Uche Orji is the Managing Director/Chief Executive Officer of the Nigeria Sovereign Investment Authority (NSIA), an establishment founded in 2011 to manage the Nigeria sovereign wealth fund where the surplus income produced from Nigeria’s excess oil reserves is deposited.
He assumed duties in 2012 and has steered the establishment to the enviable position it is today.
Orji studied Chemical Engineering at the University of Port Harcourt in Nigeria’s oil capital and after graduating, he completed his mandatory year of National Youth Service at the Nigeria Industrial Development Bank (NIDB), today known as the Bank of Industry (BOI). His job here as Project Assessment Engineer was his first foray into development financing. Orji then joined Arthur Andersen (later KPMG) as an audit trainee, auditing financial services companies and working on a system implementation for Diamond Bank. He joined Diamond Bank’s Audit Group in 1993, rising to become Financial Controller.
In 1996, Orji left Nigeria for the Masters in Business Administration programme at Harvard University. In 1998, after graduating, he joined the Goldman Sachs Asset Management European Equity Team in London as an analyst, later rising to the position of portfolio manager. During this time he managed in excess of a billion pounds in assets across Europe. A move to the Goldman Sachs Technology Team saw him managing about $600 million in assets worldwide. In 2001, he joined JP Morgan in London, as a Vice President, swiftly rising to become a Managing Director at the firm. In 2006, he made his way back to New York, to the United Bank of Switzerland (UBS), where he took up a Managing Director post. Orji would spend the next six years at UBS, leading the global team of semiconductor analysts.
In this interview, he speaks about the projects being handled by NSIA.
The 2nd Niger bridge
The early work started in 2014 I believe and the main contract was signed in February by the Federal Ministry of Works. We remain the funding partner, for the main work, however, a new mechanism was introduced. It is called the Presidential Infrastructure Development Fund (PIDF), which the NSIA is managing.The PIDF alongside the NSIA are aimed at completing five major projects of importance. One of the is second Niger bridge, the second is the Abuja to Kano through Zaria highway; third one is the Lagos-Ibadan expressway, the fourth is the Mambilla power plant and then the East-West road. These five are projects covered under the PIDF.
In terms of the place we are now on the second Niger bridge, like I said the main works contract was signed and contractor was paid in advance in August, that is what is pushing us and giving us confident that from where we are, we are on track for the scheduled handover in 2022.
It is a toll bridge and a toll road, it is big project. You can already see from the size and scale of work that is on the site. The total project, the the part of it that we are responsible for, which is phase one is 11.5 km. It comprises 1.6 km water crossing, plus all these pillars you are going to see is about another 10 km and the idea as you can see it is how high the water level rises between the rainy and the dry season. When it gets to a certain point, this whole area turns into flood plain and you need to be able to elevate it for a very long stretch.
We are very comfortable with the new funding mechanism, which increases by way of support by the Federal Government but it also allow us when we get to the part of when we need private sector participation, which we are hoping fund will be raising sometime 2020 and it will not be a difficult stretch to raise that private sector portion of the funding.
So, as we see it so far, we are pleased. We have gone from early works to now main works. The commitment we have secured from the contractor is that you get to see what looks like invisible sign of the bridge; you are seeing it already, I mean a lot of work has gone on, for the slabs and the part of the bridge that is now coupling all these pillars and all tha is expected to start next year. It is a lot of progress made and it is not a cheap project, looking at it you know, so we are looking at N220 billion project for phase one. It comprises the bridge and the 11.9km road.
First of all, it is an investment of the NSIA let’s start with that one. The business part of it is very simply, for us it is a toll bridge, we are going to toll it. Just from what you have seen in the traffic, and what we believe would be an additional traffic because there people want to drive but they defer. A lot of people reside here and we believe this will bring economic activities. We expect this to be tolled, we expect this to be profitable, we expect all the commercial benefits that will accrue as the bridge and road are done. It to lead to higher traffic, as a consequent, we expect that the toll revenue over 25 years of the concession will more than pay and earn the return.
Number two, you all saw the alignment. It goes round a little bit before you get to Asaba airport, it goes all the way round through the right side of the current bridge, pass the Owerri interchange heading towards Enugu interchange. It is a massive project.
Economically, the Chinese always say if you want to develop a country build good roads and they built many roads and you can see how many people it elevated out of from poverty.
With this bridge, those who found it difficult to take their goods to the market will be happy with it and transportation cost will come down.
