NSIA Boss Advises Against Currency Crisis, Urges Borrowing In Revenue Currency

The Managing Director of Nigeria Sovereign Investment Authority, NSIA, Mr. Uche Orji, has advised companies operating in the country against borrowing dollar-denominated funds from the international financial market to finance projects in the country.

Speaking as a panelist at the just concluded Nigerian Gas Association(NGA) International Conference and Exhibition in Abuja, Orji said it was suicidal for companies to “borrow significantly in dollars” to fund their projects when their revenues are regulated in naira.

He revealed that the NSIA, which manages Nigeria’s Sovereign Wealth Fund, SWF, took that path in the recent past and was yet to fully recover from the crisis that the currency mismatch caused the organization.

He said: “In terms of currency mismatch that necessitated the recent crisis that we are yet to recover from, why can’t you negotiate and price some of these things in local currency?

“It is suicidal to fund infrastructure in dollars when your revenue is in naira. It is not going to work. Africa and Nigeria would not develop paying for all of these things in dollars when your revenue is not only in naira. It is regulated, it is local currency and we have these mismatch situations.”

Orji also advised African countries to avoid the path that leads to currency crisis by borrowing more in local currencies to fund development projects, stressing that development will be elusive if they continued to borrow funds in dollars and other major international currencies to finance their infrastructure projects when their revenues were in local currencies.

Speaking on the NSIA’s first investment in the gas sector, Orji blamed some of the challenges on currency mismatch, among others.

“It has been very interesting in the last five years, especially when we started getting involved in the gas sector.

‘’The first investment had its challenge. We would not like to do any like that again; we had to restructure.

‘The main reasons that happened, is the issue of the mismatch in currency; there was also the issue of bad debt, payment terms were not adhered to; there were also environmental issues, with damages to pipeline. There were many challenges in the sector.

“However, we believe that the way to fund these projects is not from taking expensive bank loans; it is not from the limited equity that we have; we believe that there should be an opportunity for more private equity participation in the gas sector,’’ he said.

Orji also lamented the rate of gas flaring in the country, while commending the Federal Government for introducing new tariff structure for gas flaring.

“It is quite disheartening to watch us flare gas as if it is useless. Every time you do that, it is equivalent to taking bundles of dollars to a stove and burning them.

“You cannot live in a country that is suffering from deforestation, yet we are flaring enough

It said it was an irony that a country suffering from deforestation would continue to tolerate gas flaring and “enough Liquefied Petroleum Gas, LPG, or gas equivalent that can create LPG in the market.”