Barely three years after Uche Orji pioneered the Nigerian Sovereign Investment Agency (NSIA), his leadership has turned around the fortunes of the agency. The additional $250 million injected into NSIA by its shareholders, he believes, is a vote of confidence in its management. He bares his mind in this chat with Group Business Editor, SIMEON EBULU.
You appear upbeat and not weighed down at all. What has happened?
The development is that we have a very successful engagement with the National Economic Council which resulted in what we believe is a vote of confidence, as evidenced by the additional contribution that has been made to the Sovereign Wealth Fund of $250 million. And what makes this even more remarkable is that we are in a tough economic time. With oil price downwards and this is a very powerful signal that this administration and the National Economic Council are focused on fiscal discipline.
They have looked at examples of other countries and how this has been implemented successfully, and want to participate in what is a very credible approach to managing the nation’s resources. Other countries have done this successfully too but it is not every country that has recorded success. But most of them have done it successfully to varying degrees. If you look at Norway for instance, that has been a spectacular success story.
So across the spectrum, one thing is clear, savings, or investing is a culture that must be encouraged in good times and bad times. And this is what I take from the governors’ recent commitment.
Secondly, it is looking into the future and being able to bequeath something into the future of Nigerians. It is disciplining ourselves to be focused at whatever resources we have. But on behalf of the Board NSIA and the management of NSIA, we are pleasantly surprised by this vote of confidence. We will work very hard to make sure we justify the faith that has been reposed on us by the government and the National Economic Council in giving us additional resources.
Looking at it from the first $1billion you got at inception and the time it has taken for this second one, what was actually responsible for this change of attitude?
The first thing is, the management of NSIA has to show that they are credible and can be trusted. You have to build credibility. And I have to tell you that it is not uncommon that many Sovereign Wealth Funds start and wait before they make more contribution, and you will notice that even in the big examples that you made, even Norway.
At the beginning, people just can’t be sure. So we went through that phase, we had a meeting with the National Economic Council which is our Governing Council Meeting, during which we presented our status report and our strategy, and I think the governors could see that we are working very hard within a limited set of resources to show some gains, and be able to be in a position to make dividends. I think and I believe it is a commitment showed at managing things with a sense of duty.
Again, given the initial opposition you had with the governors, wasn’t this a surprise?
Yes it came as a surprise. A pleasant surprise and we are happy. But more importantly, I think we are happy because of the faith, again credibility has been earned and has to be justified every day. So the fact that you have it doesn’t mean we have to relax now, but you have to justify it every day because a reputation takes 20 years to build, but one second to destroy.
So we want to make sure that having crossed this major hurdle of showing that we are trying very hard to keep the money safe and make returns, we’ll continue to justify it on a day-to- day basis, but I also think that when they now started to see the level of accountability, transparency, governance, strategy and focus in managing the money, andalso commitment to justify that every day, to them, I think in some ways, that is a turning point.
But more importantly, there is a philosophical commitment to bettering the future of all Nigerians and I think that philosophical commitment is something that precedes anything we would show them. My sense is that this would have happened, regardless. So for this to happen with us, makes me happy because to some extent, we view it as us having tried very hard to earn the justification from our shareholders
For the larger society, the surprise would be that at a time that government’s resources are dwindling, there is a willingness to invest.
Yes.
How do you react to that?
It is a very powerful message. It is a powerful message that says, we are committed to this, in good times, or bad times. It is a powerful message that says to Nigerians, that there is a whole new commitment to better management of resources. It’s a powerful message that says, in the next oil boom, you’ll see a better accountability of the revenues that accrue to this country. And I think in some ways, we are very pleased with that. That is one.
It’s also a message to our international partners and I think it will win the country a lot of credibility, externally. To be blunt, I was blown away, because it was not the most politically conducive thing to do, but it is the right thing to do, and for that we are grateful to the governors, the National Economic Council and the President.
It might be early in the day to ask how soon you expect the next payment, but how do you intend to deploy the $250million?
We are most likely going to maintain the allocation strategies that we had with the first tranche, and that is, 20 per cent go to the Stabilisation Fund, 40 per cent to Infrastructure Fund and 40 per cent to Future Generation Fund. We believe that strategy has worked at the beginning. The amount we are talking about is still very small, relatively, so in itself, it won’t make huge difference. So the safe thing and the rational thing to do, would be to allocate it the same way that we allocated the first one.
But where you start to see significant likelihood of change, is when the Fund accumulates to a certain level, and depending on the opportunities we have in the day, we might still want to do a bit more Future’s generation and a bit, Infrastructure. But this $250million is, really not that a significant number to materially change our strategy. It is a significant and powerful statement that we want to make sure is not missed out.
Questions have been raised on your fund allocation to the three areas you have opted to invest in. The issue is, why are you not investing extra money where the yield is more?
