The Nigeria Sovereign Investment Authority (NSIA), which is the agency managing the Sovereign Wealth Fund, has ruled out the possibility of paying dividend to the three tiers of government from its 2017 profit despite the fact that the fund has been profitable in the last five years.
The Act setting up the agency stipulates that if it makes returns consistently for five years after commencing operations, then it has to pay dividend to the three tiers of government.
The agency commenced operations in 2013 with $1.55bn and there had been expectations that dividend would be paid at the end of the 2017 financial period.
But speaking during a press briefing on the financial performance of the agency, the Managing Director, NSIA, Mr. Uche Orji, said the issue of dividend payment was discussed by the board but was stepped down till next year.
He stated, “The law said that we should show profits in each of the three funds consistently for five years, after which we will start declaring dividend, and this is the fifth year of showing profitability.
“The dividend policy was considered by the board but we decided to step it down and consider it again next year. But it is our keen desire to come up with a policy that will be approved by the Economic Council of the NSIA such that people will begin to actually see returns.
“So, for now, it was discussed and stepped down till next year when we have to look at it again.”
Presenting highlights of the performance of the fund, Orji described 2017 as a challenging year for the agency.
For instance, he said the total comprehensive income dwindled from N149.83bn in 2016 to N27.93bn in 2017.
The agency also recorded a decline of N107.8bn in profit from N130.37bn in 2016 to N22.55bn in 2017.
Giving reasons for the decline in profitability, Orji blamed the development on the currency management policy of the Federal Government.
He stated, “The decline of the net foreign exchange gains, which accounted for the reduced net operating income recorded in 2017, was as a result of the government’s currency management policies, which were aimed at stabilising and reflecting the naira’s real value in 2016.
“To this effect, the naira weakened in value from 196/$ to 305/$ in 2016.
“Considering that at the end of that year, about 80 cent of the authority’s assets under management were denominated in the United States dollar, the devaluation resulted in the recognition of significant exchange gains in the authority’s naira books at the close of the year.”
He also said that the delay in inaugurating the NSIA board led to a lag in re-investment of matured funds, which affected profitability.
However, he stated that despite the drop in profitability, the NSIA had decided to increase its level of funding of infrastructure development.
To achieve this objective, Orji said the asset allocation strategy of the NSIA had been restructured to reflect an increased focus on domestic infrastructure investment.
The SWF, set up in 2013 with about $1.55bn, has three pots from which investments can be anchored.
The pots are Future Generation Fund, Infrastructure Fund and Fiscal Stabilisation Fund.
The NSIA had allocated 20 per cent of the SWF to the Stabilisation Fund; 40 per cent to the Future Generation Fund and another 40 per cent to the Infrastructure Fund.
But Orji said henceforth, 50 per cent of future contributions would be dedicated to infrastructure as against the previous arrangement where 40 per cent of the fund was allocated for the same purpose.
He gave the areas of priority for the agency as agriculture, health care, motorways, real estate and power.
On the outlook for 2018, he said the NSIA would continue to maintain its diversified assets strategy to drive returns and mitigate market volatility.