• Records a total operating profit of N100.8 billion
• Shows profit of N153.6 billion, provides for payment of dividends to shareholders subject to NEC approval
• Warns inflation will make 2022 harder for investors
James Emejo in Abuja and Nume Ekeghe in Lagos
Despite the volatility and headwinds in the global economy, the Nigeria Sovereign Investment Authority (NSIA) yesterday said it had delivered impressive financial results, underscoring the resilience of its investment strategy.
While it recorded a 19% growth in net assets to 919.73 billion naira in 2021 from 772.75 billion naira in 2020, the authority also recorded a profit after tax of 153.6 billion naira, down slightly by 1.9% from the 156.5 billion naira recorded the previous year.
Speaking to reporters during the presentation of the virtual earnings report, NSIA Managing Director/General Manager, Mr. Uche Orji said that this was the ninth consecutive year that NSIA has consistently remained profitable, adding that all three funds ended the year positively, beating their individual benchmarks.
According to him, it posted a basic income of 100.8 billion naira in 2021, down 8% from 109.6 billion naira in 2020. The basic income excluded foreign exchange gains of 45.8 billion naira in 2021 and 51.2 billion naira in 2020.
Providing a more detailed breakdown of its performance over the reporting period, Orji said total comprehensive income declined slightly in 2021 by 8.2% to end the year at N147.0 billion from N160.1. billion naira in 2020.
Nonetheless, he described the performance as a “very solid result”, adding “we are very pleased with how we have navigated 2021 as an authority”.
The NSIA boss, however, noted that global inflation remained a significant drag on investment, adding that it continued to distort the global economy.
He said: “Reactions to runaway global inflation could lead to recessions in some economies as central banks announced various measures to hike rates and halt balance sheet expansion.
“The human and economic costs of the Russian-Ukrainian conflict have continued to mount, leading to increased geopolitical tension, global supply chain disruption, inflation and potential impact on food security.
Orji added that: “China’s growth prospects will be undermined by its zero-tolerance stance on the emergence of COVID-19 leading to lockdowns in different regions and cities.
However, given the positive performance over the years, the NSIA MD said it was considering the idea of paying dividends to fund shareholders, including federal and state governments. But he stressed the move was subject to National Executive Council (NEC) approval.
Orji, said a decision would have to be made on whether to pay dividends now or reinvest the proceeds in additional investments for better returns, given that the NSIA repaid $150 million in October 2020 to the government from the Stabilization Fund. in accordance with the provisions of the NSIA Act 2011.
He also hinted that work on the second Niger Bridge will be completed by December.
But he said the biggest risk to the global capital market has been complicated by the Russian-Ukrainian war, as well as supply chain issues in China as it struggles to contain the COVID-19 pandemic. adding that “these are all factors that are creating headwinds in 2022.”
Orji said, “In Nigeria, these global headwinds are exacerbated by local environmental challenges. The World Bank, CBN and Fitch forecast Nigeria’s economy to grow by 2.5%, 3.1% and 2.8% respectively.
“Notwithstanding the results, the growth range will have minimal impact on per capita given the 2.5% population growth rate.”
Orji warned that NSIA’s financial performance in 2022 will be affected by the changing global and local environment given its exposure to the three funds, namely the Stabilization Fund, the Future Generations Fund and the for infrastructure.
But he assured that the authority will take measures to strengthen the resilience of its strategy through diversification, portfolio selection and other options to improve the risk/return profile and liquidity.
He said ESG and asset transfer will be critical to NSIA’s overall long-term strategy to expand access to third-party capital and support the global effort to build a climate-resilient economy.
Orji also said the fund will have a significant footprint in agriculture in 2022, noting that “we have been able to show our capabilities in some areas and we will now deploy funding even more aggressively.”
He insisted that inflation remained major constraints for reasonable projections in the future.
He said: “I said there was simply too much money being pumped into the global market and there will be inflation issues. But I remember very smart economists rejecting it and saying it would be a short-term thing; even some central bank governors, even the Federal Reserve, thought it would be short term.
“We said at the time that it won’t and we say that only as market players who have seen what it would take to untangle the supply chain that has become a problem.
“Keep in mind that inflation is a big problem for investors. And when it is globalized and synchronized at the same time in the United States, Europe and across Africa, it will continue to challenge and affect returns in 2022.”
He said: “I think 2022 would be the toughest year to invest in the last 15 years. Between 2008 and today, it will be the most difficult year to invest, because managing inflation and controlling it without triggering a recession is the biggest challenge facing central bank governors around the world. And it’s still not the right time to invest.
Continuing, he said: “So I need you to understand that the outlook in 2022 and beyond will be affected by inflation and the numbers may not be as close to what they have been historically. I think the world is now in a new phase of investment cycles, and we all need to be prepared.
He further predicted a risk of recession in 2022 as central banks step up efforts to reduce inflation.
“It’s a challenge and navigating what many of you are already seeing in most asset prices, especially tech companies that have been highly valued over the last 2-3-4 years and are feeling now the heat as interest rates begin to rise in efforts to contain inflation,” Orji said.
He added: “This is also something that affects emerging market debt. Also, this issue of rising interest rates as we bring inflation down, I think, will continue to affect emerging market debt, especially Eurobonds.
“So the first half of 2022 maybe through the third quarter would still be tough, but I’m very optimistic that in the second half, especially the fourth quarter, things will get a bit better.”