The Managing Director/CEO of the Nigeria Sovereign Investment Authority, Mr. Uche Orji, in this Interview on ‘The Morning Show’ on Arise Television, spoke about the management of the fresh $308 million forfeited assets to Nigeria. He also spoke about the interventions of his agency in both the health and agriculture sectors. Nume Ekeghe presents the excerpts:
What do you think are the implications of this new scourge called coronavirus on the investment outlook and what does it mean for an investment authority like yours?
It is quite unfortunate that we have to deal with the situation of Coronavirus. All I would say is that in situations like this, three things tend to happen: Firstly, the market tends to overreact, secondly the situation tends to pass and then, there is a buying opportunity. That is really my personal view. I speak to that from experience because in 2003, I was a semi-conductor analyst for JPMorgan based in London and I saw the impact of Severe acute respiratory syndrome (SARS).
And again, I have been told by many people that Coronavirus is not as serious as SARS was. But SARS was devastating to the market as well and when it passed, the market recovered. My view with this is that as complicated as it is, and quite frankly it is more complicated given the role that China plays both as a consumer and as well as an integral part of the global supply chain. There is no company today especially in technology that does not manufacture in China or components that come out of China or to which China is not a big demand driver. So, let’s accept that China is a big factor in global economy. And so, when things like this happen and you are shutting down cities and there are all kinds of companies closing down operations and closing shops, it would have an impact.
So, in the short term, I expect the markets to feel a negative impact of this but I also see this as a buying opportunity. For the NSIA, we are not making any changes to our portfolio at the moment. In fact, quite frankly, the discussion we are having right now is whether to take advantage of this to add to some of the exposures we already have. Because all of these things shall pass and when it passes, the markets would tend to recover.
About the funding of the NSIA by the federal government, you started off with $1 billion from the Obasanjo administration and the current administration of president Buhari upped that, can you tell us how much funding you have received in total as well as the returns on investment. It was reported last year that you had made $250 million, do you have an update on that?
Yes, I do. First of all, one of the things that is really remarkable for the NSIA is that through the recession and through the challenges in the economy, the government continued to support and fund the NSIA. You would remember, last November, the National Economic Council approved the sum of $250 million for the NSIA. Those funds haven’t hit our accounts yet; we are expecting them.
But there is a commitment to funding the NSIA which we are grateful for especially considering what we are facing today in the economy and country. We ended the year in a solid position for 2019, the audit is being carried out and we would report before the end of April our results for 2019. We continue to pray there would be consistent contribution to the NSIA. In terms of funding that has come from the government, we started with $1 billion, this government has added $500 million, plus $250 we are expecting and that would make it $750 of actual cash contribution.
And if you add up all of that with the returns so far, the NSIA in terms of real cash is just slightly above $2 billion. There are also other pockets of funds that we manage, for example, the Presidency Infrastructure Development Fund (PIDF) to which $650 million has been injected prior to now; N90 billion has also been injected and into which the new $308 million that is being repatriated would be injected. The PIDF is designed to address five critical projects – the Lagos-Ibadan express way, the Abuja- Kano highway, the second Niger bridge, the Mambila power plant and the East West road.
The $308 million that was announced, credit to the government, will be channeled to the Lagos-Ibadan expressway, the Abuja- Kano highway and the second Niger Bridge. And there are all sorts of enhanced scrutiny and supervision attached to this given the external funding nature with the agreements struck with the US government. All in all, our returns have been solid and stable. In 2019, we closed well and solid. I am looking forward to 2020 to be a good year and I am actually quite optimistic in a number of things we have done and I also think that one of the things we are going to see in 2020 is a lot of co-investments and partnership funds we are creating to address several areas.
So quite frankly, in total the core NSIA funds is slightly over $2 billion and then we have all these other funds like PIDF which with all the funds coming in now, we would expect that PIDF would be over $1 billion funded. And then also we have other funds we are managing for the federal government in other areas and also for the Debt Management Office (DMO). However, we need to be very careful because those are not core funds of the NSIA and are not included in our books. Those are third party funds we manage on behalf of other agencies of government.
You mentioned that the new Abacha loot is going to be used for three main infrastructural projects in the country, is there a timeline for completion and also there is also a lack of transparency towards the contracts and the likelihood of corruption. What is the NSIA doing to ensure that there is transparency and accountability and to ensure the project is finished within a certain timeframe?
The current decision to transfer this fund to these projects should give some level of comfort. The government has been involved in these discussions long before the NSIA was asked to participate in the negotiations. The first time we got involved in this was in June 2018, and since then, there had been a lot of due diligence across the entire three projects. So, consequently for us to come to a level of comfort here the external parties are willing to participate should give you some comfort.
Secondly, we have been very transparent on all these projects. Our involvements, how much has been voted into the projects, the size of the projects and the levels of completion. Every quarter and every year, we take the press to go and see the projects. I intend to go and see before the end of this quarter, like I usually do. In terms of timing for completion, we are still looking at 2022 for all three projects. We are looking at February 2022 for the Second Niger Bridge; sometime around July 2022 for Lagos -Ibadan expressway. And if there is anything fundamental that comes up with a delay, we would be transparent with you. I think every week, we receive progress report from contractors which is distributed quite widely and I see some of those pictures trending on the internet. So there has been a lot more transparency and I think there would be a lot more scrutiny and transparency in these projects.
And let me also say that with the Abacha funds that would be repatriated to these projects, there is an enhanced level of governance beyond what we have today which I believe is transparent and world class. That is because the sovereign wealth fund institute has ranked the NSIA top consistently in terms of transparency. We expect to see more civil society involved in supervising this and that is actually part of the agreement. So, there are all sorts of requirement to ensure everything is done transparent and openly. We are expecting these funds sometime in April and all the enhance governance would be in place.
