On June 30, Global SWF published the 2023 GSR Scoreboard that assesses the progress of State-Owned Investors around governance, sustainability, and resilience since 2020. There has been significant improvement in best practices globally during the past three years, including resilience factors.
This year, the industry specialist firm rated 18 African funds, including all 11 members of the Africa Sovereign Investors Forum (ASIF). The average score increased from 50% in 2022 to 54% in 2023, thanks to the improvement of newer funds such as Egypt’s TSFE and Ethiopia’s EIH, and also to the continuous progress of mature funds, even when operating in challenging environments.
In fact, Nigeria does not necessarily come to mind when it comes to solvency, and credit rating agencies classify its sovereign debt as B-/B2. However, the Nigeria Sovereign Investment Authority (NSIA) has been an example of best practices since it was set up in 2012. Its predecessor, a stabilization fund called Excess Crude Account (ECA) had peaked at US$ 20 billion in 2007 but was rapidly withdrawn by the different cabinets.
To avoid the pitfalls of ECA, the NSIA was designed as a three-tier umbrella with stabilization, savings and infrastructure development missions. The Stabilization Fund, with 20% of the AuM since inception, aims to provide budget support in times of economic stress; the Future Generations Fund, with 30% of the allocation (40% until 2018), saves for future generations of Nigerians; while the Nigeria Infrastructure Fund, with 50% of the allocation (40% until 2018), invests in catalytic domestic infrastructure. They all have different horizons, target returns, asset allocation and style (SF and FGF are external and global; NIF is internal and domestic).
More importantly, the three funds are ring-fenced and have different fiscal rules. In October 2020, the Federal Government of Nigeria requested NSIA’s first withdrawal of capital, in the sum of US$ 150 million (43% of SF’s balance), to help contain the impact of Covid-19 and low oil prices in the country’s fiscal position. Prior to this withdrawal, the NSIA received a total of US$ 1.8 billion core capital contribution from the Government. In 2021, the Presidential Infrastructure Development Fund (PIDF), a fund managed by the NSIA on behalf of the government, injected US$ 312 million in repatriated assets. NSIA recorded a net core capital injection of US$ 100 million in 2020 while US$ 160 million came from retained earnings. These developments accounted for a growth in AuM of US$ 260 million between 2019 and 2020.
Other SWFs without such delineated funds suffered larger withdrawals and longer consequences. Under the leadership of Uche Orji from 2012 to 2022, and of Aminu Umar-Sadiq, who assumed the role of CEO in October 2022, NSIA continues to uphold the fund allocation and investment approach, and it amplified the diversified assets strategy, which has insulated the institution from headwinds over many market cycles.