Defying the impact of the pandemic, the Nigeria Sovereign Investment Authority’s (NSIA) comprehensive income soared 343% to NGN160 billion in 2020, according to its financial results published today. Investments in capital markets along with exchange gains from foreign currency worth NGN51 billion drove the sovereign wealth fund’s performance.
NSIA’s net assets jumped by a third in local currency terms to NGN772.75 billion (US$2.1 billion), helped by a US$250 million injection from the government. On the downside, the pandemic had an adverse impact on logistics around infrastructure projects especially the toll road projects and the Presidential Fertilizer Initiative (PFI). The PFI has saved Nigeria over US$350 million in forex from the erstwhile payments on subsidy and import substitution through fertilizer development. Recent plans by NSIA for a US$1.4 billion plant are going to boost forex reserves even further as the country looks to become self-sufficient in fertilizer.
This week, the NSIA announced it would invest in equity capital and sell sukuk bonds to fund technology and roads infrastructure in Africa’s biggest economy. It plans to inject US$50 million of equity into the NSIA Innovation Fund, which sits within the National Infrastructure Fund (NIF) portion of the NSIA. Launched in Q420, the NSIA Innovation Fund is seeking to promote local innovation and technology, particularly in agri-tech, pharmacology, biotechnology, data networking and storage, and fintech and the NSIA is keen to encourage co-investors. The first set of direct investments are set to be completed in Q221. Sukut will be sold for road projects in the NIF, although the size of the bond offering was not disclosed.
Forming the strategic part of the NSIA, the NIF remains its largest mandate, representing around half of AUM. It is branching out into various sectors, including healthcare, fertilizer production, animal feed processing, solar energy generation, and the development of financial infrastructure to foster greater inclusion. It is going further to support local innovators through VC.
Speaking to Bloomberg in March, NSIA CEO Uche Orji said the fund may trim its allocation to public equity in the Future Generation Fund (FGF) portfolio, which represents the fund's long-term savings pool with around 30% of AUM. According to today’s report, the FGF shifted towards hedge funds, venture capital, and direct and co-investment in equities. In US$ terms, it saw the best performance in VC with a 29% return, while private equity returned 13% and HF returned 11%. Long equity managers provided a 22% return in emerging markets and 19% in developed markets.
Rather than drastically cut exposure to public equities, the NSIA is now looking mostly at shifting from tech stocks due to expensive valuations and towards pharma, aviation and consumer discretionary in anticipation of a post-pandemic economic revival, as well as emerging markets.
The Stabilization Fund, representing around a fifth of AUM and comprised of US dollar-denominated fixed income, saw US$150 million of withdrawals to help alleviate strains on government finances. Orji stated that the SF was cutting its US Treasury exposure, having achieved a return of 6% in 2020. He said, “I’m very worried about rising interest rates. We were very bullish across most asset classes last year. We’re more cautious now.”