Again, it is also a sign of physical integration. Someone was telling me a story of when there were no roads, it was so difficult back then.
So, this project will be be economically viable.
Again, from the industrial nature of this part of the country, this project is vital. I know many companies very well have moved out of here because of the inadequate infrastructure. So, the industrial concerns here will benefit from this and expect many of them to come back and restart because the skill set here is quite significant in terms of supporting those industrial concerns.
Thirdly, the preliminary traffic studies we’ve done show that the significant chunk of the traffic on this road isn’t just east and South-south, it is also from North Central, as far as people from Ogoja in Cross River north, Taraba and all that. Many of them taking their goods trying to come across here. I look at it as something that provides wide economic benefits. The initial design shows it is a project with significantly sized project, especially if you’re coming one lane coming, one lane going to three lanes going, three lanes coming.
It is massive. We are thinking about the future. When the first bridge was built, the story was that it was too much, but now it’s not enough. And that is how it ought to be with infrastructure,when you build it once you hope never need to go back to it again.
Private sector funding
There is both equity and bonds. We have the financial plan under control. There is a bond programme and we believe that by the time we go to the market to raise capital, we also raise a significant part of it alongside.
These five projects have a combination of a funding arrangement and the structure is very simple; we have the PIDF, NSIA, third party fund market, we will give you more details on that but for the moment we are very comfortable with what the plan is. PIDF first phase has injected $650 million for the five projects. We are expecting another $650m from PIDF, from here PIDF has invested N33 billion on the main project. The main works.
Politicizing the project
There is nothing like elections and whatever. I just know that we have funding and we are tracking the project. You heard us talk about plans to finish it in 2022. We are working and you can see things for yourselves. Piling is ongoing.
This moment there are 820 people on direct jobs here.
We have done most of the structuring. There is a lot of money we spent on project preparation. The sequencing of the fund is such that we started with PIDF. NSIA money will come, third party money will come. So, we want to make sure it is sequenced properly so you don’t want to burden the project with huge amount of cost. So, there is commitment of NSIA, there is an approval by NSIA to inject up to $300million for the entire projects not just only this one. It will be a remix for me to speak to you on each project, we are looking it in totality for the five projects.
There are three funds and three different mandates when people look at the NSIA mandate. Initially, we started with 20 per cent Stabilisation Fund; 40 per cent in Future Generation Fund; and 40 per cent in the Nigeria Infrastructure Fund, with different horizons. The Stabilisation Fund is actually short term and it’s not expected to generate a huge amount of return because is short term you couldn’t instrument. We are expected to liquidate within seven days and make any demand from the federal government. So, short-dated instrument, very liquid, is expected not to earn a huge amount of return. But in 2017, we did about six per cent return on that fund in dollars. The Future Generation Fund is really where we expect to see a lot of returns; that is about 10 years horizon, and it’s across the diversified private equity, public equity, global, local. Also we look at things like other devices like hedge fund asset, commodity investment, real estate investments, all in that fund. That fund returned 8.6 per cent last year in dollars. Now, we expect that fund to really be the engine of the NSIA in terms of generating returns because of the kind of assets invested in. So if you take private equity for example, we tend to double our money in every private equity business we make. So over a period of five, six years we are looking at another return of 15 to 20 per cent in private equity.
In Mambila, we are still at the early stages, a lot of back and forth going on but we are very confident that this we be done.
For us, it is new unlike the second Niger bridge that has been on since 2014. There is a lot of catching up that we need to undertake before we start spending money. The East-West road is also new to us. We only just got involved in it. The one we have mobilized is the Abuja-Kano, Lagos-Ibadan, second Niger bridge. The East-West road, not yet but we will. But don’t forget it is from another ministry, the Ministry of Niger Delta. Unlike these three projects that are under the Ministry of Works. Look, we are finance people, in terms of negotiating this, we must make sure there is risk metrics for each of the contracts are properly mapped out.
Trust me, that takes time. We spend a lot on lawyers, on our own people, we actually sit down and make sure the projects are properly outlined, so we know what it takes. We also bring our own engineers on site in addition to the Ministry of Works officials, who also help us in certifying any payment. As you can tell, that is a good process that surpasses any form of audit. The general complain I hear is that we are slow and this why we are slow because we need to be very careful. At the end of the day, it is your money and we need to spend it judiciously.
