[FILE PHOTO] Uche Orji, CEO, Nigeria Sovereign Investment Authority (NSIA)
Orji was the Managing Director of the Equities Division of UBS Securities, New York, after six years at JP Morgan Securities, London, as Managing Director in the Equities Division. He also worked at Goldman Sachs Asset Management, London from 1998-2001, rising to become an executive director, before resigning in 2001. He was the Financial Controller at Diamond Bank Plc, among others.
Orji has a degree in Chemical Engineering from the University of Port Harcourt, Nigeria, and an MBA from Harvard Business School, Massachusetts, United States of America. In this interview with Business Editor, CLARA NWCHUKWU and Assistant Editor, Finance/Economy, CHIJIOKE NELSON, he enumerated lost opportunities for late establishment of the sovereign wealth fund and huge benefits inherent in consistent contribution to the fund by government.
How would you describe NSIA’s operational profile thus far?
We started operations in October 2012, and if I look at the way other people run theirs and the way we run ours, I think it is important to understand three things.
First is that the NSIA have a value defence mandate compared to other sovereign wealth bodies.
In other sovereign wealth countries, you have two mandates, one of which is stabilization, the other is future generation.
In NSIA, in addition to having both the stabilization mandate and the future generation mandate, we also have a mandate to invest in domestic infrastructure, which most other commonwealth countries do not have that.
So, what we have in the NSIA is a home grown solution that addresses all the trade issues that the sovereign wealth countries is supposed to address; stabilization, savings for future generation and investment in domestic infrastructure, which is where we really have a significant challenge.
NSIA model has been copied by so many countries, especially developing countries, because developed countries have solved their infrastructure problems through their budget, so they are saving up their sovereign wealth fund to provide for the future, but we have presently, infrastructure problems, so that makes a big difference in what we are doing and what the other countries are doing.
But with the way Nigeria’s sovereign wealth fund is run compared to other countries, cuts across in a ranking that is done by the sovereign wealth institute in United States, which is looks at the operations of the sovereign wealth funds.
I am very pleased to inform you that for the last four years, we are still in the top quartile in terms of transparency and governance and that I think is one of the most important things we have achieved.
This ranking, basically is not about the performance, in a terms of the returns you make, although add we have been comfortable in a row in the last five years in the NSIA.
But it is also about the governance, the transparency, and the way the operations affect us.
We don’t know who they are at the institute and they work independently. The ranking in terms of transparency and governance gives us a little bit of comfort.
Now, in terms of areas we need to improve, it is in the consistency and discipline of funding the sovereign wealth fund.
Other countries have gotten that part, in terms of how the funding works.
We are still trying to get the will properly and all the basic elements of the law that defines how the sovereign wealth fund should be funded is adhered to.
Once we are able to do that, the NSIA consistently overtime would receive funding and I think that would go a long way in making a big difference to the way the NSIA operates.
However, I am generally pleased, but I believe we can do more and I think the most important message is that we can do more with the NSIA.
From where we are so far, I think in general, the organization has received the support of the government.
The management team was appointed by the last government and retained by this government.
We are one of the first organizations to receive a new board from this government, which speaks the fact they take our governance seriously.
To what extent has your operations incorporated the sub-national governments?
In terms of the governance of the NSIA, yearly, we report our results to the National Economic Council (NEC), which is a subset of our governing council.
In the NEC, all the state governors are members and we present our reports on how far we have gone and where we are going.
They are part of the governance structure. Secondly, they are all shareholders. We have given all of them certificates of contribution.
So, for every time we receive allocation into the sovereign wealth fund, we provide certificates to the states to make sure that shareholder register reflects contribution of every state and local government in the country.
After passage of profits, the law says we should start providing dividends and so, we are hoping that at some point, we will approve some dividends and we will pay all the states and local governments, as well as the Federal Government, by the ratio of their shareholding contribution.
In the last two or three years, we have become very active in terms of our infrastructure investment and in everyone of those our investment, we seek the support and the collaboration of the state governments that we are investing with.
In the recent programme with the Presidential Fertilizer Initiative, which we designed as part of the NSIA, we revived about 12 blending plants across the country, mostly in the north and one in the Ebonyi State.
It has helped create quite a good number of jobs and it also helped bring down food price inflation.
