—-“We invested $100 million NSIA instrument with Seven Energy

By Omoh Gabriel, Business Editor

The Minister of Finance and Coordinating Minister of the economy Dr Mrs Ngozi Okonjo-Iweala disclosed on the sideline of the IMF/World Bank Group Annual Meetings in Washington that the Federal Government’s new economic thrust has been to efficiently channel the country towards becoming a non-oil economy by the time the on-going transformations embarked by the present administration get to an end. To this effect, an Infrastructure development Bank will soon be launched in the country in an effort to provide long-term investments in the critical sectors of the economy.

Ngozi Okonjo-Iweala, made this known to Nigerian journalists in washington DC over the weekend, after a meeting with a focused group of Sovereign Wealth Funds managers across the globe (Business Council for International Understanding (BCIU)).

Worried by the legal battle with the State governments over deducting their funds to invest in the Nigerian Sovereign Investment Authority (NSIA), the Federal Government she said is already considering a more permanent flow of funds for investment by the Sovereign Wealth Fund (SWF).

Dr. Ngozi Okonjo-Iweala said as part of the new deal, $5 billion would be injected soon, two years after the government injected $1 billion to kick-start the SWF. Since then, and owing to the legal battle, the Federal Government has only injected $550 million through third party sources, into the fund.

In an opening remark at a roundtable with members of the Business Council for International Understanding (BCIU) by the NSIA, at the ongoing 2014 annual meetings of the World Bank Group, Okonjo-Iweala, noted that the management of Nigeria’s SWF has done well, by co-investing with others, in addition to investing local infrastructure development.

The progress being made by the SWF, she added, is an indication that it “is one of the most important institution in Nigeria. This is an encouraging sign that the future is good.”

She told the gathering that there are fabulous investment opportunities in Nigeria and the government’s efforts to promote transparency.

The Minister noted that that rebasing of the Nigerian economy has shown that it is bigger and more diversified than previously imagined, growing at an average of 7 per cent over the past 10 years on the back of a thriving service sector. The rebasing, she continued, showed that Nigeria is the Africa’s largest economy, 26th in the world, with the 9th largest gas and crude oil reserves, besides the presence of 33 other mineral resources.

All of these, she continued, is an indication that the economy has sources of continued growth, a fact that is very important, going forward, besides the huge manpower to fuel the growth. There is however to reform, strengthen and build the manpower, she added.

The minister who analysed the contents of the country’s rebased GDP, noted that the new economic status of the country may have encouraged the intensification of the on-going expansion of certain segments of the economy which have now shown new growth potentials than the oil and gas sector.

Also at a briefing, Managing Director/CEO of Nigerian Sovereign Investment Authority(NSIA) Uche Orji said the body has invested in Seven Energy which is part of the gas to power fund. He said “We invested $100 million in NSIA instrument with Seven Energy along side Seven Energy bond for the same instrument but ours come with considerations. We invested in Seven Energy to complete a gas pipeline to deliver gas to Calabar NIPP and also to deliver gas production out of their gas facility to help deliver gas to power. That pipeline when completed will help Calabar NIPP get started. It is already at 650 mega watt capacity.

He disclosed that  that “gas power investment has started. There are two other things in our pipeline that hopefully, we should complete by the end of this year also in enabling gas to power. $10 million has been done and we have other investors who are part of that project. We have IFC, Terracet all in the same Seven Energy. There are other small projects that hopefully, we should be able to conclude before the end of the year. One of the major things that have happened is that we have completed investment in gas to power. The second thing is that we have continued to make significant progress in equity investment and maybe in respect to what might have been written about NSIA, the reality is that out of about some equity managers that we have invested with, three are either focused on Nigeria or in Africa.So our private equity allocation is pretty done in terms of all these investments. Private equity usually take time to show return, but when they tend to show return, they tend to return somewhere an average of 20 to 25 percent. This is the kind of return that we expect, which over the period should yield two to three times our investment for the future generation fund.

“The infrastructure fund, overall, is going on well. Some investors have made commitments, these continue. The Second Niger Bridge continues. Lagos-Ibadan continues to go through,. Many others are showing interests more than the amount we committed on the Second Niger Bridge and Lagos –Ibadan expressway, but that project will be formally announced by the key officials in the Federal Ministry of Works but our commitment has been there and we ready for the two major toll road projects.

“The point here overall is that reform continues. One other thing that has dominated conversation for NSIA is our efforts at establishing the Nigerian Credit Enhancement Facility. This facility is a very important initiative of the NSIA. We started working on it late last year and hopefully, sometime by the end of this year, we will start to work on implementing that . What is Nigerian Enhancement Nigerian Credit Facility?

“The idea here is to provide the facility that provides some kind of enhancement to make it easy for pension fund and insurance company to participate in credit enhancement. The question most Nigerians keep asking is how do we get this pension fund to participate in the process. The challenge some of the insurance firms have is they need a form of guarantee  or insurance that makes it easy for a pension company to invest in insurance.

NSIA has been involved for the last six months to develop the facility. The NSIA cannot provide guarantee, but the NSIA can invest in a guarantee, so this is a conversation that we had yesterday .

Our Q2 results came in line, it met our expectations, while Q3 as the business generally become more challenging was very difficult as a whole so it is operation with the same cyclical movement of the market.

