As NSIA Beats Market Expectations

Kayode Tokede writes on the Nigeria Sovereign Investment Authority recently released audited results for 2022 which showed that the organisation recorded profit consecutively for 10 straight years

Since 2022, the global economic uncertainty has remained elevated due to the cost-of-living crisis and the Russia-Ukraine war.

The shocks have shaken the global economy in recent years and introduced a new normal of turbulence, driven in some cases by political fragmentation between countries and affected negatively returns on investments.

The uncertainty saw multilateral institutions such as the International Monetary Fund (IMF) and World Bank cut their projections for 2023.

Despite the gloomy economic projection and slowdown in economic activities in Nigeria, the Nigeria Sovereign Investment Authority (NSIA), manager of Nigeria’s sovereign wealth fund, recently announced its audited results for the 2022 financial year, beating market expectations.

The financial performance underscored the resilience of the NSIA’s investment strategy, and the quality of its earnings given the challenging macroeconomic environment.

The financial results showed that the Authority recorded its 10th year of continuous positive earnings in spite of volatility and headwinds across markets. Its total assets grew by 10.5 per cent to N1.02 trillion in 2022, up from the N919.73 billion recorded in 2021.

Also, its 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, while its total comprehensive income of N96 billion in 2022 represented a decline of 34 per cent relative to 147 billion in 2021, due largely to strong macroeconomic headwinds.

Nonetheless, the agency was able to outperform most global investment benchmark and indices to deliver a respectable performance.

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.

Commenting on the results, Managing Director and Chief Executive Officer, Mr. 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.

“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.”

The earnings of the NSIA Group at the end of 2022 was N96.96 billion, which was 34 per cent less than the N146.98 billion recorded in 2021. This decline was primarily attributable to the performance of our Future Generations and Stabilization portfolios that are invested in emerging and developed financial market instruments.

NSIA’s a well-diversified portfolio continues to provide the resilience to withstand market challenges as evidenced by the results.

In 2022, 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 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.

The NSIA Funds

The NSIA has three funds which includes the Nigeria Infrastructure Fund (NIF), the Stabilisation Fund and the Future Generation Fund.

The NIF is one of three distinct and ring-fenced funds managed by the Authority. It focuses entirely on domestic investments in certain sectors of the Nigerian economy, some of which include motorways, healthcare, power and agriculture.

NIF focuses on domestic infrastructure investments that meet the following four criteria: alignment with national priority; potential to attractive commercial and social returns; the ability to attract both domestic and foreign private sector participation, availability of conducive regulatory and legislative environment.

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:

Under the Presidential Fertiliser Initiative (PFI), as of year-end 2022, 72 blending plants had 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.

Also, in the year under review, Pandagric Novum, 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.

 “Under its gas industrialisation 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.

“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 (AKR) Highway.

“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.

“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,” the Authority disclosed.

In addition, the NSIA has incorporated an equipment leasing company, Equilease. This was 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.  

The NSIA also 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.

On the other hand, the Stabilisation Fund (SF) is the smallest of the three NSIA pools of capital, with a 20 per cent allocation of Funds under management. The purpose of the SF is to act as a buffer against short-term macro-economic instability associated with considerable government revenues derived from hydrocarbon exports. The Stabilisation Fund is intended to act as a buffer against short-term macroeconomic instability. The SF’s assets are therefore to be invested conservatively, striking a balance between generating a modest positive return and preserving capital in nominal terms.

For the Stabilisation Fund, in 2022, the Authority stated that it largely invested in the United State’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% (in US$ terms) for the year.

Also, the Future Generations Fund is to preserve and grow the value of assets transferred into it – by investing in a diversified portfolio of appropriate growth investments – in order to provide future generations of Nigerians with a solid savings base for such a time as the country’s hydrocarbon reserves are depleted. In 2022, for the Future Generations Fund, the 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% 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.

NSIA Prize for Innovation

Also, 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.

Umar-Sadiq, said the intention of the programme was to assist the Authority to establish direct access to the Nigerian technology sector.

He pointed out that for centuries, prizes in various fields of human endeavour have served both as a reward and tool of encouragement for ideas that solve critical challenges for the human race. 

He noted that in modern times, such innovation programmes have helped to nurture novel ideas and ingenious innovation in science, technology, and many other fields. 

He said the NPIP was the NSIA’s rationale for choosing to leverage innovation as a tool to stimulate developments in Nigeria’s fast-growing digital ecosystem.

The new NSIA CEO said, “Some may ask, ‘why an Innovation Prize?’ Our answer is simple. ‘Why not?’ We have over the past decade explored various strategies to deliver our vision, which has seen us play an ever-increasing role in promoting investments for Nigeria’s economic development. 

“We see the innovation prize as another vertical under our strategy. We have explored the route of sponsor, co-developer, and financial investor on a number of projects. 

“The prize approach is a different but equally potent path. With this, we aim to serve as not just a catalyst for the fast-growing domestic technology and innovation industry but also as a deliberate enabler across the various tiers of the ecosystem.

“Our Board is convinced that this approach will mobilise participants and capital, spread the burden of risk, set a problem-solving agenda, and serve as an effective accelerator for viable projects.”

Umar -Sadiq explained further that the Prize for Innovation programme was designed for national coverage.

He added that the NSIA was committed to working assiduously as it has always done to deliver a programme that is inclusive, transparent and outcome-driven, covering the entirety of Nigeria’s digital hubs.

Through this, he added that the Authority would identify and elevate early-stage projects with transformative economic potential. 

“We will commence the programme by opening the innovation prize application portal in short order. Once opened, we expect to receive a flurry of high-quality entries reflective of Nigerian ingenuity.

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 would 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 de-globalisation challenges. It added that the focus on ESG, Sustainability and Climate finance would play a vital role in its investment approach and strategy going forward.

The NSIA also said it would 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.