NSIA announces audited financial results for 2015

The Nigeria Sovereign Investment Authority (“NSIA” or “The Authority”), manager of Nigeria’s sovereign wealth funds has announced its audited results for 2015, reflecting the Fund’s fiscal position and investment activities for the year.

Highlights of NSIA’s activities and performance during the period are as follows: Growth of 20 percent in total assets to N213.66 billion, total comprehensive income increased by 67 percent from 2014 to N26.3 billion,investment income grew by 47 percent to close at N5.8 billion.

During the period under review $250 million of additional capital was approved for allocation to the Authority. This was consequently received in February 2016 and will be invested within the new fiscal year using the existing deployment ratio of 40 percent in Infrastructure Fund, 40 percent in Future Generations Fund and 20 percent in Stabilisation Fund..

In the period the NSIA brought on-boarded 5 Private Equity (PE) fund managers of which 4 are Nigerian-based, bringing NSIA’s total commitments to PE fund managers to 24.

It also strengthened its infrastructure intervention framework through co-investments collaborations with other institutional investors.

Whilst NSIA returned a flat absolute performance 2015 was a difficult year. However, the NSIA managed to protect its capital well in a harsh and volatile market environment where many significant endowments and Sovereign Wealth Funds suffered losses where equities and bonds in many leading economies suffered declines. In particular, the decision to invest in Alternative Asset classes proved beneficial in 2015 as this ensured that NSIAs portfolio was relatively immune from the market forces while traditional asset classes suffered significant declines.

Alternative Assets mainly include Hedge Funds and Private Equity both of which in aggregate have held up well during this period. Hedge Funds produced on aggregate positive returns while Private Equity investments where generally flat, with secondary’s largely compensating for the j-curve effect of primary investments. Since private equity funds draw down capital over the course of several years and make investments that often last four years or longer, most cash flows are negative in the first few years after a commitment is made, causing the initial decline in the cumulative net cash flow curve.

In 2015, NSIA has committed capital to AQR Capital Management LLC, Africa Capital Alliance Limited, Actis GP LLP, Falko RAOF GP Limited, Synergy Private Equity Fund LP and Verod Capital Management.

NSIA progressed work on the Nigeria Credit Enhancement Facility, which is expected to be operational in the second half of 2016.  The facility will provide credit enhancement solutions to project companies raising senior debt in the form of bonds to finance vital infrastructure projects. NSIA partnered with GuarantCo, an experienced credit enhancement provider, in the launch of the facility.

“The NSIA made fewer, but more strategic investments in 2015.  Investment Commitments totaling $57.5 million were made to Fund Managers within the year. More importantly, NSIA has invested in various private equity investment funds to tap into the high-growth sectors across Sub-Saharan Africa. These represent NSIA’s commitment to invest in alternative assets that offer superior performance and are relatively more immune are less correlated to broader public equity market volatility,” said the MD/CEO, Mr. Orji.

“The 2015 fiscal year was characterized by high volatility and global market uncertainty. Currency turmoil, dwindling oil prices and decelerating growth across markets created a difficult investment environment for the Authority. Nonetheless, the overall results were satisfying positive”.

In 2016, the NSIA anticipates that: Global market volatility will continue, it will increase investments in infrastructure fund as most projects come up to financial close, and increase commitment to development of institutions that will enhance infrastructure investments in Nigeria.

The sustained decline in oil prices will make further capital contributions to the NSIA by the Federation quite challenging. It is also unlikely that the Nigerian government will make a Fund call on the NSIA to bridge budget deficits according to the NSIA.

 

PATRICK ATUANYA