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| Strategic Investment Funds
present less favorable financial return potential (“Development Projects” in NSIA-NIF terminology). All potential Development Projects identified and supported by NSIA are submitted to a committee (set up for this purpose by the National Economic Council) that decides whether NSIA may invest in such Development Projects; this committee is not a standing one and its decision-making processes are not disclosed to NSIA. A comprehensive feasibility study is required to demonstrate how a prospective Development Project serves the public interest and has clear potential to provide economic and employment stimulus. Financially, NIF seeks to recover at least the total cost of operations during the life of the project (net of any government subsidies the project may receive). The NSIA Act 2011 requires NSIA to review and analyze against the criteria of financial return (specified in the subsection on investment strategy) all written proposals submitted by the federal government and any state or local government. In order to be considered by NSIA, investment proposals have to be submitted in formal letters. Before being sent to NSIA, such written proposals are usually approved at a very senior level in the presidential office, ministries, or other government bodies—therefore ensuring that NSIA is not overloaded with requests of little strategic priority for the government. Once it receives a written proposal, NSIA is required to review it, regardless of the government entity submitting it. The investment decision-making process is the same as for any other investment considered by NSIA, as described in the governance subsection and figure 13.2 later in this case study: three levels of due diligence and screening by the investment team, Executive Committee, and Direct Investment Committee, followed (in the best scenario) by board approval. NSIA analyzes investment proposals received from government entities in complete independence and is free to reject transactions that do not meet its financial return requirements. NSIA also aims to enable the government to realize its infrastructure and PPP development plan by offering, on an informal basis, capacity building services and advice. NSIA’s staff comes predominantly from the international private financial services sector. Capacity building support includes enabling the government to attract broader investment participation in Nigerian infrastructure, catalyzing further international investment and project development and financing skills, developing the government’s technical transaction skills, improving technical prequalification processes and concessioning of projects, and improving capacity of local project sponsors. More generally, when selecting investments, NSIA takes into account the demonstration effect and potential to encourage other parties to invest in Nigerian infrastructure.
INVESTMENT STRATEGY NIF pursues three broad strategies for its commercial portfolio (in addition to the Development Projects pocket): 1. Direct investments in infrastructure, with focus on four sectors: agriculture, health care, motorways, and power. NIF uses portfolio diversification to achieve a balance between financial and investment objectives, risk tolerance, and need
