Business
Economic crisis triggers concerns over state of Sovereign Wealth Fund

Obvious weak resistance of Nigeria’s economy to the global oil price volatility is raising concerns about the growth and deployment of the nation’s Sovereign Wealth Fund (SWF) managed by the Nigeria Sovereign Investment Authority (NSIA).
It seems that the change in leadership has also affected its policy and operational direction to the concern of many. As an interventionist agency, its apparent disappearance from public consciousness in the midst of grueling economic conditions leaves much to be desired.
It is even more worrisome with Nigeria’s debt stock currently standing at about N134 trillion, leaving analysts wondering why the Federal Government is quick to borrow rather than see the SWF as the last-resort source of finance during periods of fiscal deficit.
In a more puzzling circumstance recently, the Senate approved a fresh loan request of $2.2 billion as part of efforts to plug the N9.7 trillion budget deficit for 2024. Nigeria’s debt-to-service-revenue ratio quickened to 162 percent in the first half of 2024, up from the 128 percent reported in the same period of 2023.
The situation is sending a disturbing signal that the purpose of establishing the SWF may have been defeated. Observers believe it will take a long time for the country to fill the vacuum created by the exit of Mr. Uche Orji, the pioneer Chief Executive Officer of NSIA, who bowed out on September 30, 2022.
Historically, the first sovereign wealth fund was established in Kuwait in 1953, as a means of helping to stabilize the economy from fluctuating oil prices. In 1956, the Gilbert Islands (now Kiribati), established the revenue equalisation reserve fund to manage profits from phosphate mining.
However, after Kuwait and Kiribati, the next major SWFs were created in the 1970s, in the wake of the oil stock. But the most recent wave of SWFs establishment started in the 1980s with the Norwegian government’s pension fund-global in 1990, after which the trend has continued till today.
And more recently, some countries, such as China, Iran, Russia, Qatar, and United Arab Emirates, have established their own SWFs.
The Nigerian SWF, which is the brainchild of a former Minister of Finance, Olusegun Aganga, was signed into law via the Nigerian Sovereign Investment Authority Bill on May 26, 2011, by the then President, Goodluck Jonathan. And based on the Santiago Principle, the SWF comprises three investment baskets – the Nigeria Infrastructure Fund; the Future Generations Fund, and the Stabilization Fund.
Specifically, the Infrastructure Fund is expected to be used in bridging the nation’s infrastructure gap by investing in the development of critical facilities across the country. Notably, 10 per cent of this fund is to be devoted to agriculture and regional government-sponsored development projects that will promote economic development in under-served sectors or regions in Nigeria.
While the Future Generations Fund was to be used to build an inter-generational savings base by investing in longer term assets that generate returns to accumulate wealth for future generations of Nigerians, the Stabilization Fund was to be used to protect the country’s budget by providing a stable, last-resort source of finance during periods of fiscal deficit.
Also, the Stabilisation Fund will ensure the smooth functioning of government and delivery of key services during periods, where revenues from petroleum sales are less than the level anticipated and approved by the National Assembly.
Explaining his reason for initiating the establishment of the SWF, Aganga had said that, as a fundamental component of Nigeria’s macro-economic management framework, the SWF, which will be managed by the NSIA, would help to reduce Nigeria’s susceptibility to the unintended consequences that might arise from the volatility of crude oil price at the international market.
“With the establishment of the SWF, Nigeria now joins the other OPEC states and more than 50 other natural-resource-rich countries, which together manage over $3 trillion in sovereign assets, in having a national savings plan for managing natural resource wealth.
”Up until now, Nigeria was one of the few OPEC members without a Sovereign Wealth Fund. In fact, Ghana and Uganda have moved forward with establishing their own Sovereign Wealth Funds, even when their oil production was not yet fully on stream.
“Algeria established its Sovereign Wealth Fund in 2000, to save the difference between the actual and projected revenue generated from petroleum resources. In 2011, the Algerian fund was estimated to worth $57 billion. Globally, Sovereign Wealth Funds now form a fundamental component of strategic management of fiscal surpluses,” Aganga had said.
Hitting the road
On assumption of office on October 2, 2012, Orji’s immediate hurdle was to ensure that the SWF gets a legal backing that would ring-fence it from all manner of external and political pressures and interferences unlike the Excess Crude Account (ECA).
The SWF had faced legal tussle, based on the provisions of Section 162, especially Subsection (3) of the constitution, which provides that any amount accruing to the Federation Account should be shared among the three federating units based on National Assembly’s prescription.The NSIA was then created to manage the SWF with an initial US$1 billion capital.
With him as the helmsman, NSIA delivered nine straight years of profit, growing the Fund from the initial $1billion to about US$2.56bn, despite recurring tough, volatile markets.
Total Comprehensive Income grew from N53m in 2013- just a year after its set up, to N146 billion in 2021. Total assets were reported at N1.227 trillion a year before he left as against N158 billion in 2013.
