The 36 state governments have invested $250 million in the Nigerian Sovereign Investment Authority (NSIA). MD of the fund Mr Uche Orji disclosed this recently. The investment was made from the 2016 Nigerian Liquified Natural Gas (NLNG) dividends that accrued to the states. The NSIA is Nigeria’s Sovereign Wealth Fund (SWF). A sovereign wealth fund is a pool of money derived from a country’s reserves set aside for investment purposes to benefit a country’s citizens.

Why the states are investing in the NSIA

Most of the states are largely dependent on FAAC allocations to fund their budgets. The drop in the oil price, lead to a huge fall in the allocations, leaving states owing pensions and salary arrears. The Federal government had to step in and provide bail-out funds. Investing in the NSIA, is thus a means of diversifying their revenue base. Investments made by the NSIA, are unlikely to be concentrated in risky assets, and would be subject to stiff oversight. The fund has also made fantastic returns since its inception. Profit made by the NSIA jumped from N0.5 billion in 2013 to N11 billion in 2015. In 2016, the NSIA made net profits of N149.8 billion.

More funds for the NSIA

The investment by the states gives the NSIA a bigger pool of funds to operate with. Nigeria’s SWF was founded in 2011, with a start-up capital of $1.5 billion is and one of the smallest Sovereign Wealth Funds (SWFs) owned by oil-producing nations. Norway’s SWF was established in 1990 and had $958 billion in assets as at June 2017. The NSIA has about $1.4 billion in assets. Saudi has the largest SWF among OPEC nations with over $500 billion in assets under management.

Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training. He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE). He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy. You can contact him via onome.ohwovoriole@nairametrics.com

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