That element of our work agnostic to politics because at the end of the day we are not elected we are appointed to do a certain piece of work and we make sure we do it properly.
NSIA fund status
In terms of asset contributed to the fund, so far we have asset to fund to the tune of $1.5 billion. We have had returns over the last past years, we have been profitable five years in a row but the returns are on top of what we have contributed to the government. So $1.5 billon is the actual size of the contributions to the fund. Now, there are also third party funds that we manage on behalf of various agencies of government and also on behalf of the government. There was $350 million that we manage for NBET, that mandate expired at the end of July 2018 and we returned the fund at the end of August 2018. Then, we also have $650 million which we manage as part of the Presidential Infrastructure Development Fund, again, funds that are not really part of the NSIA shareholder funds. If you look at the NHIS Shareholder fund, all together it’s roughly about $1.5 billion of contributions. Last year, we made profit of $95 million, a year before we made over $130 million of profit. So, it’s been quite accreting. In terms of the status today, we are roughly at about $1.8 billion.
NSIA-LUTH Cancer Center
The NSIA-LUTH Cancer Center is the culmination of a journey that started in January 2016 when the NSIA announced its investment strategy in healthcare which was to partner with teaching hospitals and federal medical centers in a public private partnership to develop areas of excellence in healthcare. After the announcement of the strategy, we engaged with 14 federal medical institutions across all six geopolitical zones. The first three projects out of these collaborations are ready with the NSIA-Luth Cancer center being the first, NSIA-AKTH and NSIA-FMCU diagnostic centers are next and will be ready for commissioning at the end of March 2019.
Foray into healthcare
The NSIA strategy in healthcare is to focus on areas of need within tertiary healthcare that have led to medical tourism to countries in Europe, East Asia and the Middle East. We identified these areas as Oncology, Nephrology, Cardiology and Orthopedics. In a 2012 study by the Ministry of Health, Nigerians’ spend on outbound medical tourism was reported to be about $1bn a year, with cancer management accounting for more than 40% of this spend.
In the course of our research, we discovered that of the eight facilities in the country that had radiotherapy machines installed, at the time, only two were functional. More so, the two functional machines were frequently broken down causing interruptions to patient treatment. My first-hand observation at LUTH, during which I saw hundreds of patients waiting for up to two weeks to be treated, as LUTH staff frantically tried to source parts to get their old radiotherapy machine repaired, convinced us that the NSIA had to start with oncology immediately.
Following months of project development, the NSIA-LUTH Cancer center was built in a record time of nine months and at a cost of approximately US$11million. Once fully operational, this will be the largest outpatient cancer treatment centre in West Africa. Of note, the Halcyon linear accelerator installed within this Centre is only the second such machine to be installed in Africa. This PPP is executed as a Build-Operate-Transfer (BOT). The NSIA owns the center 100% today and we expect that after 10 years, the period over which we anticipate the NSIA will have recouped its investment, we shall transfer the center to LUTH. In the meantime, over the BOT period, LUTH will share 15% of the profits. We have contracted a private sector hospital operator, Healthshare of South Africa to operate the centre and facilitate skills and knowledge transfer to the LUTH Oncology Team. With this PPP structure, we will ensure that the center is maintained to the highest standards and LUTH benefits both financially as well as through training of its staff.
The center is expected to treat as many as 80 and perhaps up to 100 patients a day. It is small in the context of the needs we have in Nigeria, but it’s a start. We have progressed our engagement with LUTH and have commenced discussions to potentially invest more in other areas of the oncology service such as inpatient care and surgery. We will also give serious consideration to collaborating with LUTH on other specialties in line with our healthcare strategy and we have already secured investor interests to collaborate with the NSIA in this expanded engagement.
We have commenced the construction of a training facility next door that will serve as a resource center, supported by Varian Medical Systems, not just for staff of the NSIA-LUTH cancer center, but for other cancer centers we plan to build in the country and for oncology professionals across Nigeria.
I want to thank President Muhammadu Buhari for encouraging us to make this investment. During our meeting with him in October to discuss our investment programme, he emphasized Agriculture, Healthcare and Infrastructure as key planks of growth. NSIA has responded to these areas of need. The NSIA is the financing and operating company that continues to drive the Presidential Fertilizer Initiative. The NSIA is the manager of the Presidential Infrastructure development fund which is currently driving the construction of Lagos Ibadan expressway, Second Niger Bridge, Abuja-Kano Expressway and the Mambila Power plant.