The Nigeria Sovereign Investment Authority is a Nigerian establishment which manages the Nigeria sovereign wealth fund, into which the surplus income produced from Nigeria's excess oil reserves is deposited. This sovereign wealth fund was founded for the purpose of managing and investing these funds on behalf of the government of Nigeria. The wealth fund commenced operations in October 2018 under President Buhari and was set up by the Nigeria Sovereign Investment Authority Act, which was signed in May 2011. It is intended to invest the savings gained on the difference between the budgeted and actual market prices for oil to earn returns that would benefit future generations of Nigerians. The fund was allocated an initial US$1 billion in seed capital. However, an additional $0.5billion has been contributed to date by the current administration.
History
Nigeria is the most populous country on the African continent with an estimated 203,452,505 million people. It is also one of the largest producers of oil, on which the majority of its economy relies. Petroleum exports account for approximately 90 percent of its foreign revenue and 80 percent of government revenue. Given Nigeria's dependence on oil, its economy is susceptible to shifts in oil prices. Excess oil reserves were previously allocated to the Excess Crude Account, which was set up in 2004 as a stabilisation fund to meet the country's yearly budget deficits and to contribute to the development of local infrastructure. The constitutionality of the ECA has been brought into question. Nigeria's SWF was brought into law in 2011 via the Nigeria Sovereign Investment Authority Act by President Goodluck Jonathan and is expected to replace the ECA. The act authorized the establishment of the Nigeria Sovereign Investment Authority, giving it jurisdiction over the country's excess petroleum reserves. The fund is intended as security against future economic instability, to contribute towards the development of the country's infrastructure and as a savings mechanism for future generations, using the country's excess oil revenues. It is also expected that managing these reserve funds will help to protect Nigeria's economy from external shocks. With an initial financing of $1bn USD from the Nigerian government, Nigeria's fund is the third largest in Sub-Saharan Africa, after Botswana and Angola. Uche Orji was appointed as the Chief Executive Officer of the NSIA with Alhaji Mahey Rasheed as the chairman of the board of directors. The board was inaugurated on 9 October 2012. The total professional and administrative staff complement of the NSIA is 25. The firm, JP Morgan, was appointed as the custodian of the funds. The NSIA has formed partnerships with key players in the business sector in order to realize its objectives. The NSIA was invited to request observer status at the International Forum of Sovereign Wealth Funds, with the intention of eventual membership. The Authority was due to present its credentials at an October 2013 meeting in Oslo, Norway. As a member of the IFSWF the fund has signed up to the Santiago Principles on best practices for managing Sovereign Wealth Funds and publishes a self-assessment on how it adopts and implements the principles within its governance procedures.
Three funds
Nigeria's Sovereign Wealth Fund is composed of three distinct funds or windows, each with specific investment and development objectives. Of the initial $1bn, 85 percent of the funds will be distributed among the three windows with an initial 15 percent or $150 million remaining unallocated, to be assigned to either of the three funds as needed in the future. The funds will be invested in various securities. The Stabilisation Fund was allocated an initial 20 percent, while 32.5 percent each went to the Future Generation and the Nigeria Infrastructure funds.
Stabilisation Fund
The Stabilisation Fund is intended to safeguard against budgetary deficits. It would be a last resort from which government may withdraw annually to meet shortfalls in the budget brought about by falls in oil prices or other budgetary constraints.
The Future Generation Fund is a savings fund that will seek investment in long-term investments and assets to provide savings for future generations of Nigerians.
Nigeria Infrastructure fund
The Nigeria Infrastructure Fund is expected to secure investments in the infrastructural development of the country in areas such as agriculture and other government directed projects.