The key thing I will say is that almost every investment we have made on infrastructure development is at the state level, so at the moment we are working on the second Niger bridge project.
Julius Berger has been mobilized and work would be significantly seen once the rain subsides.
We are at the moment funding the rehabilitation of the Abuja-Kano highway, which is going to be a tolled road and we are also putting in place, the Lagos-Ibadan expressway, which would be taking on under the NSIA, through the presidential infrastructure development fund.
We have also invested heavily in healthcare and many other projects across the country.
We are taking over the Oncology Department of Lagos University Teaching Hospital under a public-private partnership.
Through the NSIA governing council, which the state governments are part of the governance and through the profitability of the organisation, there will be dividend, as soon as the board of the NISA approves dividend policy, but we are going to do that because we have been profitable five years in a row.
If you are doing all these wonderful works across the states, what is the grouse of the states against NSIA?
That happened in 2012 or thereabout, which is a long time ago.
At the moment, the state unanimously supported NSIA initiatives and the last two contributions was initiated by the states.
We didn’t ask for it, but they were the ones that moved for it. In fact, they are asking us whether we can help them with their own wealth management.
The relationship between the NSIA and the states has changed significantly.
How successful are the three ring-fenced funds you mentioned earlier?
So far so good, we have been very profitable. One thing I don’t try to talk about so much is profitability, because it can be volatile, but the most important thing for me is not to lose money.
We try to ensure we remain profitable, but not taking too much risk, else we’ll lose everything. Are we in top quartile in terms of returns? No. But we are in some areas.
If you look at the infrastructure fund, infrastructure projects take a long time, so there are periods, like during construction, when you are just spending money and you are not earning any return yet.
For the road projects, we are not making any money until we finish the construction, then we start tolling and making money, which might take a while. For such projects, there are two ways to measure the performance.
The return is one thing, which is very sacrosanct to us in the long term period of the project, but may not be in the short term.
But the most important thing to think about is the impact.
Think about what the implication of the travel cost would be between where we are making the investment, then the benefit in terms of the ease of travel across the states.
We are very excited about the impact of these projects. In summary, they are all designed to be profitable but I need you to understand that they all have different approaches.
The stabilisation fund make money on a daily basis and short term in terms of the way it is designed.
The future generations fund has a mix of assets- private equity asset and public equity asset. Public equity asset is a daily performance.
They all have different investment strategy. In the long run, we expect that every one of them would be profitable to the organisation and to the country.
Let’s look at the roads since you are talking about profitability in the long term. Does that pre-suppose the return of tollgates on these roads that you are constructing?
Yes. They are all going to be tolled. At the moment, the NSIA has a company, a subsidiary, called NSIA Motorways Investment Company. So, it is the concessionaire.
Who will determine the amount for the tolls?
We are in discussion with the government. Obviously, there will surveys on willingness to pay and the economic activities of the place, which would go into the concession period.
If the government says “Build, Operate and Transfer” in 10 years, the toll would be high, but if it says in 50 years, then the toll would be lower.
All of these factors are important to consider.
Since the establishment of NSIA, you have only produced four financial reports. What has been the issue?
We started October 2012 and 2013 report and combined 2012 and 2013 reports, because in 2012, it was only three months.
Others came out, while 2017 is about to come out. But we already published our accounts, because the yearly report is just a picture book.
We have produced five accounts accounts not four since we started. We publish our accounts before the end of March every year.
Like I said, the 2017 accounts have already been out there online. It was out in June. The picture book would be out soon.
We understand that in 2016 was the heat of recession, but it appears NSIA did very well in the results. Where did you achieve the successes?
We invest in about 17 different countries and currencies.
If you look at our investments, through the reports, we invested in public equites from Japan to U.S. and China and all that.
If you look at the private equities, we invested mostly in U.S. and Africa, particularly Nigeria.
Most of the success came from the facts that we haven’t started deploying a lot of capital to infrastructure and the global market.
Nigeria was in recession, but the global market was not in recession.
So, Nigeria’s exposure, for us, is currently less than 20 per cent.
In 2016, Nigeria’s exposure was less than three per cent, so we were protected from the domestic market issues but our Nigeria exposure is rising significantly.
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