The Nigeria Sovereign Investment Authority (NSIA) says the International Monetary Fund’s low ranking of Nigeria’s Sovereign Wealth Fund (SWF) was wrong, lacked context and did not truly reflect the position of how the Fund is run.
In one of its flagship reports, Fiscal Monitor, released on Wednesday, the IMF ranked Nigeria as the second-worst country in the world in the use of sovereign wealth funds, only higher than Qatar in the 33 country ranking where Ghana Sovereign Wealth Fund came second on the top performers after Columbia.
The Bretton Wood institution said it compiled the index using the corporate governance and transparency scores of the sovereign wealth funds and the size of assets as a percentage of 2016 GDP of the countries considered.
The Fund said it used data compiled by the Natural Resource Governance Institute and Worldwide Governance Indicators.
Reacting to the report, Uche Orji, chief executive officer, NSIA, faulted the IMF report both in context and process used in arriving at those rankings, and regretted that the Bretton Wood institution would prefer SWFs of countries that do not invest in their domestic economies and dislikes countries that want to use part of their resources to develop their own domestic infrastructure.
“I think it’s a very strange report. They put Nigeria as the second worst only to Qatar and they put countries like Columbia and Ghana SWF in the top ranking which I find very strange because of the preference by the IMF in the ranking for funds that do not invest in their economies,” Orji told BusinessDay in a telephone conversation.
“So, countries such as Nigeria are ranked poorly because they use part of these funds in their local investment which is in line with a long-held IMF bias against domestic investment as espoused in the Infrastructure Fund of the NSIA,” he said.
The NSIA had last year announced its plans to now focus 50 percent of its core resources on infrastructure investment with key areas in agricultural, health care, road construction and power sectors.
According to the new mandate, core funds are now deployed 50 percent for infrastructure fund, 30 percent for future generations fund and 20 percent as stabilisation fund.
In bridging the country’s huge infrastructure gap in the healthcare sector and help conserve about $1 billion annual FX outflows on medical tourism, the NSIA has already built three world-class cancer centres at the Lagos University Teaching Hospital (LUTH), which is due to commence operations by May 1, and also completed the Aminu Kano Teaching Hospital (AKTH), and the Federal Medical Centre Umuahia (FMCU) due for commissioning.
“So, if you do not invest in the economy and you put the money in reserves and the money stays abroad, you are not doing well by IMF. But if the fund is used for domestic investments, the IMF has issues with it.
“They have always had issues that Nigeria is using its sovereign wealth fund for development of domestic economy, that has always been their narrative and they have had issues with this, so I’m not surprised,” Orji said.
On the governance and transparency issues raised by the IMF, Orji stated that NSIA was established under the Santiago Principles, which consists of 24 generally accepted principles and practices voluntarily endorsed by International Forum of Sovereign Wealth Funds (IFSWF), which just recently, highlighted NSIA as a “well governed SWF”.
The Santiago Principles promote transparency, good governance, accountability and prudent investment practices whilst encouraging a more open dialogue and deeper understanding of Sovereign Wealth Fund activities.
Orji noted that since its inception, the NSIA has adhered to the strongest principles of governance and as a result is highly rated under the SWFI Transparency Index which has consistently ranked it in the top quartile of its transparency rankings in the past 5 years.
“The second context we need to understand is that the NSIA subjected itself to many audits, we go through six audits in a year. We go through four by our external auditors, and two in house before we publish our audited accounts which we do publicly and also audited by the Accountant General of the Federation.”
He said meanwhile, the NSIA has been used as a case study by some African countries seeking to set up their Sovereign Wealth Funds (SWF), wondering how it could attain these feats if badly run.
“The third and probably the most important for me is that there is no context in this IMF report. I have read the report and there is no analysis as to why any of the countries is ranked higher or lower.
“They just pulled data from some institute and coupled it together and which I find quite disappointing because if you are going to write things like this, you should spend time and analyze them before publishing.
“For me, they did a very shoddy job and it does not reflect the reality. And it’s also sad that the IMF doesn’t come down to interact and know how these funds work.”
He further explained that the NSIA and the World Bank Group worked extensively on a transparency initiative for its infrastructure projects.
He said meanwhile that the Authority has had a senior staff of the IFC on secondment as Portfolio Manager of the Nigeria Infrastructure fund, over the past four years at the NSIA helping it develop its infrastructure fund and ensuring that it complies with all the governance and transparency rules such as US FCPA, UK Anti-bribery Act etc.
“So whilst I accept that this report does not attack the NSIA directly, we want to state categorically our disappointment about such sweeping generalizations and use of charts from other parties without making effort at understanding the in-depth operations of NSIA,” Orji further told BusinessDay.
ONYINYE NWACHUKWU, Washington DC
