Nigeria yesterday joined most oil exporting countries to set up a wealth fund to direct oil revenues into longer-term investment by appointing a top management team for fund.
Finance Minister Ngozi Okonjo-Iweala announced that the fund would start with a cash hoard of around $1 billion. Alhaji Mahey Rasheed, a former Deputy Governor of the Central Bank of Nigeria, CBN, now a member of the board of First Bank, was chosen as the chairman of the fund with UBS executive and former JP Morgan head, Uche Orji chosen as the managing director and chief executive officer.
Uche Orji, 36, is currently the Managing Director and Senior Investment analyst at UBS Securities LLC New York. Prior to UBS, Uche had been at JP Morgan, London also as Managing Director between 2001 and early 2006 in the same capacity, but focused mainly on the European markets, Germany, Switzerland, France, Spain, Sweden etc and companies such as Siemens, Thomson Electronics, STMicroelectronics etc.
He was before at Goldman Sachs as an Investment Manager and Executive Director where he was responsible for co-managing a £1.2bn pan-European funds. Whilst in Nigeria, he was Financial Controller at Diamond Bank Limited, 1993-1996 and was a trainee accountant at Arthur Andersen & Co, 1991-1993. He is a Chemical Engineering graduate of University of Port Harcourt in Nigeria, 1990 and Harvard Business School MBA, graduate 1998.
Mr. Orji, a global investment banker with the UBS and a former Managing Director at JP Morgan will work with Mrs. Stella Ojekwe-Onyejeli as Chief Risk Officer. The candidate for the position of Chief Investment Officer was dropped, after due diligence, Dr. Oknjo-Iweala told newsmen at a briefing in Abuja.
The MD will resume on October 2, 2012 and has a five-year term of office. Other members of the board, include: Mr. Arnold Ekpe, Mr. Jide Zeitlin, Mrs. Bili Awosika, Bisi Soyebo, SAN, and Alhaji Hassan Usman, the Managing Director of the Aso Savings and Loans.
Dr Okonjo-Iweala described the establishment of the SWF as “a victory for Nigerians and a credit to the president who assented to the Bill in May last year,” adding that it also indicated the determination of the current administration to improve the lives of Nigerians through far sighted policies and initiatives.
According to the minister, the process that led to the emergence of the SWF team was a rigorous and transparent one which started on September 8, last year, when she set up a six-man Implementation Task Force headed by Mr. Fola Adeola with the mandate to assist in determining concrete steps to be taken by the federal government to actualize the Nigerian Sovereign Investment Authority, NSIA.
She added that following the recommendations of the Task Force, an Executive Nomination Committee composed to assist with the selection of members of the board. Those who served on the committee included Alh Rasheed who has been appointed Chairman of the board, Mrs. Sola David Borha, Lady Nkoyo Toyo, Mr. Uwa Etigwe, SAN, Dr, Obadiah Mailafia, a former CBN Deputy Governor and Alh Hassan Usman.
Dr. Okonjo Iweala explained that Chairman Rasheed and Alh Usman were not at the Executive Nomination Committee’s meeting that decided to include them in the board and that the decision was the decision of the other members of the committee who regarded them “as people who are worthy to be members of the board.”
The Fund has three windows: a stabilization window, which will be a means of stabilizing the macro-economy and manage volatility; an infrastructure window which will allow investment in infrastructure development in the country and to attract co-investors into the sector; and a future Generations window to make room for a solid savings base for the economy and save for the future.
Each of the windows will be assigned 20 per cent of the entire funds, bringing in to 60 per cent, while the Board and management of the NSIA are statutorily empowered to take investment decisions on the balance of 40 per cent. The minister said that the authority has to develop a 5-year rolling investment plan for each of the windows.
The SWF currently has $1 billion drawn down from the Excess Crude Account which currently stands at $ 7.35 billion. Dr. Okonjo-Iweala explained that the SWF and the Excess Crude Account will co-exist for some time until the stakeholders decide on how the SFW will assimilate the ECA.
Okonjo-Iweala said she hoped by the end of the year the team would lay out plans for the $1 billion but did not say when investments would start.
The SWF has three main aims: saving money for future generations, funding infrastructure and defending the economy against commodity price shocks. “I think the sovereign wealth fund will make Nigeria more attractive for investors,” Okonjo-Iweala told reporters. She said she hoped more money would be paid in later, adding that 20 percent of the fund would go to each of its three targets and the board would decide how to invest the other 40 percent.
President Goodluck Jonathan signed a bill into law in May last year authorising the SWF, but powerful state governors originally blocked the fund, saying it was unconstitutional. They later agreed to it going ahead, albeit with an initial limit of $1 billion, a fraction of the $7 billion savings that are in Nigeria’s Excess Crude Account (ECA).
Many state governors fear the SWF will mean less money for them to spend than the current ECA system for saving oil cash. “The battle was long but I think the country stands to gain and I think it was worth it,” Okonjo-Iweala said on Tuesday.
The SWF is meant to replace the ECA eventually but Okonjo-Iweala told Reuters last week the two will run side-by-side until people get comfortable with the SWF. Critics say the ECA is opaque and can be too easily used.
The account contained $20 billion in 2007 but fell to $3 billion after a presidential election last year, despite five years of high oil prices. It has since risen to $7 billion.