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Friday, August 19, 2022

Nigeria Sovereign Wealth Fund Records 343% Income Growth to N160.06 billion

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Nigeria’s Sovereign Wealth Fund (SWF) has delivered stellar results for 2020 a signal of optimal use of shareholder assets amid a tough macro environment of 2020 that resulted from the coronavirus pandemic.

The Nigeria Sovereign Investment Authority (NSIA), manager of Nigeria’s sovereign wealth fund, recorded 343 percent growth in Total Comprehensive Income to N160.06 billion in 2020, compared to N36.15 billion in 2019.

When devaluation gains of N51 billion are excluded, core income of N109 billion compares to N33.07 billion in 2019.

The fund manager achieved 33 percent growth in Net Assets to N772.75 billion (previous year: N579.54 billion), as it received an additional contribution of $250 million; and provided first stabilization support to the FGN of $150 million withdrawn from the Stabilisation Fund.

The SWF also received $311 million from funds recovered from late General Abacha from the US Dept of Justice and Island of Jersey for deployment towards the Presidential Infrastructure Development Fund (PIDF) projects of Abuja-Kaduna-Kano Highway, Lagos Ibadan Expressway and Second Niger Bridge.

Mr. Uche Orji, MD/CEO of NSIA said: “The 2020 fiscal year was characterized by high volatility and global market uncertainty on account of Covid-19 in the first half. However, the Authority strategic investments generated respectable returns despite the impact of Covid-19. Notably, NSIA has invested in various private equity and venture capital investment funds to tap into the high-growth sectors. NSIA expects that the outlook for 2021 would be positive, however we expect bouts of volatility as global markets adjust and recover from the impact of the pandemic.”

The Nigeria SWF significantly changed asset allocation for its Future Generations Fund (a key critique by MoneyCentral in the past) and completely changed, and expanded the stable of hedge fund managers, made commitments into venture capital sector and commenced direct trading and co-investments in equities with selected VC and private equity managers.

The following asset classes were standout performers in the year: In US$ returns Venture Capital investments were up 29 percent in US$ terms, Hedge Funds up 11 percent, Emerging Long Only Equity Managers up 22 percent, Developed Long only equity managers up 19 percent and Private Equity up 13 percent for the year.

Some managers in the long-only asset classes were up more than 50 percent in the year as most took advantage of the supportive environment provided by central banks, according to the SWF.

NSIA’s diversified Hedge Fund portfolio made gains in 2020, led by global long/short managers that participated in the market recovery in the second half of the year.

The Authority committed over US$122m to the market in 2020 as NSIA took advantage of favourable market opportunities.

The managers onboarded on the year included: Greenspring Opportunities Fund VI, Sachem Head, The Rise Fund II, Morgan Stanley Fund of Funds, Artisan Global Opportunities Fund, Lombard Odier Secondary III & European VC Opportunity II, Z Capital Partners Credit Tactical Fund Series B, Helios Private Equity Fund IV and LifeSci Venture Partners II.

In Q4 of 2020, the Authority launched the NSIA Innovation Fund.

The fund is designed to invest in projects that promote local innovation and technology, and support first time patent seekers in the technology sector.

The fund will focus on developments in areas such as agri-tech, pharmacology, biotechnology, data networking and storage, and fintech. The Authority plans to conclude its first set of direct investments under the NSIA Innovation Fund in the second quarter 2021.

In 2020, the Authority also increased its equity holdings in NG Clearing as part of efforts to enable the company to secure its operating license from the Securities and Exchange Commission (SEC). The capital raise exercise was successful with NG Clearing meeting the capital base requirement as set by SEC.

NG Clearing is Nigeria’s first counterparty clearinghouse. NG Clearing is positioned today to clear multiple instruments in the Nigerian Financial market, most importantly facilitating and guaranteeing the successful execution of derivatives trades from all trade points in Nigeria and managing the risks associated with derivatives trades. NSIA invested in the company in 2018.

As part of its Third Party Fund Management, the Presidential Infrastructure Development Fund (PIDF) was established in 2018 to accelerate the execution of critical infrastructure projects, which at the time included Lagos-Ibadan Expressway, Second Niger Bridge, Abuja-Kaduna-Zaria-Kano Highway, East-West Road Project, and Mambilla Hydro-Power Project.

The Lagos-Ibadan Expressway, Second Niger Bridge and Abuja-Kaduna-ZariaKano Road projects are currently ongoing.

In 2020, the access roads to the Second Niger Bridge, 2A and 2B, 17.5km each (totaling 35km), were added to PIDF scope of work.

These had initially been part of scope expected to be carried out by the Federal Ministry of Works but owing to several challenges they have been unable to commence the projects leading to a transfer to the NSIA.

The original scope of NSIA’s section was 10.7KM of bridge and road, bringing the entire project to more than 45KM.

As of year-end 2020, the original scope of 10.7km Second Niger Bridge is at 53 percent completion with a completion target of 2022.

The Lagos-Ibadan Expressway is at 66 percent completion and is expected to be completed in 2022. The initial scope of the Abuja-Kaduna-Kano Highway is at 66 percent completion.

The project has been expanded from the rehabilitation of 92.5km along the three sections of the road, to the full reconstruction of the entire stretch of 375km, as directed by President Muhammadu Buhari; which has extended the completion date.

The NSIA said it is exploring options to shorten the completion timeline for the project.

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