What is the value of your portfolio now?

There hasn’t been new contribution but for the first  two quarters of the year, we can talk of about N1.5billion profit for Q1 and it is slightly more than that in Q2. The second quarter was about N100 million higher. Q3 just ended , it will be audited before can use the number.

Are you not concerned about the lack of contribution after the initial seed money was released two years ago coupled with the opposition from state governments?

Let me say two things. Number one, a case is in court so there is little I can say in order to avoid subjudice. But let us establish three premises. Number one, NSIA is not being sued. Nobody is suing NSIA.The case between the states and the federal government, to the best of my knowledge is about the use of funds in the ECA of which obviously funds were brought to NSIA.  We are not being sued and the operation of the NSIA continues.

Second, sovereign wealth fund, where there is a true democracy is usually controversial and so I didn’t approach this job thinking there wont be controversy . As successful as Norwegian sovereign wealth is, I remember, because I was at Godlman Search management which used to manage some portion of the fund as far back as 1996, it has been controversial., even as at today, there is tension between future generation who think there is money now, we should spend it  and a group which say let us keep saving.

My sense and my view is that this fund tends to weather the challenges and survive and many of this type of major policies, in most countries are faced with similar challenges. Let me tell you that in the 1920s when the social security, was introduced, it became very controversial as people carried placards and today, it has come to stay. Those type of challenges happened at the early lives of good policies. It will be foolish not to expect this not to happen.

We should look at examples of people who have done it in the past and let us stick with it. It is not about have we have new contributions now or not. We haven’t even finished utilizing the one given to us but let us look at it from the point of view that 40 years from now, we will be able to look back and say we did this. If we had done this say in 1974 by setting aside some fund in terms of performance, we would have significant savings by now. That is how we should look at it as opposed to worrying about some of the teething issues. And that is not to say those issues are not important, but the point is we should look more forward about what this fund is doing. We should not face flat at the first hurdle.

There are about 50 sovereign wealth fund in existence, less than 10 started with a billion dollars, others started with smaller amounts and with discipline they grew more significantly. Spending a billion dollars wisely is not that easy. Let us focus and get it done. The good news for us is that the federal government, through third party agency, has released $550 million of third party asset we are managing. The economics is very different because we share the difference with the agencies that own them.

So, the money invested for DMO, we will share the returns with  the DMO. The money we are investing on behalf of the Bulk purchaser, we will share the return with the Bulk Purchaser because it is a third party management. It is encouraging because we could through that process bring assets into NSIA. I believe we should be very optimistic because at the end of the day, you can remember what has happened to oil price.

If  there is any reason why we feel we must save, it is what is happening today is for the future generation of Nigerians and I say that because we were 20 years younger in some cases ,more when the First Gulf war took place. If we had started doing the saving by putting aside, substantial amount of money, it would have been great.

We are here now, what happened to that money? It is about discipline and investing, and that is what the administration is trying to achieve. Am I disappointed as a person? The answer is no we are investing what was given us  and that we will stay at it and make it successful going forward.

The Federal Government has just launched a 30 –month infrastructure masterplan, how does the NSIA key into this?

We were consulted, we were  part of infrastructure masterplan. We are keying in in so many levels. There are about 18 sectors that are investible by third party. We are keying in areas where we can add value. We have a clear business plan and for third party investment. Our asset base is very tiny at this stage , so we have chosen six sectors  and we will get to other sectors later. We started with agriculture where we have investment in agriculture, providing infrastructure for small holders farmers. We are looking at healthcare. Hopefully, in the next few months you will see our investments in healthcare. We are working on centre for advanced medicine. Very soon, we will be able to announce our progress. I told you we will be investing in a gas processing plant. We are looking at investing in motorway. We believe motorway is another avenue for investment

According to the minister who addressed a focus group in the company of Uche Orji, CEO of Nigerian Sovereign Investment Authority(NSIA), noted that with the deployment of the funds towards some critical areas of the economy such as the SMEs, agriculture,pipeline infrastructure development,power plant projects, motorways, second Niger Bridge, Lagos-Ibadan Express Way, the fund will become of great internal need than the indication where the plan would have been to extend liquidity to external demands. She said that all these efforts are targeted at improving the capacities of new

“After rebasing the GDP of the economy one year ago, the economy is seen to have been getting more diversified as there is a very strong push to make Nigeria a non-oil economy. All the sectors have added new values even though oil and gas will remain very important , as we still have the 9th largest oil and gas reserves in the world. We will soon launch an Infrastructure Development Bank which has already gained support from some institutions across the world as financial partners”, the minister said.

The minister told the world in Washington that, the NSIA is already a very success story as it has posted good investment returns over a small period of time with less than $2 billion equity capital. The organisation which has recently concluded a $100 million investment in Seven Energy Group,a private equity oil and gas company, is believed to have been targetting new equity issues that will offer good returns to investors and value to the entire economy. The Seven Energy Investment which is made up of gas pipe-line projects in the country will fast-track the Calabar NIPP project which also has an IFC funding content.

The new bank, according to Finance Ministry sources in Washington, will address the funding lapses in the economy, where many long-term projects have been dormant with their implementation costs escalating every year.It is believed that the Sovereign wealth Fund (SWF) managed by NSIA will develop the road-map for the bank which will focus strategic partners across