INTERVIEW: Our investment in critical economic sectors yielding benefits — NSIA boss

Managing Director, Nigerian Sovereign Investments Authority, NSIA, Uche Orji
Managing Director, Nigerian Sovereign Investments Authority, NSIA, Uche Orji

The Managing Director, Nigerian Sovereign Investments Authority, NSIA, Uche Orji, in this interview, said of all the agency’s interventions in healthcare, power, mid-stream oil & gas, commercial real estate development and agriculture, delivering fertilizer directly to farmers at a cheap price under the Presidential Fertilizer Initiative is yielding the greatest result.  Excerpts:

PT: The country’s economy is gradually recovering from the recession. What would you say were NSIA’s contributions in the process?

ORJI: Nigeria’s economy is big. It’s always hard to measure individual or group’s effort, in terms of their effect on the economy of over 180 million people. But, NSIA chose to focus on some key areas of impact, namely agriculture, health care, power, mid-stream oil & gas and commercial real estate development.

But, I believe the area we made a direct impact in the system was in agriculture, specifically in the presidential fertilizer initiative.

A little bit of background. December 10, 2016 was the first time we were told about the programme. NSIA was invited to a meeting chaired by the governor of Jigawa State, to design a programme to bring down the price of fertilizer in the market, to enable farmers to buy fertilizer at a reasonable price. The programme was also to ensure that the government would deliver fertilizer directly to farmers.

The President (Muhammadu Buhari) had asked a question: How can we get fertilizer to farmers on time and at a reasonable price? The biggest complaint then was that fertilizer was too expensive and scarce for the average farmer. The price was as high as N9,000 per bag. In some places, it was about N14,000. Today, farmers are getting fertilizer for as low as N5,500 a bag.

Looking back, Nigeria’s agricultural productivity is not as high as it should be, because of high cost of inputs.

For instance, Nigeria’s fertilizer application per hectare of land is less than one-tenth of Pakistan’s. Today, Pakistan is self-sufficient in food production. They have the right inputs and processes for farming. One of the inputs we thought about was fertilizer. We thought if fertilizer was cheap enough, farmers will buy more, apply more and as a consequence, grow more. Therefore, addressing the issue of cost of fertilizer was one.

The second issue was addressing the problem of import substitution. At that moment, we were importing fully blended fertilizer.

There were four things involved in fertilizer production, namely urea, phosphate, potash and limestone. All these things have always been imported fully blended. But, 65 per cent of these materials are in abundance in Nigeria.

Urea is produced by Indorama and Notore in Port Harcourt Petrochemical Plant. Limestone is available all over the place. The only ones we do not have are potash and phosphate. The challenge then was to design a programme. The Fertilizer Producers Associations of Nigeria, FEPSAN had developed a concept that since there are fertilizer blending plants all over the country, that have been moribund without production for several years, if we import the 35 per cent of materials we do not have in the country, and add to the 65 per cent in the country, we could revive the blending plants. This would create jobs. More importantly, we will be able to bring the cost down, since we are not importing everything, including labour, from outside the country.

The next questions were: Who’s going to fund it? Who’s going to run it? How’s that going to work? NSIA was invited. We said we will create a special purpose vehicle, to enter into all supply contracts for all the components, namely contract with the blenders, offtake contracts with the state governments and agro dealers and run the programme.

So, we created a company called NAIC-NPK (NSIA Agriculture Investment Company-NPK). Within a short period of time, NSA worked through Christmas to put all the necessary supply contracts. Letters of Credit, LCs, were opened for all the materials needed to import. SGS was hired to do the testing to be sure the right components were bought. We entered into bagging and logistics contracts, since goods would be moved from different parts of the country. At the moment we have more 15,000 truck movements, Trucks were not enough. We had to enter into an agreement with a logistics company to use rail.

The first time a train ever got to Funtua or Bauchi for more than 20 years, it was carrying the NSIA fertilizer inputs. The train was very slow. But, we were able to move over 20 cargoes at once.

This was all put together in a space of four weeks. Eight weeks after the initial concept, the first blending plant was operational, producing blended fertilizer. Through the process, we have created thousands of jobs in the blending plants, for the people carrying the fertilizer, transport companies, trucking companies, etc.

So, this has been very impactful. If measured in monetary terms, the reality is that fertilizer price has come down by more than 40 per cent from where it was before.

Today, farmers are buying at affordable prices. Even those who were hoarding fertilizer have brought them out, and the price in the market has collapsed significantly.

The commitment NSIA made was for farmers not to hoard or rush; that they should buy only what they needed, because we will continue to produce it.

NSIA has been able to prove we don’t need subsidy. The market can operate without importing everything. We can actually create jobs through the programme. It’s cash and carry. No credits.

Those who can get credits are the state governments. But, even then it is a 90-day credit capped at an amount backed by an irrevocable standing payment order, ISPO, from the Federal Ministry of Finance.

So, as a programme, NSIA has been very lucky. We have not been affected by major incidents so far. It is the first time. Nobody expected that it would succeed at the level it has.

