Four SWFs make $100m commitment to NSIA real estate co-investment fund

Four unnamed global Sovereign Wealth Funds (SWFs) have committed $100 million each into the Nigerian Sovereign Investment Authority (NSIA) proposed $1 billion Real Estate Co-Investment Fund which will invest in the re-development of Nigeria’s existing buildings and also plans new Greenfield opportunities in the real estate industry, according to Uche Orji, Managing Director, NSIA.

The NSIA is also negotiating with three other SWFs and Endowment funds to invest in the fund, according to Orji who was speaking to the House Committee on Banking and Currency in Abuja yesterday.

Orji said this strategy has been successfully executed by some of Nigeria’s other Sovereign Wealth Fund peer countries, including the Russian Sovereign Wealth Fund which co-signed co-investment agreements with Saudi Arabia ($10 billion), China Investment Corporation ($1billion), Abu Dhabi Investment Authority ($5billion) among others.

Orji noted that this is part of NSIA’s infrastructure strategy for 2016, and expressed optimism that the Federal Government’s significant domestic and overseas real estate assets can be optimised through the fund.

He said the Fund is part of NSIA’s overall strategy to improve Nigeria’s real estate sector, coming after it had invested some $10 million in the Nigeria Mortgage Refinance Company (NMRC) in 2013 to increase liquidity within the mortgage market, increase mortgage tenors, lower cost and improve access to mortgage.

The NSIA’s overall intention is to attract significant capital to Nigeria’s struggling real sector and it plans to create similar funds for power, industries, agriculture and healthcare.

“We plan to focus on infrastructure strategy this year with the creation of co-investment vehicles,” Orji said in a document presented to the House Committee on Banking and Currency, chaired by Jones Onyereri and seen by BusinessDay.

“We expect to start with a $1 billion real estate co-investment fund with other SWFs in early 2016 and then proceed to power and industrials and Agro/healthcare.”

Part of the strategy is that the NSIA will commit up to $100 million to the Fund’s equity. But it is in the process of inviting other Sovereign Wealth Funds and select institutional investors to co-invest the same amount in order to execute on NSIA pipeline of real estate transactions.

Meanwhile, its infrastructure strategy is anchored on two pillars- co-investment strategy and the creation of institutions to develop Nigeria’s infrastructure sector.

Under the co-investment strategy, the NSIA intends to use the $400 million Nigeria’s Infrastructure Fund to attract $2 billion of equity.

The proposed real estate co-investment fund targets at least $800 million of capital with $100 million of its contribution for the proposed real estate fund.

The NSIA says moreover, that it has the potential of attracting foreign direct investment (FDI) into infrastructure development, similar to the $60 billion Norway SWF allocation of its assets to emerging markets in 2013 and $2 billion announced by the Republic of Georgia SWF to partner with co-investors.

The Authority’s management believes that with the right saving culture, Nigeria has potential of replicating the achievement of countries like Norway and the United Arab Emirates by building a saving base of $1 trillion.

Similar co-investment that would attract funds from other participating foreign SWFs into other critical sectors of the nation’s economy, such as power and industrials and agro/healthcare, is already being worked out, according to Orji.

According to its records, NSIA committed $10 million to the Fund for Agricultural Finance in Nigeria (FAFIN) in partnership with Federal Government and German Development Bank and $10 million investment into the Nigerian Mortgage Refinancing Company (NMRC).

A breakdown of other investments made so far by the NSIA into the energy sector, showed that it invested $100 million in a private bond with Seven Energy, to enable the completion of gas infrastructure, out of the $200 ceded to it to manage by the Debt Management Office (DMO) from the $1 billion Eurobond secured in 2013. The initiative has yielded 7.01% returns as at  30th June 2015.

The agency was also appointed as investment manager for the $350 million to Nigeria Bulk Electricity Trading (NBET) by Federal Government, which has yielded 2.26% returns as at 31st July 2015.

Recall that the NSIA Governing Council approved the injection of the sum of $250 million into the fund.

According to the document presented to the Committee, the NSIA audited accounts as at 30th June 2015 showed total equity and liabilities of N209.152 billion and comprehensive income of N30.199 billion up from N15.47 billion as at June 2014.

KEHINDE AKINTOLA