NSIA: How re-engineering work is paying off amid Covid-19

The Nigeria Sovereign Investment Authority (NSIA), which commenced operations in 2012, with the inauguration of the Board of Directors on October 9, 2012, has proven to be on a steady success trajectory despite challenges.

After a series of start-up hiccups, the NSIA began investment activities in the 3rd quarter of 2013, with a seed capital of US$1 billion, which was allocated as follows: 20 percent to the Stabilisation Fund, and 40 percent each to the Future Generations Fund and the Nigeria Infrastructure Fund.

An additional $250 million was committed to the Authority by the National Executive Council on November 19, 2015.

The Authority has also begun implementing the directive for the restructuring of the Presidential Fertiliser Initiative.

Under the modifications, the NSIA has been transitioned to an upstream player thereby limiting its involvement to importation, storage and the wholesale of raw materials to blenders.

The NSIA’s subsidiary, NAIC-NPK Limited will be spun off to the Ministry of Finance Incorporated.

Under the new arrangement, blenders will no longer be paid blending fees by NAIC-NPK as they will recover their costs directly from selling the fertiliser to the market.

This is aimed at balancing the incentives of the business and ensure the blenders build the right capacity to actively participate in the local supply sub-sector.

The Blending plants are expected to provide bank guarantees to cover requisitioned raw materials demand that are appropriated for their respective production volumes.

As part of the new structure and in line with the Presidential directive, the Federal Ministry of Finance Budget and National Planning and the Central Bank of Nigeria are expected to engage commercial banks to facilitate lines of concessionary credits to blending plants for the purchase of raw materials.

It is also expected that the CBN will ensure that the foreign exchange needed for the programme is provided as and when needed to cover some raw materials.

The approval, which takes effect immediately, was communicated in a letter through the Office of the Chief of Staff to the President which was issued in November of 2020.

Although finance experts had predicted, and rightly too, that the impact of the Coronavirus (Covid-19) on companies’ finances in 2020 would be catastrophic, NSIA has shown resilience against all odds.

Its recently released 2020 performance scorecard revealed that its total assets grew to N981.78 billion in 2020, at a time its counterparts across the world are currently on ventilators, as they feed on series of bailouts to recover from the pestilence.

The N981.78 billion is an increase of N331.93 billion when compared to the N649.85 billion recorded in the previous year.

The Authority, which manages Nigeria’s sovereign wealth fund, attributed the growth in assets to discipline, strategic financial execution and consistent implementation of well-defined infrastructure investment programmes for the year.

It also weathered the Covid-19 storm owing to strong performance from its investments in international capital markets, improved contribution from subsidiaries and affiliates and exchange gain from foreign currency positions.

Highlights of NSIA’s activities and performance during the period showed that the Authority recorded 343 percent growth in Total Comprehensive Income to N160.06 billion in 2020 as against N36.15billion in 2019.

Excluding devaluation gain of N51billion, core income of N109billion was recorded in 2020 compared to N33.07billion in 2019.

The NSIA also received an additional contribution of $250 million; and provided first stabilisation support to the Federal Government where $150 million was withdrawn from the Stabilisation Fund.

Uche Orji, managing director and chief executive officer of the NSIA, who spoke at a briefing to present the financial performance, said the Authority received $311 million from funds recovered from the late General Sani Abacha from the US Department of Justice and Island of Jersey.

Orji explained that the amount was deployed towards the Presidential Infrastructure Development Fund projects of Abuja-Kaduna-Kano Highway, Lagos Ibadan Expressway and Second Niger Bridge.

He however, noted that the Covid-19 pandemic adversely affected logistics around infrastructure projects, especially the toll road projects and the presidential fertiliser initiative.

To square up to the pestilence, the managing director said that the NSIA partnered Global Citizen, a not-for-profit group, to form the Nigeria Solidarity Support Fund.

Separately, he said that the NSIA acquired and distributed oxygen concentrators to the 21teaching hospitals as part of corporate social responsibility, in addition to staffing support to the Presidential Task Force on Covid-19.

On the performance of the Nigeria Infrastructure Fund, the NSIA boss said the Authority reached major milestones across domestic infrastructure projects specifically in motorways, agriculture, and healthcare.

In healthcare, he said the Authority operationalised the NSIA-Kano Diagnostic Centre; the NSIA-Umuahia Diagnostic Centre and commissioned Administrative and Training Centre for the NSIA-LUTH Cancer Centre.

He further explained that the NSIA commenced a plan to roll out additional healthcare projects across the country, adding that the Authority partnered University College London Consult to develop a pharmaceutical investment strategy with a plan to developing active direct investments in 2021.

On the positive effect of NSIA on agriculture, Orji commended the Presidential Fertiliser Initiative (PFI), which, he strongly believes, holds great benefits for Nigeria.

