Subpar Returns at NSIA Future Fund Highlight Need for Management Overhaul

The Nigeria Sovereign Investment Authority (NSIA) is facing sharp criticism following the release of its 2025 financials, specifically regarding the Future Generation Fund (FGF).

Tasked with building a “savings base” for unborn Nigerians in a post-oil world, the fund delivered a return of just 5.2%—a figure that pales in comparison to the 17.9% total return of the S&P 500 during the same period.

For a fund with a decades-long horizon, this 1,270-basis-point “alpha gap” represents not just a missed opportunity, but a significant erosion of the compounding wealth necessary to replace Nigeria’s dwindling hydrocarbon revenues.

The FGF mandate is: “To invest in a diversified portfolio of appropriate growth investments in order to provide future generation of Nigerians a solid savings base for such a time as the hydrocarbon reserves in Nigeria are exhausted.”

In essence this means investing for unborn and very young Nigerians who will have to deal with a future with zero oil wealth as the energy transition gathers steam across the globe.

Usually such a fund would have to invest in global growth equities and technology stocks epitomized by a benchmark like the S&P 500.

The Performance Gap: NSIA vs. Global Benchmarks

The 2025 market was defined by the “AI Gold Rush” and resilient corporate earnings, which pushed global equity indices to record highs. While the SPY (S&P 500 ETF) capitalized on this growth, the FGF’s diversified approach failed to keep pace.

Source: MoneyCentral

• Opportunity Cost: Had the NSIA simply mirrored a low-cost S&P 500 index fund for its equity portion (as long advocated by MoneyCentral), it would have generated nearly $200 million in additional profit for the Nigerian people in 2025 alone.

• Asset Allocation Drag: The FGF’s suboptimal return suggests a heavy tilt toward underperforming “alternative” investments or cash-equivalents, rather than the high-growth technology and AI-linked stocks that drove the 2025 rally.

The Compounding Crisis: Stealing from the Future

The “Future Generation” mandate is built on the mathematical power of compounding. For young Nigerians, a 5.2% return is essentially a “wealth-destruction” rate when adjusted for global inflation and the rising costs of the energy transition.

• The 8% Rule: Historically, US equities average 7–10% annually. At an 8% return, $1,000 grows to ~$10,000 in 30 years. At 5.2%, that same $1,000 grows to only ~$4,500.

• Time as an Asset: Young and “unborn” Nigerians possess the ultimate investment asset: Time. This allows for a 90–100% aggressive equity allocation. By delivering a conservative 5.2%, the NSIA is failing to utilize the long-term risk appetite inherent in the fund’s own mandate.

NSIA Strategic Failures: Kasi Cloud and Illiquidity

The underperformance is compounded by specific “Level III” asset failures within the NSIA’s broader portfolio, which likely bled into the overall sentiment and resource allocation of the authority.

• The Kasi Cloud Write-Down: The 91.5% markdown of Kasi Cloud (from $6.23m to $529k) highlights the risks of the NSIA’s “pioneer” tech bets compared to the proven liquidity and growth of the S&P 500.

• Salary vs. Performance: As noted in earlier reports, personnel expenses surged 48.6% in 2025. Critics argue that a management team presiding over a 91% drop in total profit and a 5.2% FGF return should not be seeing record-breaking compensation increases.

The Case for a Management Shake-up

Financial analysts are increasingly calling for a “passive pivot” or a total management overhaul to align the NSIA with global best practices:

1. Indexation: Shifting a larger portion of the FGF into low-cost, high-liquidity ETFs like SPY to capture global growth without the “active management” fee drag.

2. Transparency: Moving away from “Level III” unquoted equities that allow for opaque valuations until a massive write-down is inevitable.

3. Accountability: Benchmarking executive bonuses strictly against the performance of the Future Generation Fund and other Funds (Infrastructure and Stabilisation) relative to its global peers.

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