• Wednesday, July 24, 2024
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BusinessDay

Questions remain as Nigerian SWF begins investments in June

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Nigeria’s $1 billion sovereign wealth fund (SWF) will start investing in June, as its board has approved the investment policy statements for the three funds it includes, Uche Orji, its CEO, said.

This is as questions remain over the rate of accretion of dollars to the fund, in view of the fact that no extra money has flowed to it since the setting aside of the initial seed $1 billion funding in 2012.

The excess crude account (ECA), in which the country saves revenue above the benchmark oil price set in the budget, is now down to about $5 billion, Ngozi Okonjo-Iweala, finanace minister, said on Monday. The account held $9.2 billion in January.

In Africa, Angola has set up a $5 billion SWF, and Libya has a SWF with assets worth $60 billion at the end of 2012.

BusinessDay reported on Tuesday that the board of NSIA had approved an investment allocation formula to the three funds that make up the SWF in the ratio of 32.5 percent, each for the future generation and Nigerian Infrastructure Funds, while the Stabilisation Fund gets 20 percent.

Consequently, $200 million would go into the stabilisation fund, while $325 million would go into the future generation and infrastructure funds, respectively, leaving about $150 million funds unallocated.

The idea is to allow fund managers the flexibility to top up each of the funds, as investment opportunities arise, according to Orji.

“Investment in the Stabilisation Fund will start in early June. The Future Generation Fund has the same timeline but will continue till the end 2013, because it is a more diversified portfolio with a more complicated process,” Orji said, in a press conference in Abuja.

“For the infrastructure fund, a very detailed and thorough review of possible investment areas and projects is ongoing. The investments being considered are in healthcare, transportation, water resources, power, housing, etc. Our focus is investments that are both relevant to the current needs of Nigerians and profitable and sustainable at the same time,” he explained.

Orji said so much work had gone into getting the NSIA operation, which according to him, was quite faster compared with those of the nation’s peers across the world.

On how the funds would be managed, he explained that the Stabilisation Fund would start out outsourced, and soon transit to an in-house management, saying the reason this particular component was being outsourced was because it would take some time to do the infrastructure to trade domestically.

According to him, this fund has the objective to be invested in safe, liquid instruments with the idea of capital preservation and consequently, things like treasuries and investment corporate bonds would also be looked at. For the Future Generations Fund, which he described as very broadly diversified, about 60 percent of it would be invested in publicly related securities, both fixed income and equities and both of which would also be domestic and international. Forty percent would be involved in what he called ‘unlisted securities’ which would include private equity, infrastructure and real estate.

He said here, “the objective is to earn real return above inflation.” The reporting currency, he said would be the US dollar.

Nigeria, which gets 90 percent of its exports and up to 70 percent of Federal Government revenue from the sale of crude oil, is among the last members of the Organisation of Petroleum Exporting Countries (OPEC) to set up a wealth fund.

 

PATRICK ATUANYA