Q&A: Nigeria Sovereign Investment Authority

Education is vital to the growth of Africa’s investment community and ecosystem, says Kolawole Owodunni, chief investment officer at the Nigeria Sovereign Investment Authority.

How does the NSIA invest in private equity?

Kolawole Owodunni, chief investment officer at the Nigeria Sovereign Investment Authority

The NSIA has three main funds: the Stabilisation Fund, which is there to augment the government in times of economic stress; the Future Generations Fund, which is an endowment-like strategy that invests for future generations of Nigerians, with the aim of providing returns to Nigerians when hydrocarbon reserves run out; and the Infrastructure Fund, which invests in commercially viable infrastructure projects in Nigeria.

Within the Future Generations Fund, we invest in long-only equity, hedge funds, PE and VC. We have a very diversified, global portfolio and have exposure to different vintages. The PE bucket, which accounts for 30 percent, or about $300 million, of FGF, is a thoughtfully constructed design to protect us in times of economic turmoil. It includes everything from buyouts, growth and early-stage VC to pre-IPO. US and Africa are our biggest exposures at around 70 percent, and the rest is spread globally.

Do you plan to increase your allocation to PE?

We just increased it from 25 percent to 30 percent within the last 12 months. We saw good opportunities in the market, especially in the VC space globally and in Africa. We thought we needed to take advantage of that and add more risk to our portfolio. We are going to see how that plays out for us over the next couple of years, and then we will assess our allocation.

Aside from buyout and growth, which other strategies do you favour?

We have committed to some newer strategies, including impact funds. We are also focused a bit more on accessing women-led funds. We looked at our portfolio and realised we didn’t have that gender balance, so we decided to aggressively look for opportunities in the region that we would be happy to back.

Recently, we have expanded our scope to earlier-stage funds. We now have investments in pre-Series A funds because we saw attractive opportunities there, especially within Africa.

What we’re trying to do is encourage the ecosystem to grow. As investors, we need to build a system that can help accelerate those deals into Series B or Series C, and to try to better structure businesses and encourage entrepreneurs to grow these businesses.

We are also keen to deploy more capital in Asia and Latin America. China and India are particularly interesting.

What are your concerns about the market environment?

I expect to see some markdowns from what I saw in 2021. Actually, that is taking some of the froth off the market and making PE valuations a bit more realistic. What we have done historically is to be conservative and ask our managers to be a bit more conservative as well in terms of pricing assets.

What would you like to see more of from Africa’s LPs?

For a lot of Africa’s growth, we need PE – both hard currency and also local currency. This is something we are trying to encourage within Nigeria, too. We need a lot more local capital to come into these funds. The businesses are there, the opportunities are there, but patient capital is not necessarily there. The investment community needs to have a better understanding of what it takes to invest in the asset class and how to back the right managers. Education is very important for [helping] the ecosystem and community to develop and grow.