Recall that President Muhammadu Buhari approved the PFI in 2017, with clear-cut objectives of boosting agriculture, cutting back on stupendous foreign exchange spent on fertiliser substitution and importation and boosting job creation locally.

Four years down the line, there are lots of harvested fruits from the programme, prompting the President to approve its restructuring for another four years starting from 2021, but with some modifications.

The approval, which takes effect immediately, was communicated in a letter through the Office of the Chief of Staff to the President, issued in November of 2020.

NSIA, by investing in local fertiliser production, said it saved over $350 million from the erstwhile payments on subsidy and import substitution through the implementation of the Presidential Fertiliser Initiative (PFI).

Within four years of the initiative, the programme has delivered on key outcomes including over 30 million bags of 50kg NPK 20:10:10 equivalent spanning project period; price reduction on fertiliser from over N10,000 to under N5,500, resuscitation of 41 blending plants from an initial number of four plants at project inception and creating 250,000 jobs (direct and indirect) across the agriculture value chain. This includes jobs in logistics, ports, bagging, rail, industrial warehousing, and haulage touch-points and others that have been created.

The Authority also said that food security has been achieved by facilitating increase in domestic food production through the provision of affordable, high quality fertiliser. Already, the PFI has been extolled by various agriculture and finance stakeholders because aside the gradual realisation of the food sufficiency goal, it has shown the possibility of exporting farm produce in large quantities to buoy foreign reserves, when local consumption target is achieved. For decades, Nigerian farmers have been hit by poor harvest because of near-zero access to fertiliser to boost crop performance.

The NSIA managing director said that the number of participating blending plants increased to 44 from less than seven at inception, noting that the Authority has completed the restructuring of the PFI. He stated also that the Authority has embarked on the next phase of the PFI, which substantially reduces NSIA’s involvement and transfers more of the responsibility to the fertiliser blenders.

He said the NSIA has also completed the construction of 3000 hectares Panda Agric Farm in Nasarawa, which is the first project of the UFF-NSIA partnership.

Under the new format, blenders will be responsible for bulk of the activities in the fertiliser production value chain such as transporting the raw materials, sourcing filler, blending the fertiliser, and selling to off-takers. Also, the Federal Ministry of Agriculture and Rural Development will perform its statutory monitoring and quality control role over blender activities.

The benefits of this new approach include but are not limited to unlocking more development finance (loans and investments) into the local fertiliser blending value chain of Nigeria.

It is also expected to strengthen market systems and encourage actor participation. This will lead potentially to mergers and acquisition and innovation and growth across the industry which will benefit farmers.

The new approach would further reduce food price inflation in the market as the availability of fertiliser will drive down the price or cost of food products. It is to reduce the high rate of unemployment as more people will become engaged in the production process.

In Financial Markets Infrastructure, he said the NSIA has significantly improved contributions from subsidiaries/affiliates such as Infrastructure Credit Guarantee Company (InfraCredit), Nigeria Mortgage Refinance Company (NMRC) and Family Homes Funds Ltd (FHFL).

Orji explained that the Authority has also invested additional capital into NG Clearing, the first derivative clearing house in Nigeria to maintain NSIA’s shareholding at 16.5 percent following the company’s rights issue of 2020. He added that the NSIA has admitted InfraCo Africa, a PIDG company based in the UK as 33 per cent shareholder in InfraCredit, thus reducing NSIA’s stake from 50 per cent in 2019 to 33 per cent in 2021.

Mohammed Abubakar Badaru, governor of Jigawa State, who also is the chairman, Implementing Committee of the PFI said: “The programme has in many ways served to augment the administration’s policy-driven programmes to diversify the Nigerian economy.

“In the main, the programme has bolstered Nigeria’s industrial base, resuscitated, and strengthened domestic production capacity for fertiliser, eliminated to the huge fertiliser subsidy burden placed on Federal Government, created thousands of direct and indirect jobs and alleviated the plight of the domestic farmer by ensuring availability of fertiliser,” he said.

The governor further said: “Clearly, the programme is a strong value proposition for the nation in the agriculture space given the variety of socio-economic benefits it presents. We are grateful to Mr. President for creating this programme and look forwards to supporting the next phase as it evolves.”

Speaking on the development, Uche Orji, MD/CEO NSIA, said with the support of the President, the programme has accomplished its principal objectives.

“Having fulfilled the establishment, stabilisation, and market discipline phase of PFI, the primary objective of which was to revive the blending plants and create a viable domestic blending industry, we believe the PFI should gradually evolve into the next phase, which is a tactical withdrawal of intervention in the industry and the emergence of a self-sufficient, sustainable, and efficiently operated market,” he said.

According to him, “NSIA is pleased with the government’s decision and looks forward to seeing the innovation and creativity which will characterise the open market in the sector.”