Why FG Must Save For Rainy Days- NSIA

The Nigerian Sovereign Investment Authority, is concerned that the Federal Government must learn the habit of saving against the rainy days as crude oil prices had risen above the $40 per barrel benchmark set in the 2021 budget.

The Managing Director and the Chief Executive Officer of the Authority, Uche Orji, said during a monitored programme on Arise TV Morning Show on Wednesday that Nigeria could copy the Norwegian Sovereign Wealth Fund model.

NSIA which is an agency in charge of managing the Sovereign Wealth Fund was set up in 2012 and received a $1bn grant in 2013.

Between 2016 and 2017 under the Muhammadu Buhari’s administration, the NSIA received extra amount of $1.1bn.

Nigeria’s sovereign wealth has only grown to $2.15bn as of September 2019, which is a weak growth compared to other Sovereign Wealth Funds unlike the Norwegian Sovereign Wealth Fund which had grown to $1.2trn.

The Federal Government hopes to partly fund its N13.88trn budget with crude oil proceeds at $40 per barrel, however prices of crude has surged to $67.61 per barrel. This means an excess of $27.6 for Africa’s most populous nation.

Nigeria pumped 1.43 million barrels of crude per day in December last year, with the $26.6 per barrel difference from the budget benchmark, Nigeria could save $38m dollar daily.

Orji said although the decision to save lies in the hands of the government, there are ongoing discussions to facilitate the process.

He said, “The decision to save is not the NSIA’s to make. Of course the NSIA is designed to receive savings, the laws actually require the government and a lot of the conversation we are having with the government is actually obeying that laws and making the transfers.

“But obviously, we are indeed in a political economy and we are also aware of the devastation of the economy last year by Covid-19.

“So these conversations are ongoing. I mean we missed our opportunity as a country and every time I speak to my friends they keep pointing out to the Norwegian Sovereign Wealth Fund which in 2012, 2013 and 2014 when oil was extremely high, the Norwegian Sovereign Wealth Fund was saving $1bn a week. Just think about that; $1bn a week.

“We need to just have the discipline to save. No matter how small, just make sure we have the discipline to save a little bit at a time and then ten years down the line we can actually look to have a sizable investment.”

The NSIA MD revealed that its results for 2020 tripled the N34.46bn earnings of 2019.

He said, “The year that just ended was a very good year for the NSIA. We will be announcing our results in a month or so. So far, last year was a very good year in terms of external investments that we made, markets were very good and we took advantage of it.

“So, we are hoping that will encourage the government in accepting that the NSIA is a credible investor and worthy of encouragement and investing.”

He said the push was owing to the performance of the global equity market despite Covid-19, adding the NSIA was “able to push the level of the risk management.”

He said across its 60 investments in the international market, the majority had impressive returns last.

He said, “My prognosis for 2021 is that the investment climate will not be as good as 2020 and am glad that we took advantage of the market in 2020 and I’m hoping that encourages the government to save more with the NSIA.”

He also revealed that the NSIA has structured itself to resist shocks that may result from any threat in the investment environment.