Economic downturn is fuelling calls to deepen the capacity of the National Sovereign Investment Authority (NSIA) to protect the economy against shocks by reforming the Nigerian National Petroleum Corporation so that more funds for investment can go to the Authority.
Stakeholders in the Nigeria’s oil and gas industry say NSIA can better put to use Nigerian government investments from oil earnings, which the National Petroleum Investment Management Services (NAPIMS), a corporate services unit (CSU) in the Exploration and Production (E&P) Directorate of the NNPC, is currently charged with in the present arrangement.
“The fund they have is a little over $1 billion imagine, if they have $100 billion to themselves. Definitely, they can help, but the money is not enough and it simply means that we need to invest more,” Taiwo Oyedele, head of Tax at PriceWaterHouse Coopers, Nigeria, said.
NSIA was signed into law by former President Goodluck Jonathan to replace the ECA. The Act gave the NSIA jurisdiction over the country’s excess petroleum reserves. The fund is intended as security against future economic instability, to contribute towards the development of infrastructure and as a savings mechanism for future generations, using the excess oil revenues.
However, very little of these revenues have actually gone to the Authority despite a track record of performance.
NSIA audited financial reports for 2015 indicated that total comprehensive income increased to N26.3 billion, representing a 67 percent growth. Investment income grew by 47 percent to close at N5.8 billion.
Total assets recorded a growth of 20 percent to N213.66 billion at year-end. $250 million of additional capital was approved for allocation to the Authority. In 2016 fiscal year, it plans to invest using the existing deployment ratio of 40 percent in Infrastructure Fund, 40 percent in Future Generations Fund and 20 percent in Stabilisation Fund.
It continues to manage assets for Nigeria Bulk Electricity Trading Company (NBET) and the Debt Management Office (DMO). While NBET’s $350 million remains fully invested, half of the funds managed for the DMO was recalled and redirected to other investments reducing the assets under management to $100 million.
“The NSIA made fewer, but more strategic investments in 2015. 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 less correlated to broader public equity market volatility,” Uche Orji, MD/CEO of NSIA, said.
He further said, “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 positive.”
An investor from the private sector who craved anonymity told BusinessDay that “Perhaps Nigeria will be better served if the oil earnings are directly managed by NSIA rather than routing it through NAPIMS to the federation account where it is shared and misused.”
NAPIMS, charged with the responsibility of managing Nigeria government’s investment in the upstream sector of the oil and gas industry, is mandated to maximise return on its investments through effective supervision of the Joint Venture (JV), Production Sharing Contracts (PSCs) and SC Companies, using best industry practices.
Chijioke Mama, energy analyst, disagrees with the calls to scrap NAPIMS in an NNPC reform, “NAPIMS have a separate mandate, different from NSIA. It can be improved but it should remain. NSIA invests in other sectors not just oil.”
Olu Akinola, a legal expert based in Lagos, does not believe the current fiscal regime with NAPIMS serving in this role augurs well for Nigeria’s fiscal system. “We have a system in the country where the bulk of oil revenue goes to the federal government at the expense of the federating units and this has contributed to a situation where the states cannot function without the centre.”
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