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The Nigeria Sovereign Investment Authority (NSIA) managers of the nation’s Sovereign Wealth Fund (SWF) recorded a 97% plunge in profit in the first quarter (Q1) of 2025 largely due to losses incurred from its hedge fund and trading strategy as well as non-recurring foreign exchange (FX) gains, compared to a year-ago.
Profit for the NSIA fell to N30.58 billion ($20 million) in Q1, 2025, compared to N1.185 trillion ($790 million) in Q1, 2024.
NSIA reported fair value loss on financial assets of N43.93 billion in Q1, 2025, compared to gains of N573.8 billion in Q1, 2024.
The losses were comprised of Unrealized fair value (loss) on collateralised securities of N21.69 billion, realized fair value (loss) on collateralised securities (net of derivative cost) of N10.7 billion and an N11.56 billion loss from fair value changes on private equity, hedge funds and other securities.
NSIA’s poor trading strategy revealed
The Private Equity loss was particularly skewed to hedge fund positions held by the NSIA and long only instruments, a signal of a poor and convoluted trading strategy.
In total there was a N617 billion swing (from positive to negative) under the Fair value (loss)/gain on financial assets at fair value through profit or loss (FVTPL) income line, from N573.8 billion in Q1, 2024 to minus N43.93 billion in Q1, 2025.
MoneyCentral has long advocated for the NSIA to terminate its hedge fund strategy and invest through simple index funds that track main global stock market benchmarks such as the S&P 500, which would provide better returns and cheaper fees.
The NSIA’s investment management fees soared by 225% in 2024, as the manager of the country’s Sovereign Wealth Fund (SWF) invested through some 56 different Investment Fund Managers, leading to a ballooning of expenses.
The NSIA also saw elevated net foreign exchange (FX) gains of N550.57 billion recorded in Q1, 2024, fall back down to earth to N7.952 billion in Q1, 2025, as the naira was relatively stable against the dollar in the period.
Net foreign exchange gain represents net unrealised gains or losses from translation of Authority’s foreign denominated financial assets and financial liabilities.
Impairment charges on financial assets jump 377%
NSIA’s impairment charge on financial assets and Investments jumped by 377% to N3.429 billion in Q1, 2025 from N718 million in Q1, 2024, a signal of stress creeping into its investment holdings.
The major culprit was impairment charges on investment securities held by the NSIA which jumped 2,322% to N4.52 billion from N186.6 million.
This indicates increased credit risk or market losses, and may point to weaknesses in credit assessment, or portfolio management by the NSIA.
Overall, a 377% year-on-year increase in impairment charges by the NSIA is a very negative signal about asset quality and financial health, requiring close analysis by stakeholders to understand causes and remedial plans.
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NSWIA management should be disbanded immediately. Low cost index funds is the ONLY way to achieve national wealth.