DMO recalls $100m of its $200m portfolio
– Financing of second Niger Bridge on course
Despite the slow economic growth in the country as a result of the failing crude oil receipts, the country’s Sovereign Wealth Fund ( SWF) has recorded an increase in assets from N177.838 billion the previous year to N213.674 billion as at the end of December last year.
According to the Nigeria Sovereign Investment Authority ( NSIA), operators of the country’s SWF, the growth represents a 20 per cent leap in total assets. The fund’s comprehensive income for the year under review recorded a 67 per cent growth from N15.772 billion in 2014 to N26.355 billion while investment income equally grew between 2014 and 2015 at different rates as follows : investment income – from N3.941 billion to N5.821 billion; net foreign exchange gain and other fees income , from N3.329 billion to N8.774 billion and share of profit from investments in associates from N16.364 million to N124.914 million.
Overall, profit for the year rose from N5.165 billion to N11.775 billion even as the cost of managing the fund’s investment rose from N1.644 billion in 2014 to N2.333 billion.
But states in the country will have to wait till the end of 2018 to begin to draw dividends of the profit generated by the fund’s investment, as this was clearly defined in the Memorandum of Understanding establishing the NSIA that dividends would begin to be drawn by equity holders only after five years of profitable venture. The fund has also just concluded two years of transactions .
This is coming as the last year’s approved additional investment capital of $250 million to the fund was released to the MSIA last February to boost capital outlay for investment . All these numbers are contained in the fund’s 2015 financial result released by the management of the fund at the weekend. The fund is a joint Federal and State Governments of Nigeria’s investment vehicle being part of measures to diversify Nigeria’s stream of income from solely relying on oil mineral resources. It took off in 2014 with a seed investment fund of $1 billion, pulled from the jointly owned Excess Crude Account ( ECA) while the Debt Management Office ( DMO ) and the Nigerian Bulk Electricity Trading Company ( NBET) offered the fund $200 million and $350 million respectively to invest for them.
On the result and the activities of the fund, its Managing Director and Chief Executive Officer, Mr. Uche Orji announced in Abuja at the weekend that the DMO had recalled $100 million of its investible funds with it while it had just received the additional $250 million released to it by the Nigerian Federation last year which would be directed at several green investment platforms already identified .
The NSIA chief also shed light on the activities of the fund’s investments in different sectors including the Second Niger Bridge project where it is a key investor under a Public Private Partnership (PPP), saying all things being equal the project would be delivered as scheduled .
His words : “ The key sectors for infrastructure investment – agriculture, healthcare, motorways, power and real estate – are five out of the 15 investable sectors as contained in NSIA’s Infrastructure Rolling Plan for 2015. Highlights of activities undertaken across these sectors are provided below.
They include : Motorways/Second Niger Bridge ;healthcare investments, which involve the development of five modern medical diagnostic centres and a specialist hospital across the six geopolitical regions of the country. Till date, the NSIA has approached 14 federal healthcare institutions across the country and signed seven Memoranda of Cooperation (MOC) with as many. The authority signed a binding agreement with a consortium of private sector diagnostic centre operators to develop, construct and operate the diagnostic centres. This will bring best-in-class technical expertise to the process and enhance overall service quality.
“ The first phase of the programme will commence with three projects – Federal Medical Centre, Umuahia(South-East) and Aminu Kano Teaching Hospital (North-West) and project development for the specialist hospital to be cited in the Lagos University Teaching Hospital (LUTH) (South-West) is expected to commence in second quarter of 2016.
“ Federal hospitals in each of the remaining three geo-political zones – North-Central, South-South and North-East – have been identified for potential development of diagnostic centres, and are expected to commence development work following approval from the Federal Ministry of Health.
“ The Ogun State Government in partnership with the NSIA and Lafarge Africa Plc signed a Memorandum of Understanding for the joint development of Ogun State Forest Landscape Restoration Project. The project’s goal is to transform 108,000 hectares of heavily degraded land into an arable green area. The project combines land restoration with business development objectives by applying the latest findings of agro-ecology and agro-forestry.
‘‘ The Fund for Agricultural Finance in Nigeria (FAFIN) – a Fund, co-sponsored by NSIA in partnership with the Nigerian Federal Ministry of Agriculture and Rural Development (FMARD), and KfW, the German government-owned development bank – raised a total of $34 million. In addition to an investment already made in L & Z Integrated Farms Limited, FAFIN invested in Diamond Pearls Agro, an edible oils business in the period under review.
“ The year 2015 was a difficult year but the NSIA managed to protect its capital in a harsh and volatile market environment where equities and bonds in many leading economies suffered declines. In particular, the decision to invest in Alternative Asset classes proved beneficial in 2015 as this ensured that our portfolio was relatively immune from the market forces while traditional asset classes suffered significant declines.”
“ Alternative assets mainly include hedge funds and private equity both of which in aggregate have held up well during this period. In 2015, NSIA has committed capital to AQR Capital Management LLC, Africa Capital Alliance Limited, Actis GP LLP, Falko RAOF GP Limited, Synergy Private Equity Fund LP and Verod Capital Management
“ NSIA progressed work on the Nigeria Credit Enhancement Facility, which is expected to be operational in the second half of 2016. The facility will provide credit enhancement solutions to project companies raising senior debt in the form of bonds to finance vital infrastructure projects. NSIA partnered with GuarantCo, an experienced credit enhancement provider, in the launch of the facility.
“ The authority 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,’’ he said.
Orji also stated:“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.”
According to Orji, “the 2015 fiscal year was characterised 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.”
On the outlook for 2016, Orji declared that NSIA anticipates that though global market volatility would continue, NSIA would maintain its strategy of a diversified portfolio to drive returns and mitigate market volatility.
Source: Guardian