We have learnt that within the next two to three years, as NSIA continues to run the programme, we will continue to implement a process where the programme will give Nigerians more comfort that fertilizer prices will be lower than they are at the moment.

It will eliminate all the bad behaviours that happened in the subsidy programmes in the country.

There is a whistleblower policy at the back of the programme, so that when people see any of these things, they call.

Many of the culprits have been arrested. Anybody arrested faces a maximum punishment. The National Security Adviser, NSA, is particular about this, because fertilizer is in his purview.

NSIA is feeling so privileged that this programme is contributing to the effort to enable farmers in the country. We are waiting to see what the impact will be in the harvest season.

PT: Apart from agriculture, with the additional funding from government recently, what other programmes are we looking at going forward?

ORJI: We are looking at a couple of other programmes, like modular refineries we hope to install this year. Part of that is a little bit of opportunity creation. This will help solve the problem of local production of kerosene and diesel.

The modular refineries we are looking at are not going to produce petrol for our cars yet. That will require more sophisticated refinery. But, we can make kerosene and diesel, to try to reduce the environmental impact of these illegal refineries.

PT: Who are NSIA partnering with in the programme? And where are we now in the actual execution.

ORJI: We have Delta and Akwa Ibom State governments. We have finished the development of the business plan. We are about to start the procurement of the technical partners who would bring the modular refinery into the country, including the financing package.

We will do two or three first, before rolling out the rest. Ultimately, we are going to do between five and ten. We don’t want to do too many. Any residual issue could impact the crude export line. That’s why we want to get two or three out of the way first, and to reduce the adverse effect of illegal refineries.

PT: What production volumes are you looking at from those refineries?

ORJI: They are small refineries. The volumes would range between 2, 000 to 3,000 barrels per day. We will continue to show interest in working with the Nigerian National Petroleum Corporation, NNPC on the larger refineries’ refurbishment. But, the modular refineries are within our area of small investments.

NSIA does not have a lot of money to invest, compared to our peers elsewhere. We have to be careful. Do not forget part of our job is to build a savings base. As such, we can’t put every dollar into projects. Although we have to invest, the investments have to be in liquid form, not into infrastructure, which tends to take time before it pays back.

PT: How is the pre-privatization of the Commodity Exchange plan coming up?

ORJI: NSIA is taking over the Commodities Exchange before the end of October this year. You would see the impact of the Commodities Exchange as we would be rolling it out.

NSIA is doing a pre-privatization financing. We are taking over from the Bureau of Pubic Enterprises, BPE, to revive it. The value of the Commodities Exchange is that it brings about price transparency.

What happens to the cash crops farmers produce is that those big companies would send people to go and trade, or buy from farmers at certain prices, and those prices would end up taking value from the farmer. The Exchange would bring about price transparency.

Everyone would know the value of their commodities. This would allow NSIA to create a whole new set of people who would trade in commodities in a transparent manner. This would give more value, as opposed to being cheated by people who go around buying or negotiating for people to buy at different prices.

If a farmer gets an alert in his phone every morning about the price of his commodity, then he is not going to be cheated by the special buyers working for the big trading companies. That is what we want to do.

Again, the more money you put in the hands of the farmer, the more value you create in the economy. The multiplier effect of programmes like this is huge.

For every N1,000 put in the hand of the farmer goes a long way than N1million or N2 million in the hand of a rich man. The farmer creates a multiplier effect.

When you think about the transparency the Exchange would bring for the pricing of the commodities, it means a farmer would get more value for his products. That creates another impact on the economy.

PT: What’s the update on the second Niger bridge project?

ORJI: The project went through a bit of a slow down last year. But, that is coming back now. NSIA has still has not signed the concession agreement yet. Hopefully, we’ll get that signed once we are through with financing.

But, that was a programme that was stalled. Let us not go back to the reasons. Now, we are trying to put it back in shape. There are a lot to talk about the projects in the next couple of weeks. Just watch this space.

PT: Are these all we are expecting?

ORJI: No! Look at the co-investment funds we have created. They have attracted external investments into the country. The agricultural fund is moving very fast. We have four projects in our pipeline.

The first one is about to close. This is a maize and soya farm in Nasarawa State, which we are expanding from 400 to 2,000 hectares, with integrated feed mill and all that. That would create tons of jobs and make a lot of money for the NSIA as well as opportunities for the people.

We are about to go into financing before the end of September. There are many other things, namely cassava farm in Edo State, rice farm in Enugu, tomato in Kano. The real value and joy is that we are able to use them as vehicles to attract investment into Nigeria.

PT: Your investment profile is beginning to sound as you are doing too much with your small finances?

ORJI: We are not because we are doing these things as joint ventures with other people. A lot of the load is shared by our co-investment partners, most of whom are experts in their fields.

For instance, our co-investors in agriculture invests in their own farms from South Africa to North Africa. They are the ones who help in assessing these opportunities using sophisticated mechanisms for soil testing. More importantly, they are bringing capital. What we would like to do is use our small capital to catalyze investment.

