but we started with toll roads, agriculture, healthcare, power, gas industrialisation, financial markets infrastructure and more recently we added technology. So, these are the areas we are focused on at the moment, we are developing projects here and we are investing in projects.

In healthcare, we developed our first three projects with LUTH which is a cancer centre and the radiology and diagnostic centres in Kano and Umuahia. Those have become very successful and actually better than I expected. We now have a mandate to now roll out 20 across the country, including a centre for advance medicine which we are going to build here in Abuja in partnership with somebody else. In agriculture, the president designed the Presidential Fertilizer Initiative which we have drawn. We have evolved, we have restructured that, it has continued to be successful. When we started there were less than seven blending plants, today there are 51 blending plants. When we started there were shortages of fertilizer, subsidies were very high, today there is an excess quantity of fertilizer and hardly any subsidy. So there is a lot of domestic production – that is success. We have also gone on to make direct investment in agriculture. We have a farm in Nasarawa State for example. And then of course you know about the three big road projects, Lagos-Ibadan, second Niger Bridge and Abuja-Kano road. These are all things that we are working on.

What should be expected in this regard specifically when Mr. President said your new board should make investments that relate to economic diversification?

Basically I think the question and the demand is very straight forward and that is to drive more investment in the domestic sector. And I think we are going to see more of the direct investments of the NSIA and I think will benefits a number of people. At our inaugural meeting, we talked to a number of things and it is quite for me, very heart-warming to see the devolution of the various NSIA boards. This is the third board and the quality of conversations going on in the board, you can see the strength and diversity of different board members. Especially with regards to having deep local knowledge within the country. I mean we are having conversations about logistics Yobe, Lagos, Port Harcourt, and agriculture and healthcare and all sort of things. So, there is enough strength and depth and knowledge to continue to drive that.

So look for us to do more of the domestic infrastructure investments. Like I said before, we have plan to do 20 of these healthcare projects, which I think is going to create a lot of jobs. The LUTH Cancer Centre employs in an excess of a 100 people. And I think in the diagnostic centres we have more than 50 people each. And we are going to have 20 more and a big hospital coming up in healthcare. Not only is that going to save us foreign exchange going for medical treatment abroad which saw with the LUTH Cancer Centre during COVID, people could not travel. So, most people who unfortunately cancer had ended up paying and coming to our centre and we have very good therapist. The second thing is that of course you have seen us in agriculture, and you are going to see more in agriculture. The farm in Nasarawa is doing very well which is very interesting. But there is a lot more in logistic that you are going to see us play a role in agriculture. This I think is going to be very important for economic diversification. But what is even more fascinating is what you are going to see us do in technology. We have not been in technology for a while, we started investing in venture capital two years ago, and now we are going to start making direct investment in technology. And it is everything from networking, from sub-marine cable systems, cable landing stations, all the way through to metro network fibre and Fintech.

I want to ask if you are putting some money in some of our fintech start-ups?

There are ways to invest in them. The NSIA has invested in almost every private equity company that exist in Nigeria today. And we have made a decision to also invest in venture capital firms that exist in the country. So, we have started making those investments, and some of our venture capital and private equity investments that we have made end up investing in those companies. So, yes we do have some exposure, you know one step you move yes, but at the moment that is a level of exposure because it is also risk management for us. As we continue to development and evolve, we are now feeling more confident to start taking direct steps into this area. So just watch out that is all I can tell you, a lot of work has gone into them and I believe between now and the end of the year you will see us announce a number of real important interventions for investments in these areas. This is something I feel very confident that Nigeria is going to build a competitive advantage. When we were investing in healthcare, one thing was clear, in New York, Nigerians have a competitive advantage in healthcare, same in London, we have doctors, we have good people. So, healthcare investment for us was straight forward. Same in technology, there is a huge competitive advantage in technology that are going to work out to help grow as NSIA.

Can you unveil your new board?

Our chairman is Mr. Faouk Mohammed Gumel. Gumel was a partner at Pwc and then he has gone on to work for a conglomerate that is involved in commodities and agriculture called TGI Group. He is am executive director there and chairman of a number of subsidiaries. Farouk Gumel is somebody who knows the NSIA very well, we met in 2012, that was actually when I arrived to start the NSIA. The then Minister of Finance, Ngozi Okonjo-Iweala introduced Farouk and I, and he is been very close to the NSIA, and he ran our first strategic session. So this is not somebody who is a stranger to the NSIA, he knows the story very well. He has been very instrumental in the history of many things that we have done including fertilizer, roads and all that. So he is the chairman and we are very glad and he is an inspired choice from the president and we are very happy to have him as our chairman.

We have Ali Goni Kadugum, a top scholar at the College of Education in Yobe State, who is also now a member of the board representing North East. There is Mr. Ike Chioke, a first class engineer, who runs Afrinvest, a Rhodes Scholar and Oxford Scholar. This is someone I have known for a very long time and he is somebody that we are very pleased to have on our board. We have Oniyangi Kabir Sulaiman who was at the NDIC as a top examiner, representing North Central and of course there is Isiekwana Ikemefuna Louis, a lawyer. The law requires that we must have an imminent legal personality and Isiekwana Ikemefuna is that lawyer and he also represents the South-South region of the country. And then there is Babatunde Sobamowo, who represents the South West again, who has very experience in the capital market, who has also joined the board. So this is a group with deep experience across many sectors, many of them know Nigeria better than I do. But interaction of the board, first day for me was really remarkable. Every day you learn and I think this is one of the things I find fascinating just from our early interactions. I have very high hopes for what this board is going to accomplish.

How would your new board and the existing executive management team position for the global economic market development such as the US Trade inflation, the tapering of bond buying and so on?

If you remember when who spoke during our earnings announcement and even in January and maybe first quarter when I spoke on the show, I made it clear that one of the things that really worried me was inflation. We had very successful 2020 and I was very clear that 2021 may not be as strong as 2020 because we were going to start taking some risk off. We may have taken some risk off too early, because one of the other thing also emerging in the market unfortunately is that against all the data of inflation and growth that is not quite matching up to the stock market exuberance, people continue to invest in the market, because many times people have come to realise that they have no options. So, you have seen more and more money go into the market. But we have taken some risk off, a number of things for us is essentially what you mentioned which is inflation.

Some of us are old school when it comes to investing, I understand what inflation can do to the market. It is an extraordinary task on the market and makes it very difficult for people to invest. What happens with inflation – interest rates have to rise, to slow down inflation and once they rise equity markets goes down and bond market goes down. So we decided to take some risk off and you saw us also swivel more to Europe. We started buying more European equities because Europe has a lot of value and highly rich devalued stocks in the United States. So there is a lot of what you call value investment going in Europe. So we made a switch into European equities a little bit at the beginning of the year and we are going to maintain that. Look, I would rather just leave the last five per cent on the table than chase it all the way and fall off a cliff.