It depends on your view of the yield curve. Do you know what the yield would be in two, three, or more years! First of all, I’m open to suggestions. In the first place, we have a firm called Cambridge Associates working with us on assets allocation. They are an Investment Advisory firm, and their job is, advice firms bigger than ours, including us on how to allocate assets. So we use them as advisers, and the things that go behind an investment decision, go beyond what we see today.
Somebody could have said to me, Uche, why didn’t you buy oil stocks last year! Oil was booming, booming, then, and today, it’s a whole different story. You could get carried out on a stretcher very easily, if you had put your money in some of these things.
We are humble enough to admit that we don’t know all the answers, and so we are open to suggestions, and we have also hired a lot of advisers doing their job to advise us on what to do. I want people to be rest assured that the decisions we are making today are to the best of our ability and to the best of information we have available to us. Nobody is always right, we may make mistakes, but one of the commitments we gave to ourselves, is to have more wins than losers.
I laugh because last year, the biggest criticisms I got was that we didn’t take enough risks, that we should have put more in equities, put more in this, or that. This year, we are making more money, but our peers are not, because the equities market, dipped. I am willing to take suggestions, but we have an army of smart people who are helping us. All we need to do is try and do the right thing, and we are hoping that we can do the right thing and always do the right thing.
Back home, people are anxious to know NSIA’s commitment to certain infrastructure projects, amongst which are the Second Niger Bridge and the Lagos-Ibadan Expressway. How committed are you to these projects?
Very committed, however we have not signed a Concession Agreement for the Second Niger Bridge, we are still in the process of actualising that. At the moment, we are Project Managers and Co-developers. We have engaged many financiers, so we are willing to put money into it.
There is a lot of work being done and we are hoping to get the preliminary works concluded by sometimes mid next year before we get into full construction. You know this is a big project and people sometimes don’t realise that. We are working very hard, and for big projects like that, you don’t wield the magic-wand and the bridge comes up, no, we’ve been talking about the Second Niger bridge since the 1970s, so I will never mislead people to think that it will happen overnight. The plan we have is that by 2020, that bridge will be finished. That is the plan we have today, but like every project, things vary, but we are still sticking to that plan.
Lagos-Ibadan Expressway, we have committed ourselves that we will invest $100million, subject to the structure making it comfortable for us. Now we cannot talk about that project any more because there is currently a court injunction against the development of that project.
Second Niger bridge, we are Co-developers, Lagos-Ibadan expressway, we are investors, somebody else is developing it. When that person is through with his work and he says, NSIA, here’s the financing plan, then we’ll come in.
What is the assurance that you will recover your financial commitment to these projects?
We have a contract with the government, where, if we don’t get through to financial close, the government will pay us back our money. The contract is structured in such a way that we can always get our money back, and the investment return is structured in such a way that Nigerians will be very happy with.
The NSIA is an investment company. Before we go into any project (unless it’s a social project and we have a few), but for commercial project, we structure it in such a way that it primarily protects the NSIA, because the NSIA’s money does not belong to the Federal Government, it belongs to the three-tiers, so I have to account to all these people.
Are you confident that these projects will be seen through?
There are still so many things that the government needs to do — like the right of way, buying, paying compensation, and such things, so lets wait and see what the budget says.
How are you able to insulate yourself from the politics that goes with your office?
My number one responsibility is to keep the NSIA’s money safe, and my second responsibility is to earn a return. I never lose sight of that. Politics is transient, the money is permanent.
We are making an effort,our best possible efforts to keep the money safe and make a return, but more importantly, we have constituted the benchmark for ourselves with global peers. So we have presented it to them at the National Economic Council and we will continue to engage with them. I think that all of that will go a long way in making sure that more faith and confidence is imposed on the management of the Sovereign Wealth Fund.
Given the return so far on our investment, there is every reason for everyone to believe that it is a profitable engagement. Which other sources are you considering to grow you investment funds?
Some Sovereign wealth funds grew through cash given to them, some through assets given to them. So you know, the government will transfer certain assets to the Sovereign Wealth Fund. So we are looking at those alternatives. Of course in a Federal system, it could be very tricky because this is a wealth belonging to the federation. So if I go to the Federal Government and I say, give me a building, how do I account for that! There are many things that we would be careful about. Let’s not rush these things. You know we wake up late and then we start rushing.
Everybody else started this thing long time ago, and many of them took many years, in some cases, decades, before they started making great impact. But we want to do everything at once, let us be realistic in our expectation. We are working as hard as we possibly can. Don’t forget that if I don’t keep this money safe, it doesn’t matter what I built, so that if I say your money is in that bridge, you have got to show me how and why. So you have to be very careful. But we are going to do what we can.
We are going to show you a few things in the healthcare ,let us not forget about that because that is important. We are working on forest programme with Ogun State to reforest land that has been wasted, for the purpose of agriculture for tens of thousands of people. So we are working on many things.
But if you look at other Sovereign Wealth Funds, many of them took a long time before they started making great impact. And I must say that I am not trying to lose expectations but I am trying to keep it realistic.