It is on record that Orji and his team left a number of impressive footprints in almost all aspects of the economy, from agriculture, healthcare, Gas Industrialization, road infrastructure, and financial servicing to technology, among others
In 2014, Orji led the Authority to become a signatory to the Santiago Principles of the International Monetary Fund (IMF)/International Forum of Sovereign Wealth Funds, hinged on best practices, making NSIA rank global joint-second by the Sovereign Wealth Fund Institute for transparency at the time..
Among other outstanding achievements in critical sectors of the nation’s economy, Orji through the NSIA, made a lasting impact in Nigeria’s dilapidated health care system, building of a world-class cancer treatment centre in Lagos University Teaching Hospital (LUTH) and later two diagnostic centers in Kano and Umuahia.
All the three Centres have been operationalized, with over 200,000 patient encounters at LUTH so far, while over 60,000 patients have received care at the Kano and Umuahia Diagnostic Centres.
NSIA is also in the process of developing an Active Pharmaceutical Ingredient Manufacturing Plant, and has secured approval and began the development plans for the construction and operationalization of 23 new modern medical diagnostic centers of excellence covering all 6 geopolitical zones in the country. Two Oncology centres will be cited in Enugu and Kaduna states, as well as six Cath Laboratories.
Observers believe that either the current leadership of NSIA does not have the expertise to sustain the growth in SWF or lacks the political will to utilise the Fund judiciously.
“’Uche was cerebral and brought his wealth of experience to bear, hence the landmark achievements the country recorded with SWF under his watch”, a public affairs analyst, Francis Okoro, noted.
“Why will a country start a very profitable venture with a brilliant and visionary leader only to suddenly slow down the pace of progress by sacrificing merit on the altar of primordial sentiments?”, Okoro queried.
For a policy analyst, Patrick Adeyemi, those managing the SWF presently do not even have to come up with new projects for Nigerians to be impressed.
He said, “All the present managers of the Fund need to do is to make sure the many initiatives of the previous managers remain afloat through judicious deployment of the money’.
“They should also come up with convincing ways of showcasing their activities, so we can know whether the Fund is still there or not; whether it’s growing or shrinking.
”It is also worrisome the our debt profile is hitting the roofs and our currency maintains a free fall, with no likelihood of finding succour in the Sovereign Wealth Fund”.
Critical numbers
However, while presenting NSIA 2023 earnings to journalists in Abuja recently, the CEO, Aminu Umar-Sadiq disclosed that Nigeria’s SWF grew by 119 percent in 2023 to N2.258 trillion ($2.47 billion) from N1.032 trillion ($2.27bn) in 2022.
Umar-Sadiiq explained that the Fund received $45.59 million as fresh capital from the Nigerian Upstream Petroleum Regulatory Commission, NUPRC, in line with the provisions of the Petroleum Industry Act (PIA).
The fund which was set up in 2013 with a seed capital of $1 billion is currently made up of Stabilisation Fund (20%/$316 million), Future Generation Fund (30%/$1.06 billion) and Nigeria Infrastructure Fund (50%/1.102 billion).
According to him, in addition to its funds, the NSIA manages other third party funds including the Presidential Infrastructure Development Fund (N1.03 trillion), Debt Management Office ($200 million), FGN Stabilization Fund (N57.12 billion), Nigerian Electricity Supply Industry (N200 billion) and Presidential Fertiliser Initiative with N34.1 billion net assets.
He noted that through the Nigeria Infrastructure Fund, NSIA has invested in the construction of the Lagos-Ibadan Expressway and the Second Niger Bridge, and the Abuja-Kaduna-Kano Expressway.
The Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, while inaugurating the new Board of Directors of the NSIA, charged them to pursue the critical mandate of steering the nation’s economic growth and stability.
Reflecting on the NSIA’s 11-year journey since inception, the minister, who praised the institution’s outstanding progress in achieving its mandate, described the NSIA as “an essential institution for our nation’s economic stability and growth”.
The new board members include Mr. Segun Ogunsanya (Chairman), and Mr. Aminu Umar-Sadiq (Managing Director/Chief Executive Officer). Others are Prof. Fabian Ajogwu, Mr. Abdullahi Mahmud Gaya, Mr. Ahmed Goniri, Ms. Ada Osakwe, Dr. Suleyman Ndanusa, Ms. Ijeoma Taylaur, and Mr. Kola Owodunni.
In his inaugural remarks, the newly-appointed chairman, Ogunsanya, affirmed his commitment to fostering a prosperous future for the next generation in line with the Renewed Hope Agenda of the President.
He said: “Our mandate is clear. We are here to enhance the wealth of our nation and ensure that future generations do not face the spectre of poverty.”
Ogunsanya also highlighted the board’s ambition to significantly grow the fund under its management.