SWF to get $1bn fresh capital in new FG plan

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The Federal Government is proposing to raise Nigeria’s Sovereign Wealth Fund (SWF) to $4.5 billion by 2018,  erasing earlier fears that the Fund may not receive additional capital, at least in the near term, due to low oil prices.

Nigeria’s SWF, managed by the Nigerian Sovereign Investment Authority ( NSIA ) still has about $1.5 billion assets under mangement since 2011 when it was established.

But the new proposal, coming a few weeks after the fund managers raised concerns that weak oil prices were dampening hopes of additional contributions to the SWF, is really to inject at least $1 billion each year for the next three years.

The proposal is contianied in a draft  2016 budget and Medium Term Plan  (2016-2020) seen by BusinessDay,  which also highlights plans to raise the Excess Crude Account (ECA) to $4.5 billion by 2018 and grow foreign  reserves to $7.65 billion.

The policy document still being reviewed, has six main pillars, including economy; social development; infrastructure; governance; environment; as well as states and regional development, which would form the thrust of fiscal expenditure between 2016-2020.

The proposal, if pulled through, would bring total assets under mangement by the NSIA to at least $2.55billion by end of next year.

With $1.55 billion total assets under management today, Nigeria’s SWF ranks 52 out of the 84 SWFs globally, which manage assets worth over $7 trillion.

Norway leads the largest global total assets under management at $882 billion, followed by United Arab Emirates at $773 billion and then China at $747 billion.

But African SWFs are still fringe players accounting for just about 2.3 percent of all SWF assets globally, with Algeria and Libya accounting for more than  80 percent of this proportion.

The Nigerian government has not been able to make additional contributions into the nation’s SWF since the initial $1 billion seed capital, and an additional $550m the country’s finances have been battered by more than a halving in crude oil prices in the last one year.

And with oil prices going further South, there were earlier fears that the President Buhari administration may not be able to make more commitments into the fund unless the present tight oil revenue improves.

Uche Orji, CEO, Managing Director NSIA confirmed that funding was a major challenge that the SWF as well as the country faces in the immediate.

“Oil price is below benchmark and because we are supposed to be funded when the oil price is above benchmark, so it will not make any sense for the government to make any contribution now that the oil price is still low,” Orji,  said recently, after briefing Buhari on the activities and investments of the fund so far.

But he disclosed that they were currently working out possible alternative means of funding, on which they have also briefed the President and which will be made public when tidied up.

The immediate past President Jonathan administration had established the Nigerian Sovereign Wealth Fund (NSWF) in 2011 with an initial $1 billion seed capital from the nation’s excess crude account, and a commitment to funding from the states and federal government.

Of the $1billion capital, $200 million has been allocated to the Stabilisation Fund,  $400 million to the Future Generation’s fund and the remaining $400 million to the Infrastructure Fund.

The NSIA manages additional  $350 million and  $150 million on behalf of the Nigerian Bulk Electricity Trader (NBET) and Debt Management Office (DMO) respectively.

Orji, said  despite the lack of funding, the NSIA had so far made a turnover of N15.7billion profit.

Nigeria’s SWF  invests and manages revenue generated when oil prices exceed the figure budgeted by the government.

However, oil prices have been unstable, stifling government’s resources as Nigeria currently almost solely depends on revenue from oil.

The NSIA, the manger of the fund was set up to receive, manage and invest in a diversified portfolio of medium and long term revenue of the Federal Government, State Government, Federal Capital Territory, Local Government and Area Councils, in preparation for the eventual depletion of Nigeria’s hydrocarbon resources, as well as the development of critical infrastructure.

Source: BusinessDayOnline

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