Nigeria pivots to domestic investments

The Nigeria Sovereign Investment Authority (NSIA) is restructuring its portfolio to focus more on domestic investments after a drop in the currency wiped out foreignexchange gains in 2017.

“The asset allocation strategy of NSIA has been restructured to reflect an increased focus on domestic infrastructure investments with 50% of future contributions to be dedicated to infrastructure,” the fund said.

The institution, which in 2017 had 80% of assets under management denominated in US dollars, saw valuations decline after the central bank introduced policies that weakened the local naira by at least 15% against the greenback.

Measures such as a market price-determined trading window for investors and exporters were aimed at improving supply of dollars at a time revenue from oil, the nation’s biggest export, had fallen, causing the economy to contract by 1.6% in 2016.

Profit at the fund slid 82% in 2017 to 22.6-billion naira (R824.9m) as foreign-exchange gains fell 98%. They made up more than half of 2016’s profit.

NSIA MD Uche Orji expects the government, which provides the fund’s capital, will inject additional money after oil prices more than doubled since 2016.

“The expectation is that we is what the government took from its oil savings to fight Islamist militants

is how much was left in the excess crude account at the end of 2017 will increase, but I don’t know by how much,” he said in an interview earlier in June, referring to the asset base.

Nigeria, Africa’s biggest oil producer, has been tapping into its oil savings. The government took $1bn to fight Islamist militants and may draw a similar amount to fund the completion of a state-controlled steel plant.

The excess crude account stood at about $2.32bn at the end of 2017.

The NSIA manages $2.15bn, up from $1.5bn at the end of 2017. That includes a government deposit of $650m approved in May to fund infrastructure development.

The fund will increase investment in farming, healthcare, power and toll roads, Orji said during the interview from his office in the capital, Abuja.

It has already spent more than $200m on infrastructure and farming projects that will “generate returns after at least two years”, he said.

Orji signed an agreement on Monday with Morocco’s phosphate monopoly OCP to build an ammonia plant in Nigeria, according to a statement from the presidency. The deal comes as the NSIA invests in the nation’s fertiliser plants, which require ammonia inputs.

The NSIA did not reinvest funds that matured at the beginning of 2018 immediately, pending the inauguration of new directors, said Orji.