The news that the investment programme of the Nigerian Sovereign Wealth Investment Authority (NSIA) will finally begin in March, 2013, is set to further boost the value of Sovereign Wealth Funds (SWF) globally which, as at the end of April 2012, stood at just under $5 trillion.
The ministry of finance last week said the Nigeria SWF is making progress towards becoming fully operational and that the Strategy Document which will guide its operations was ready, while its investment policy guidelines and the processes for the three fund mandate were almost finalised.
Under the Nigeria Sovereign Investment Authority Act (NSIA), the SWF is empowered to invest anywhere within or outside Nigeria in a range of assets including international equity, private equity, real estate, debt and “all other asset classes generally utilized by best-in-class investment fund managers”.
The fund has three main aims: saving money for future generations, providing financing for badly needed infrastructure, and starting a stabilisation fund to defend the economy against commodity price shocks.
The Nigerian SWF is to begin investments with an initial $1 billion.
According to the Sovereign Wealth Fund Institute, there are a total of 56 sovereign savings and investment funds globally which have been set up with the intention of harnessing revenue from excess natural resources and creating reserves for future generations.
Assets under management of SWFs have grown 10 percent per annum over the past four years and is on its way to reaching $US30 trillion over the next 20 years provided there are no significant capital draw downs, notes Rainmakerto US$5 trillion.
There was an additional $7.2 trillion held in other sovereign investment vehicles, such as pension reserve funds, development funds and state-owned corporations’ funds and $8.1 trillion in other official foreign exchange reserves.
Taken together, governments of SWFs, largely those in emerging economies, have access to a pool of funds totalling $20 trillion.
Countries, such as Nigeria, with SWFs funded by commodities’ exports, primarily oil and gas exports, totalled $2.7 trillion at the end of 2011. Non-commodity SWFs totalled $2.1 trillion.