Despite Global Headwinds, Nigeria’s Sovereign Wealth Fund Grows Net Asset to N920bn in 2021

•Records total operating income of N100.8bn 

In spite of the volatility and headwinds in the global economy, the Nigeria Sovereign Investment Authority (NSIA), yesterday said it delivered impressive financial results, underscoring the resilience of its investment strategy.

While it recorded 19 per cent growth in Net Asset to N919.73 billion in 2021, compared to N772.75 billion in 2020, the authority also posted a profit after tax of N153.6 billion, which was slightly down by 1.9 per cent from the N156.5 billion recorded the previous year.

Addressing journalists during the virtual earnings’ report presentation, the Managing Director/Chief Executive, NSIA, Mr. Uche Orji, said it was the ninth consecutive year the NSIA has consistently remained profitable, adding that all the three funds closed the year positive, beating their individual benchmarks.

According to him, it posted core income of N100.8 billion in 2021, down eight per cent compared to N109.6 billion in 2020. The core income excluded forex gains of N45.8 billion in 2021 and N51.2 billion in 2020.

Providing further breakdown of its performances in the review period, Orji said total comprehensive income declined marginally in 2021 by 8.2 per cent to close the year at N147.0 billion compared to N160.1 billion in 2020.

 Notwithstanding, he described the performance as a, “very solid result,” adding “we’re very pleased with the way we navigated 2021 as an authority.”

The NSIA boss however noted that global inflation remained a significant disincentive to investments adding that it has continued to distort the global economy.

He said: “Reactions to the raging global inflation may lead to recessions in certain economies as central banks have announced varying measures of rate hikes and halt to balance sheet expansion.

“The human and economic costs of the Russia-Ukraine conflict have continued to escalate resulting in heightened geopolitical tension, disruption of the global supply chain, inflation, and potential impact on food security.”

Orji added that: “The growth prospect in China will be undermined by its zero-tolerance stance on the emergence of COVID-19 leading to lockdown in different regions and cities.”

However, in view of the positive performances over the years, the NSIA MD said it was considering the idea of paying dividend to the shareholders of the fund including the federal and state governments. But he pointed out that the gesture was subject to the approval of the National Executive Council (NEC).

Orji, said a decision would have to be made as to whether it was necessary for pay dividends now or plough back the proceeds into additional investment for greater returns, given that the NSIA returned $150 million in October 2020, to the government from the Stabilisation Fund in line with the provisions of the NSIA Act 2011.

He also hinted that the work on the Second Niger Bridge would be completed by December.

According to him however, the single biggest risk for global capital market was complicated by the Russia- Ukraine war, as well as supply chain issues in China as it struggles to contain the COVID-19 pandemic, adding that, “these are all factors that create headwinds into 2022.”

Orji said, “In Nigeria, these global headwinds are exacerbated by challenges in the local environment. The World Bank, CBN, and Fitch have projected the Nigerian economy will grow by 2.5 per cent, 3.1 per cent, and 2.8 per cent respectively.

“Notwithstanding the outcomes, the growth range will have minimal impact on the per-capita given the population growth rate at 2.5 per cent.”

Orji warned that financial performance of the NSIA in 2022 will be impacted by developments in the global and local environment given its exposure across the three funds namely the Stabilisation Fund, Future Generation Fund and Infrastructure Fund.

But he assured that the authority will take steps to strengthen the resilience of its strategy through diversification, portfolio selection, and other options to enhance the risk/ return profile and liquidity.

He said the ESG and assets transfer will be critical to the overall long-term strategy of the NSIA to expand access to third-party capital and support the global effort toward building a climate-resilient economy.

Orji also said that the fund would make significant footprint in agriculture in 2022, stressing that “we’ve been able to show the abilities in some areas and we’re now going to roll out funding even more aggressively.”

He insisted inflation remained major constraints to reasonable projections going forward.

He said, “I did say, that there was just too much money pumped into the market globally and that there will be inflationary concerns. But I remember very smart economists dismissed it and said it was going to be a short-term thing; even some central bank governors, even the Federal Reserve, thought it was going to be short-term.

“We did say at the time that it will not be and we say that purely as market participants who have seen what it is going to take to untangle the supply chain that has become an issue.

“Bear in mind inflation is a big problem for investors. And when it is globalised and synchronised at the same time in the US, Europe, and across Africa, this will continue to challenge and affect returns in 2022.”

He said, “I think that 2022 would be the toughest year of investing over the last 15 years. Since between 2008 and now this will be the toughest year for investing because navigating inflation and controlling it without triggering a recession is the biggest challenge that central bank governors all over the world have to deal with. And that is always not a good time for investment.”

Continuing, he said, “So I need you to understand that the outlook in 2022 and beyond will be affected by inflation and numbers may not be anywhere near as close to what they’ve been historically. I think the world is now in a new phase of investment cycles, and we all should be prepared.”

He further predicted a risk of recession in 2022 as central banks intensify efforts to curtail inflation.

“This is a challenge and the navigation of what many of you are already seeing across most asset prices, particularly technology companies that have been highly valued over the last 2-3-4 years and now feeling the heat as interest rates start to rise in the efforts to contain inflation,” Orji said.

He added, “This is also something that is affecting emerging market debt. Also, this issue of rising interest rates as we curtail inflation I think will continue to affect, emerging market debt, particularly the Eurobonds.

“So the first half of 2022 maybe up until the third quarter would remain challenging, but I’m very optimistic that into the second half, especially in the fourth quarter, things will look a little bit better.”

James Emejo in Abuja and  Nume Ekeghe in Lagos

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