Nigeria- $1 billion Sovereign wealth fund to start investment in 2013
Two months after its inauguration by President Goodluck Jonathan, the much discussed Sovereign Wealth Fund is making progress towards becoming fully operational. The Nigeria Sovereign Investment Authority (NSIA) will start all the securities investing by March 2013, according to Uche Orji, the newly appointed head of the NSIA.
Orji, the former Goldman Sachs Group Inc. and UBS AG banker plans to make spending on local infrastructure a key aim after local lawmakers opposed the fund’s creation.
“It’s a crucial institution for the country and I think it’s important that it went through a robust debate,” said Orji. “Our country is making progress, it might not be visible to people, but we’re building foundations and institutions.
Orji, 42, who also worked at JP Morgan Chase & Co, said “this is not saving money for savings sake, this is about impacting the lives of people in a way that will be very fundamental for the future of Nigeria.”
“We’ll start all the securities investing by March” for the Fiscal Stabilization Fund and the Future Generations Fund.
“I’ve run money and been part of a portfolio management team and this isn’t any different,” Orji said. “All Nigerians must support it because the signal it sends to the international community is huge.”
Orji will have a first term of five years, Finance Minister Ngozi Okonjo-Iweala said, and will work from Abuja. Nigeria’s crude production of about 2.2 million barrels a day accounts for 95 percent of foreign income and 80 percent of government revenue.
Nigeria’s sovereign wealth law requires the creation of funds for infrastructure, the future generation and budget stabilization, with each representing at least 20 percent of the total. Savings through the fund will enable Nigeria to build its infrastructure and also provide a buffer against volatility in oil prices.
The wealth fund was set up in May 2011to invest savings made from the difference between budgeted oil prices and actual market prices. This will help meet budget shortfalls in the future, provide dedicated funding for development of infrastructure and keep some savings for the future generation, according to the law establishing it.
The fund, signed into law by President Goodluck Jonathan, aims to replicate the long-term growth of funds such as the Abu Dhabi Investment Authority, Orji said.
Abu Dhabi, capital of the United Arab Emirates and home to about 7 percent of the world’s proven oil reserves, set up its wealth fund in 1976 to diversify its sources of income by investing globally.
The wealth fund, known as ADIA, doesn’t invest in the U.A.E. or typically in the Gulf Arab region, and had assets valued at $328 billion at the end of 2008, according to the New York-based Council on Foreign Relations.
Sovereign wealth funds such the Qatar Investment Authority are boosting overseas acquisitions as oil prices hover near $100 a barrel. The country has taken a 12 percent stake in Swiss miner Xstrata Plc and last month bought a 22 percent stake in Chinese private equity firm Citic Capital Holdings Ltd.
Nigeria is among the last members of the Organization of Petroleum Exporting Countries to set up a wealth fund.
“I’m actually very close to many of the sovereign wealth funds in the Middle East; I’ve known many of them for many years and I’ve watched them grow,” Orji said. “It takes time for a fund to build and get invested and contribute, but you have to start somewhere.”
NSIA will advertise several key management and staff positions on 21st December 2012. NSIA projects a full complement of staff to be in place by the first quarter of 2013.
Nigeria’s 36 state governors challenged the creation of the fund in a lawsuit at the Supreme Court, saying it violated a constitutional requirement that all government revenue must be shared among federal, state and local governments. They later agreed to back plans to appoint the wealth fund’s board, while planning to almost double the amount in the excess crude account, which the wealth fund was originally to replace, to $10 billion.