Legal structure

oil price is below budget breakeven levels, no contribution is made to NSIA, unless other sources can be identified (for example, some of the profits of the state-owned liquified natural gas producer can also be used to capitalize NSIA). Funds are deposited in a central bank account pertaining to NSIA and, at that point, only NSIA can authorize transfers.

NIF was initially allocated 40 percent of NSIA’s fund, but this share subsequently increased to 50 percent following a five-year review by the NSIA board that was conducted in October 2017. Initially, NSIA allocated its capital in the following ratios: 40 percent each to NIF and the Future Generations Fund, and 20 percent to the Stabilization Fund. This resulted in total funding to NIF of US$600 million, which increased—as a result of realized returns of US$50 million—to US$650 million as of June 2018. At the October 2017 review, the NSIA board decided to allocate 50 percent of all future capital injections to NIF, 30 percent to the Future Generations Fund, and 20 percent to the Stabilization Fund.

In addition, in may 2018, Nigeria’s president approved the establishment of a separate Presidential Infrastructure development Fund (PIdF) to invest specifically in large road and power projects across the country (NSIA 2018a). Although separate from NIF, PIdF will be managed by the NIF team under the standard operating procedures of NSIA. Seed funding of US$650 million for PIdF will come from the Nigeria Liquified Natural Gas dividend Account, as authorized by the National Economic Council. The investments will yield returns, which are expected to diversify revenues to federal states and improve Nigeria’s fiscal sustainability profile. Potential projects include a large hydropower plant and four nationally strategic toll roads. PIdF will secure counterpart funds required for projects being codeveloped with China Exim Bank and China development Bank, and mobilize any additional funding required from development partners. Up to US$300 million of the original NIF capital can be used for co-investments in PIdF projects. Taking into account both NIF and PIdF, NSIA’s cumulative commitment to infrastructure investments is US$1.3 billion.

LEGAL STRUCTURE

NSIA was established by ad hoc parliamentary law—the Nigeria Sovereign Investment Authority (Establishment, etc.) Act, 2011, or NSIA Act 2011—in may 2011, as a body corporate. It is not a fund governed by securities law, nor is it a company in a strict sense, governed by corporate law. As a body corporate under the definition of the NSIA Act 2011 (1) it can sue and be sued; (2) it can acquire, hold, and sell assets necessary for the performance of its functions; and (3) it is “independent in the discharge of its functions and shall not be subject to the direction or control of any other person or authority.”

NIF is a ring-fenced pool of capital managed by NSIA under its own distinct investment policy. It is a fund without a separate legal identity. The same is true of the Future Generations Fund and Stabilization Fund. For instance, as a fiscal stabilization mechanism, the Stabilization Fund is focused on capital preservation and invests primarily in short-term, low-risk investments. The Future Generations Fund is mandated to establish an intergenerational savings pool and, coherently, pursues long-term investments. Both funds invest in externally managed funds. In contrast, NIF pursues direct investments in Nigerian infrastructure.