The disbursement of $150 million (about N52.5 billion) from the Stabilisation Fund to augment the monthly statutory Federation Account allocation to the three tiers of government would not take more than 72 hours of the request, the Nigerian Sovereign Investment Authority (NSIA) said on Wednesday.
The Managing Director of the agency, Uche Orji, told PREMIUM TIMES in an exclusive interview in Abuja that the NSIA does not require more than three days to make the money available to government to meet that emergency.
“The Federal Government is not asking us (NSIA) to make the money available now, but in June. But, the beauty of our system is that even if the government needed the money urgently, all that we will require will be a formal notice as short as three days, to activate our processes to call the money and make it available to the government.
“Although the money is invested in various financial instruments around the world, it is so liquid that it could be recalled at very short notice and made available,” Mr Orji said.
Augmentation to FAAC
The Minister of Finance, Budget and National Planning, Zainab Ahmed, announced on Monday in Abuja that President Muhammadu Buhari gave approval for $150 million to be drawn from the Stabilisation Fund to support the June 2020 Federation Account Allocation Committee (FAAC) disbursement to the three tiers of government.
The Fund is a special account domiciled at the Central Bank of Nigeria (CBN) and managed by the NSIA on behalf of the Federation as a pool of funds the government can draw from to cushion serious economic emergencies occasioned by a drastic collapse in crude oil prices.
The minister said the money would henceforth augment FAAC allocations until the end of the current economic crisis caused by the deadly global coronavirus pandemic.
Mr Orji said between 2013 and 2018, the three tiers of government, consisting of federal, state and local governments, contributed a total of $300 million into the Stabilisation Fund ($200 million in 2013; $50 million in 2016, but received in 2017, and another $50 million in 2017, but received in 2018).
He said apart from the total contribution, the NSIA invested and earned an additional $51 million, bringing the balance in the Fund to date to about $351 million.
“So, even after the $150 million is disbursed to government in June, about $201 million would still be left for us to continue to invest and generate more earnings. What we are giving to the government is actually $100 million of capital they gave us and another $50 million of the returns we earned,” he said.
In its 2018 annual report, the NSIA said, as at the end of 2013, all capital in respect of the Stabilisation Fund had been deployed in allocation to three fund managers: UBS (US Treasury mandate), Goldman Sachs and Credit Suisse (Corporate Bond mandates).
He said the way the management of the Stabilisation Fund is structured is such that the fund should be readily available to the government if the request is in compliance with Sections 42, 43, 47 and 48 of the NSIA Act.
The sections, he said, states that the financr minister, upon demonstration of the urgent need for ‘stabilisation’ in the economy, may call for the fund for support.
He said in the circumstance the country has found itself as a result of the impact of the coronavirus pandemic on the country’s economy, and the unprecedented drop in crude oil prices at the international market, the minister is acting within her powers to call for the money.
“Therefore, the NSIA is ready and able to make that Fund available accordingly, to enable the country to meet that urgent national emergency.
“The beauty of the Fund is that when it is drawn, it is used for the benefit of the three tiers of government, which are the contributors to the Fund in the first instance. That is the reason the government is drawing the money to use in augmenting the FAAC allocations to the three tiers of government,” Mr Orji said.
The NSIA is owned by the federal government (45.83 per cent), state governments (36.25 per cent), local governments (17.76 per cent) and the Federal Capital Territory (0.16 per cent).
On the performance of the other Funds (Future Generations and Infrastructure) also managed by the NSIA, Mr Orji said they were doing well, despite a considerable impact on the agency’s investments in the equity market during the year.
“2020 is a very unpredictable year. We were very lucky that we did not expose ourselves too much in the equity market. We reduced our exposure significantly last year, although we still suffered some harsh conditions. But, we have done much better than our peers.
“I am still very optimistic that the market will recover before the end of the year. This is the worst pandemic the world has seen in terms of impact and stress on the global economy.
“We are glad we are in a position to support the government in a time of crisis. That is why it is important that the country must continue to build such strategic financial buffers in the future to provide the cushion in terms of emergencies like this.
“The recent approval of another $250 million by the Federal Government in November last year has not been received yet by the NSIA. It is still in process,” he said.