Like the agriculture fund, we are targeting $200 million. But, we are bringing only $25 million, which is matched by our partners in South Africa.

We have been on the road with them. We have gone to the Middle East to raise additional capital for investment. We are structuring ourselves such that every one dollar we put in brings money and expertise from outside and leverage it. That’s the only way.

Yes, you are right. It appears we are biting too much. But, we are being careful not to stretch ourselves too.

We are moving to the next stage of bringing the capital and expertise into Nigeria to help out. NSIA is small, both in capital and number of people.

The strategy is to leverage all these partnership as much as we can for funding and technical expertise. Most of the soil testing in the agriculture was done in and out of South Africa by our technical partners. Every dollar we put in, we are bringing $ 4 from outside. We are mindful of the fact that we are small.

We are also creating institutions to help infrastructure investments in Nigeria. We will soon launch the NSIA Infra-Credit Fund, to help create infrastructure bonds market so that pension funds can handle investment.

The seed investment in the fund is 50-50 between NSIA and GuarantCo. This is in the development stage. There is also the Private Investment Development Group, PIDG, backed by DFID and many other development agencies. Over two years, we have created this company, Infra-credit, based in Lagos.

At the moment, most power projects are funded using loans from banks. That’s not the right way. You have to have long term instruments of 10 to 12 years bond, which can be invested in intervention funds if there are guarantees to provide enhancement.

The job of Infra-Credit is to provide infrastructure bonds guarantees. It started operations this year. They will be announcing their first transaction very soon. This will the first time we will see a pure infrastructure bond issued in Nigeria, with a wrap from Infra-Credit and pension funds and insurance companies buying into it.

PT: NSIA manages the N350 billion NBET Fund for the power sector. But, the industry operators are still complaining of lack of financial guarantees to help secure financing for projects to boost power generation capacity. What do you have to say about this?

ORJI: I honestly don’t know what the issues are between the operators in the power sector and NBET. Even if I knew, it is not my place to say. It is between NBET and the operators to discuss and come to understanding.

The money NSIA has in NBET is very liquid. If NBET needs that money today, NSIA would provide it within a couple of days.

NSIA cannot be the reason NBET cannot provide guarantees for power industry operators to get funding for their projects. The money we manage for NBET is within a certain set of agreements.

PT: Port congestion is a big issue in terms of movements of goods in and outside the country. What is NSIA doing to better the system in our ports?

ORJI: NSIA is involved with the Nigeria Customs Service, to help resolve the challenges and speed up the process of clearance of goods.

Part of the challenges is that Customs has no scanners. We are working with them to set a system for them do their work more efficiently, particularly in the area of revenue collection. The scanners would help improve their revenue collection and the speed goods are cleared at the ports.

At the moment, they have virtually been searching containers manually. If they can scan the containers faster, the difference would be clear. There are containers that come from low-risk destinations, which can be scanned quickly to clear the system.

We have just completed a business plan, which is currently undergoing approval processes. After the approval, we would be clearer what we are going to do. The important thing is for us to be able to put up a structure that would, at the end of the day, allow us get our money back, as investors.

PT: What’s NSIA’s intervention in health care?

ORJI: There are three things happening in health care. The first is the collaboration we have with Lagos University Teaching Hospital, LUTH, to build a cancer centre. Work is ongoing on that. Cancer is one of the biggest single killing epidemic in Nigeria today.

There is nobody I know who has not been affected by it one way or another. Either through their immediate family, friends or friends of friends, and all that. Part of it has been that we are having longer life expectancy these days. Most of these things are lifestyle diseases.

We also have the programme on diagnostic centres. Similar to the way we approach agriculture, we understand healthcare is a highly specialized sector. We have to bring in people who understand it. Again, it requires a lot of capital. So, one has to look for partners who have capital and ready to invest.

Initially, we had wanted to spread ourselves thin. But, later we resolved to start with a handful of places, demonstrate competence and develop the places into centres of excellence, before spreading out.

We have gone into partnership with a specialist provider in this area based in the Middle East. They have a $1 billion fund for health care in Africa. We have gone into partnership with LUTH, Federal Medical Centre, Umuahia and Aminu Kano Teaching Hospital, Kano.

One thing we must give to Nigeria is that we have skilled people. The doctors at LUTH are fantastic, professionals. They are among the very best in the world. But, the challenge of lack of equipment is huge.

If they want to have a simple operation, the equipment keep breaking down. The entire unit of equipment does not cost more than $6 million dollars. It’s a real challenge.

So, we thought that we need to work aggressively on this. That’s where we are. Our investment in infrastructure is huge. But, we are mindful of our size, both in terms of people and capital.

That’s why we do most of these things through partnerships. Most of them want to work with us, because they assume we know the terrain and they don’t.

But, we don’t have the capital and expertise, which they do. We are working with the Federal Ministry of Health to create a fund to invest in healthcare in the country.

There are a few other areas we would want to intervene. At the appropriate, time we would continue to let the people know about them.


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