INTERVIEW-Nigeria fund invests $200 mln as oil price cushion

Wed Sep 25, 2013 8:37am IST

By Daniel Bases

NEW YORK, Sept 24 (Reuters) - Nigeria's fledgling sovereign wealth fund on Monday completed investment allocations for the 20 percent of the $1 billion it is setting aside to guard against commodity price shocks, its chief executive said.

Nigeria, Africa's top oil producer and most populous nation, established the Sovereign Investment Authority (SIA) in 2011 in an effort to manage resources that economists say have often been squandered in the past.

"The key to sovereign wealth funds is in the consistent contribution going forward," Uche Orji, the SIA's chief executive officer, said on the sidelines of the Africa Investor conference in New York.

The SIA is dwarfed by Norway's fund of $737 billion and Saudi Arabia's fund of $676 billion, according to data collected by the Sovereign Wealth Fund Institute.

Of the $200 million, 25 percent was allocated to U.S. Treasuries and 75 percent to investment grade corporate bonds, he said. Credit Suisse Asset Management, Goldman Sachs Asset Management, and UBS are managing the money in what the SIA calls the 'Stabilization Fund.'

Orji, who left a job as a managing director in UBS' equities division in New York a year ago to move back to Lagos to head up the SIA, said the stabilization segment is fully funded.

Twice delayed in its launch, the SIA has faced political opposition from powerful state governors who want oil savings distributed for spending on projects rather than kept by the federal government, a move they consider unconstitutional.

In addition to the Stabilization Fund, Nigeria is placing 32.5 percent of the overall $1 billion fund into what the SIA calls a 'Future Generations Fund' and 32.5 percent into a 'Nigeria Infrastructure Fund.' The remaining 15 percent of assets are unallocated.

By the second quarter of 2014 Orji expects to have both chosen the asset managers for the Future Generations Fund and have it fully allocated.

"We are targeting a return of 400 basis points over the U.S. consumer price index for the Future Generations Fund and 500 basis points over (the same index) for the Infrastructure Fund."

Nigeria pumps around 2 million barrels of oil a day, but much of that money is wasted on corruption and a bloated, inefficient bureaucracy, economists say.

Oil theft is another problem. An estimated 100,000 barrels per day of oil was stolen from pipelines in the Niger Delta in the first quarter of this year, a report by the London-based Chatham house, recently said.

In sub-Saharan Africa, Botswana's is the biggest sovereign wealth fund at $6.9 billion, followed by Angola at $5 billion. Nigeria is now third in the region.

The $1 billion of seed capital is "not inconsequential", said Orji, a Harvard Business School graduate who worked at Goldman Sachs and JPMorgan in London as well as UBS.

"It is a healthy balance between what I think is a reasonable start up capital, but it is also time for you to gradually invest and make sure you fine-tune your processes," he said.

(Reporting By Daniel Bases; Editing by Kenneth Maxwell)

((daniel.bases@thomsonreuters.com)(+1 646 223 6131)(Reuters Messaging: daniel.bases.reuters.com@reuters.net)) Keywords: NIGERIA FUND/

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