Are you stymied by government bureaucracy?
I grew up in Nigeria, my father was a civil servant, a sub-treasurer in Umaiha and my mother was a primary school teacher. And I understood bureaucracy watching my father. But you have to realise it is easy to sit in the private sector and say – that government bureaucracy.
But when you are in government, you realise that it is a lot of work. I had a new found respect for the ruling government and I understand why in some cases the bureaucracy exists, and I am not saying it shouldn’t be improved, but I understand why it exists. So we are working with them as much as we can with it. Don’t be part of the problem, be part of the solution. That is the way I look at it. If you don’t like something, go and try to fix it.
When I go to the Ministry of Health or this MDA, there are so many things I don’t like and I am like, hey, can I just help you this way, this is how you should do it with the Sovereign Wealth Fund. So the bureaucracy is something you will have to work with whether you like it or not.
There is provision in NSIA to lend support to government. How soon do you see this happening?
You know, they have just given us money, so they have not come to us to ask for money now. So let us just keep the money. Look, there are lots of demand, we will help solve problems for this is the job we are all signed up to do. So we are trying our best to solving the problems.
You know by raising more capital, getting investors, and how do we solve these problems. Because, there is a lot of problems and we are very happy to participate. This is our country. It is how you make your bed that you lie on it. We grew up complaining about our fathers, the things they didn’t do, we say they could have done it this or that way. But now, we are the ones in charge and it is time to do it.
The NSIA has come a long way, give us a picture of where you want to see this Sovereign Wealth Fund in the future?
For sure, in the near future, I will be looking at it from the outside. But I think during one’s time, you ensure you build a house solid enough to add another layer. In 10 years time, I want to see Nigerian Sovereign Wealth Authority punching above, sitting down amongst the committee of nations and being very influential and very powerful.
So I think that is the first thing I will like to see happen. It is that the Nigerian Soveriegn Wealth Authority is respected, growing and solving Nigeria’s problem. Being very effective in solving infrastructure problems of the country. I will like to see a more sovereign development, not sovereign wealth. The Infrastructure Fund is development and we cannot substitute sovereign development for sovereign wealth.
And I am not trying to play on words here. But we have infrstucture funds, it is not big enough to really authorise big projects, but I will like to se it 10 years from now, that the Federal Government of Nigeria wants to build certain projects and that project is commissioned by the Sovereign Wealth Fund.
Before you start calling any DFI or Donor Agency and World Bank and others, you call the Sovereign Wealth Fund first, and that is what I want to see. Ten years from now, the CEO of the Sovereign Wealth Fund is at the top table and making big decisions, that would be fantastic. You know why, because that is how it is in Abu Dabi. That is how it is in other countries. If this thing is viable and big enough for you to bring in foreign investors, let your own Sovereign Wealth Fund do it, because you said it is viable.
So 10 years from now, that is what I am planning to see. My greatest legacy for the Nigerian Sovereign Wealth Investment Authority is to have built the foundation for a viable, solid, strong business. And that the government has had enough confidence to grow to the point where it becomes the first point of call for large infrastructure projects that are commercially attractive.
And let them build that platform that other countries want to come and invest in. We would start that next year in 2016, you will see more investment, you will see us being able to create funds and bring other people. We would put that platform in place by 2016 in certain areas, but because we still have small money, that platform would be fairly small, but 10 years from now, I want to see that platform much bigger.
Given your experience and insight of the other very successful Sovereign Wealth Fund, what limitation do you see in the Nigerian entity?
I think we have overcome the very first limitation, which is, should we do this. I like to again thank the Governors and the National Economic Council for having the courage to make what is a very difficult decision. And so I think that over the next few months and years, it would put us in a position where we would make the economic environment better.
How have you managed to keep your cost low?
We have 21 professionals in the organisation. First of all I set a cost cap, to no more than eight per cent of assets. So all I need to earn is one per cent and I am making profit. So if I earn four per cent, or five per cent, I make a whole lot of money. So with that in mind, I will say that there is no big man at the NSIA , most time when they see us flying,you will never see us on a first class. It would never happen. If you ever see me in a first class, it is because they gave me an upgrade, or it is my own money. And I will never use the Sovereign Wealth money. It is a culture that has started with the fact that it started with no money.
When I arrived to start the Sovereign Wealth Fund , there was not a penny in the bank. There was not even an office. After squatting in what was a storage room in the Ministry of Finance, I rented a house, a service department, from my own pocket, and I put the Sovereign Wealth Fund department at the ground floor, and my dinning table was the office.
I borrowed resources from our partners, the FID. That is because we didn’t have any money to operate for the first three months. By the end of the fourth month, we even borrowed money, which we had to repay within a year. So we have got a small office. Even now, our offices are compact. So we learnt so honestly, it is the same way I would have started it, if it were to be my business. For a long time, we had no official car, we had two Hondas, of which I used to drive myself on the weekends. So you do things like that and gradually, you build a name.
