Ex-Goldman Banker Managing Nigeria Fund Targets Spending

Uche Orji, the former Goldman Sachs Group Inc. (GS) and UBS AG (UBSN) banker named to lead Nigeria’s sovereign wealth fund, plans to make spending on local infrastructure a key aim after local lawmakers opposed the fund’s creation.

“It’s a crucial cornerstone of the mandate of the fund,” Orji, 42, who also worked at JP Morgan Chase & Co. (JPM) and most recently spent almost 16 years in the U.S. and Europe, said last week in a telephone interview from New York. “This is not saving money for savings sake, this is about impacting the lives of people in a way that will be very fundamental for the future of Nigeria.”

Nigeria, Africa’s top oil producer and most populous country, imports gasoline because of a lack of refining capacity. Power cuts are a daily occurrence and cost the country at least 3 percentage points of gross domestic product growth annually, the Bureau of Public Enterprises said in April.

Nigeria’s 36 state governors challenged the creation of the fund in a lawsuit at the Supreme Court, saying it violated a constitutional requirement that all government revenue must be shared among federal, state and local governments. They later agreed to back plans to appoint the wealth fund’s board, while planning to almost double the amount in the excess crude account, which the wealth fund was originally to replace, to $10 billion.

Expected Bargaining

It’s “inevitable that there would be always be some bargaining around it, but I don’t think we should assume that this is going to be the case forever,” Gary van Staden, a politcal analyst at NKC Independent Economists, said by phone today from Johannesburg. “They’ve made agreements to get it off the ground and then they’re going to be able to claw back some of the concessions.”

Orji was named head of the Nigerian Sovereign Wealth Investment Authority, as the fund will be known, on Aug. 28. He will have a first term of five years, Finance Minister Ngozi Okonjo-Iweala said, and will work from Abuja. Nigeria’s crude production of about 2.2 million barrels a day accounts for 95 percent of foreign income and 80 percent of government revenue.

Nigeria’s sovereign wealth law requires the creation of funds for infrastructure, the future generation and budget stabilization, with each representing at least 20 percent of the total. Savings through the fund will enable the West African nation to build its infrastructure and also provide a buffer against volatility in oil prices, Okonjo-Iweala said.

Crucial Institution

“It’s a crucial institution for the country and I think it’s important that it went through a robust debate,” said Orji. “Our country is making progress, it might not be visible to people, but we’re building foundations and institutions.”

Nigeria’s economic growth accelerated to 6.6 percent in the second quarter, from 6.2 percent in the previous three months, the Central Bank of Nigeria said in a report yesterday. The country has the capacity to generate about 4,000 megawatts of power, about a tenth of South Africa’s installed base, with a population that’s three times bigger.

Nigeria is among the last members of the Organization of Petroleum Exporting Countries to set up a wealth fund, as it battles to reduce corruption and safeguard cash generated from crude production.

The fund, signed into law by President Goodluck Jonathan in May 2011, aims to replicate the long-term growth of funds such as the Abu Dhabi Investment Authority, Orji said.

Overseas Acquisitions

“I’m actually very close to many of the sovereign wealth funds in the Middle East; I’ve known many of them for many years and I’ve watched them grow,” he said. “It takes time for a fund to build and get invested and contribute, but you have to start somewhere.”

Abu Dhabi, capital of the United Arab Emirates and home to about 7 percent of the world’s proven oil reserves, set up its wealth fund in 1976 to diversify its sources of income by investing globally.

The wealth fund, known as ADIA, doesn’t invest in the U.A.E. or typically in the Gulf Arab region, and had assets valued at $328 billion at the end of 2008, according to the New York-based Council on Foreign Relations.

Sovereign wealth funds such the Qatar Investment Authority are boosting overseas acquisitions as oil prices hover near $100 a barrel. The country has taken a 12 percent stake in Swiss miner Xstrata Plc (XTA) and last month bought a 22 percent stake in Chinese private equity firm Citic Capital Holdings Ltd.

“I’ve run money and been part of a portfolio management team and this isn’t any different,” Orji said, without giving more details on plans. “All Nigerians must support it because the signal it sends to the international community is huge.”

To contact the reporter on this story: Chris Kay in Abuja at ckay5@bloomberg.net

To contact the editor responsible for this story: Vernon Wessels at vwessels@bloomberg.net or Dale Crofts at dcrofts@bloomberg.net

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