The healthcare projects the NSIA is involved in, like the Cancer Center at the Lagos University Teaching Hospital (LUTH), radiology and diagnostics center in Kano and Umuahia, do you have other projects in the pipeline and what is the overall strategy to strengthen the healthcare sector. And if I may add, the cancer center at LUTH is managed by a South African body, why is that and does it mean we don’t have healthcare management professionals in Nigeria to manage it?
On the overall strategy, when we decided to invest in healthcare, we considered healthcare as a critical part of social infrastructure and is very important for so many reasons. It is important because it would save us medical tourism which as far back as 2008, was estimated at over $1 billion a year. So, we focused on four areas – cancer, cardiology, renal care and surgery. But cancer was 40 percent of medical tourism as far back as 2008 when we received the first data and it has increased subsequently.
So, we decided to attack cancer as one of the key areas. We have 14 projects in our pipeline and what we decided to do was to implement these three first, learn our lessons, stabilise those and make sure our systems work well in our environment by making sure we do not make too many mistakes and then we would get more aggressive. I think we have stabilised the cancer treatment center in Lagos, it is running very well at the moment and when I see the data that comes from there, we are currently running at the rate of 100 patients a day. We have expanded it and we expect that by the time all the new equipment we have in place come in, we would be expanding to more than 200 patients a day.
The center is running very well, and if you remember, the President commissioned it February 9th last year and it is working well now. We are actually expanding it and what we have completed last month was the training center because one of the things we found was that the knowledge required to operate some of the modern machines we put there was lacking in the country. Nigerians need to be trained and quite frankly that also speaks to why we had to get an operator who is used to running these centers in other countries. Obviously, the idea now is to train Nigerians to the point where we can upscale ourselves. It is not that we don’t have oncologist and physicists, it is just that the history of cancer treatment in Nigeria has been so bad and I know this first hand, having watched people being treated at LUTH before we made this investment. And the reality is that the equipment that were there before were old, broken down and for many years ago.
When we made this investment, one of the equipment, the high energy accelerator was the second of such in Africa and there was nobody who could operate it. And so that is why we had to bring outsiders to manage it for us. Obviously, overtime as our people get trained, then we would be able to transfer the management of that. They have also been trained by Nigerians who live abroad and at the moment, there is a team coming from the University of Virginia to conduct training.
One of the areas in the US Nigeria has a competitive advantage is medicine and I know that because I lived in New York for six years and you would hardly go to any hospital and you would not see a Nigerian. It is quite remarkable how skilled we are in New York and in other parts of the United States. But the reality is that bringing some of these people home is difficult so at the moment we are just having training missions and then they can go back. But I think we are getting to the part where we can confidently hand over the management of these facilities. The reality about our strategy is that there are many more things in the pipeline. There are about 10 projects in the pipeline, but we would take it in bits as our capital improves.
Outside of healthcare, and cancer treatment, we are looking at something like a center for advanced medicine so we can take on all three major areas of therapy; renal, cardio, cancer and a few other areas our research shows that are important. So, you’ll see our footprint on healthcare would become more aggressive. And finally, on healthcare, we are raising funds where external parties are going to co-invest with us in developing these projects. It would be an exciting area for NSIA in 2020.
You recently signed an agreement with a Russian firm for the production of fertilizer in Nigeria, can you give us an update on that and other projects in this sector?
On fertilizer and agriculture, these are major areas of investment for the NSIA. On fertilizer, we started in 2017 and we are privileged to have been invited to be the implementing agency on the presidential initiative and it has been a success. We have blended and sold about 20 million bags of fertilizers of 50kg. When the program started, the president asked the question on how we can deliver high quality fertilizer at a reasonable cost to farmers and the only idea was to domesticate the blending. And at that time, there were only 4 blending plants operational. Today in the program, we have 23 blending plants that have been accredited to participate in 2020.
We are looking at having 29 blending plants within next year. So, if you think about it, as early as January 2017, only four were operational and they were running at very low utilisation rates and today we have 23 in the program, which is rising to 29 if all the new applicants are qualified. The agreement signed with Eurochem and the agreement signed with Morocco, all continue to subsist and those agreement address different components. There are four components you need to blend fertilizer in different mixes.
There is urea which at the moment we buy from Indorama and we are looking forward to a Dangote project coming soon as that would also provide a huge relief and less dependency and make it more affordable. We also have the potash which is what we signed Eurochem, which is the implementing company in Russia. And then, there is phosphate, which we buy from OCP of Morocco and then of course, there is limestone granule which we buy locally in Nigeria. So these are the four components needed and you blend them in different mixes to make fertilizers for different types of products.
This year, we expect the presidential fertilizer initiative to significantly increase, we are looking at more than doubling our historical commitment to this program. Secondly, we are also looking to increase the number of products. Up until now, it has been more than one type of blend 20-10-10 which is good for grains, but then we need to make other types of blends which is good for things like cocoa and palms. So, this is going to be quite an interesting program for 2020 and we all need to be grateful to the initiative to be honest.
Regarding the wide agricultural strategy, we a have a partnership with a South African company where we created a fund to invest in agriculture projects in Nigeria. The first project we invested in was the integrated maize, soya and feed mill plant in Nasarawa sate. Construction work is ongoing now we are expanding that farm and we would show you when we are done. We tend to not talk too much about these things until we are done and we would be showing you some really remarkable things going on in Nasarawa state.