Last June was the 10th anniversary of the Establishment Act of the Nigeria’s NSIA, a multi-billion, multi-mission fund that has rapidly emerged as a role model for SWFs and Governments across the continent. In our 2021 GSR Scoreboard, the fund scored 100% in Governance and Resilience. We had the immense privilege to talk with Mr. Uche Orji, NSIA‘s CEO since 2012, about the fund’s success factors and future plans.
[GSWF] The NSIA is one of the most sizeable SWFs in all of Sub-Saharan Africa, along with the Angola’s and Botswana’s funds. Do you feel a Pan-African responsibility?
[NSIA] In some way, although that is secondary to our main mission, which is to convince our stakeholders and gain the trust of the Nigerian Government and people. That said, we do get together often with other African SWFs and discuss best practices and mutual interests..
[GSWF] The NSIA didn’t have an easy task given the legacy of the ECA; yet, it has been highly stable and praised for the past 10 years. What is your formula of success?
[NSIA] I need to give credit to everyone that supported the establishment of the NSIA starting with Mr. Olusegun Olutoyin Aganga and Dr. Ngozi Okonjo-Iweala, who pushed the SWF agenda as Ministers of Finance. Since NSIA’s beginning, its main characteristics have been the clarity of its establishment act and structure, including a solid withdrawal mechanism; the independence and transparency, including the hiring process of all the staff; our risk aversion, with no losses since the start of the fund; and our internal culture where everyone is encouraged to contribute.
[GSWF] How do you manage three sub-funds with different missions, risk profiles and asset allocation with little staff?
[NSIA] The guidelines set by the Board of Directors form the foundation of the funds’ management. We started by deciding on asset allocation and by selecting the fund managers for each of the sub-funds. Our activities are overseen by a number of mechanisms, including the externally managed and direct investment committees, the audit and finance committee and the governance committee.
[GSWF] NSIA’s blended return in 2019 was 6.4%. What can you tell us about the performance of the fund in 2020?
[NSIA] In 2020, we rotated our equities position more into developed markets equities, which fueled the fund’s performance to the double digits. We also changed our hedge fund managers resulting in superior performance.
[GSWF] The FGF allocates a significant portion to private markets, incl. 25% to PE. How did the Abraaj situation affect you?
[NSIA] The allocation is based on the premise that private markets will grow more in the longer term, although our public investments have also helped us. Private Equity in emerging markets is tricky because it implies trust – our investment in the Abraaj Healthcare fund, which was our only exposure to the Abraaj Group, was not large and we were able to recover part of the capital; but it was certainly a challenging experience that we have learned a lot from.
[GSWF] How much of the total portfolio is invested in Nigeria and how much overseas? Did Covid-19 change this share?
[NSIA] 60% of our capital is invested overseas, and 40% into domestic infrastructure. We are doing a lot of the domestic heavy lifting in agriculture, toll roads, power, gas, financial markets and technology. The fund invests in projects of national importance but they must also have commercial sense, and we aim at attracting other parties. We are currently developing a number of key projects:
Fertilizer plant – with the objective of developing an industrial platform that will produce fertilizers for all of Nigeria;
Gas industrialization – a US$ 1.4b plant along with Morocco’s OCP to produce ammonia, which aligns with our ESG strategy;
Financial markets infrastructure – incl. infra bonds via InfraCredit with partners PIDG and AFC; AfDB and KfW; mortgage refinancing via NMRC; and support to the country’s MSMEs thanks to our stake in and partnership with the Dev. Bank of Nigeria;
Toll-roads – via the PIDF, including the Second Niger Bridge, and the Lagos-Ibadan and Abuja-Kano Expressways; and
Healthcare – we have a cancer treatment center, a couple radiology and diagnostics centers and we now have plans to build 20 new projects in Nigeria ranging from a world class hospital to outpatient centers – cancer, renal, diagnostics and radiology.
All these projects are running ahead of schedule and making some decent money for us, so we are very happy with them.
[GSWF] Around ESG, are you planning to join the UN PRI, the One Planet SWF or any other similar alliance in the future?
[NSIA] We are observer members of One Planet SWF and have been members from inception. We are focused on pushing the domestic sustainability agenda, including deforestation, reduction in gas flaring, land degradation neutrality, water management, etc.
[GSWF] What is your summary of the past 10 years, and what do you expect for the NSIA in the next 10 years?
[NSIA] My ten-year tenure will end by October 2022. I believe the continuous success of the organization will depend on the following:
An active asset management, where we receive not only cash but also assets, i.e., “NSIA as a combination GIC and Temasek”;
A nimble asset allocation that optimizes our risk-return profile and drives our financial returns and performance;
A monetization of the assets we have developed or been given, e.g., listing the toll road management company; and
A continued independence from political interference.