Nigeria Wealth Fund profit falls 33% in 2022

The Nigeria Sovereign Investment Authority reported a sharp decline in profit for 2022 compared with the previous year, citing macroeconomic conditions in global markets as well as in the Nigerian economy.

– Key points to note

The government’s investment arm said its profit fell 33% to N102.4 billion, while total comprehensive income dropped 34% to N97 billion, according to its financial statement for the year.

Total assets fell as did total liabilities, pushing net assets upwards 10.5% to N1.02 trillion.

“The 2022 fiscal year was marked by unprecedented shocks, such as the Covid-19 lockdown in China, the Russia-Ukraine conflict, food and energy crises, supply-chain disruptions, soaring inflation, and monetary policy tightening, which precipitously impacted the global financial markets,” it said.

“Like other emerging and frontier markets, the Nigerian economy faced multi-dimensional challenges during the year. From surging inflation primarily driven by high cost of petroleum products and food prices to declining oil output and weakening currency, thus the prospect for growth diminished as the year wound down.”

– Why this matters

The NSIA, founded in 2011, receives, manages and invests Nigeria’s excess oil revenue. The funds under management was 1.2 trillion naira as of 2021, making it one of the biggest sovereign wealth funds in Africa.

It has three pillars: stabilization fund (focused on stabilizing government’s current fiscal needs), future fund (saved for the future) and infrastructure fund (committed to supporting the development of infrastructure).

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The NSIA said the reduction in its earnings in 2022 was primarily attributable to the decline in the performance of the future generations and stabilization funds invested in emerging and developed financial market instruments and exposed to volatility issues within the global markets.

“The Stabilisation Fund is largely invested in the U.S.’s sovereign debt instruments and Investment Grade Corporate Credit,” it said. “At the end of December 2022, approximately 30% of the fund was invested in a portfolio of U.S. treasury bonds tracking the Bloomberg Barclays U.S. Treasury bond 1–3-year index. The fund returned 4.08% (in US$ terms) for the year.”

The NSIA said the performance was “respectable,” measured against market expectations and its own internal forecast.

“Against market expectations and internal forecast, NSIA closed the 2022 financial year with a respectable performance,” Managing Director & Chief Executive Officer Aminu Umar-Sadiq said.

“This result underscores the robustness of our diversified portfolio, and the excellent commitment of the staff. Although the Group reported declining earnings year-on-year, the underlying portfolio exhibited significant resilience given the challenging macroeconomic environment characterized by rising inflation, geopolitical tension, and the impact of Covid-19 particularly in China.”