PenCom, PFAs under pressure to release pension funds for infrastructure
The National Pension Commission (PenCom) and Pension Fund Operators are under pressure from the Presidency to release accumulated pension funds for infrastructure development.
The Presidency team, led by the Vice President, Yemi Osinbajo and the Finance Minister, Kemi Adeosun, are engaging with the pension regulator and key operators in the industry on how to unlock the over N7.1 trillion pension fund assets, to bridge the country’s infrastructure gap, BusinessDay learnt.
According to our source, the Presidency team held a meeting last Tuesday, with the parties from PenCom and other operators, while the next meeting is scheduled to hold tomorrow Saturday.
Andrew Alli, president/CEO, Africa Finance Corporation (AFC), disclosed recently that Nigeria needs as much as $3 trillion over the next 30 years to plug the nation’s infrastructure gap and achieve rapid sustainable development.
Alli also said that while the government must be a primary source of funding, federal and state governments’ fiscal inflows are grossly inadequate to match the pace of investments required in infrastructure.
The nation’s Contributory Pension Scheme has, as at the end of August 2017 accumulated pension fund in excess of N7 trillion, from which N3.79 has been invested in Federal Government Bonds.
According to data obtained from PenCom, 53.46 per cent of the total funds had been invested in Federal Government of Nigeria’s Bonds.
The breakdown further shows that Treasury Bills gulped 18.59 percent of the total pension assets, while Agency Bonds (NMRC & FMBN) got 0.24 percent, and State Government bonds got 2.24 percent, respectively.
Investment in domestic and foreign shares took 8.9 percent and 1.37 percent of the total pension fund assets.
Susan Oranye, executive secretary, Pension Fund Operators Association of Nigeria (PenOp), who confirmed being aware that such meeting held, said “I was not there, so I cannot comment on the outcome of the meeting.
“But I do know that it is all about how to utilise the accumulated pension funds for infrastructure development”
Oranye said “We don’t have issues with using the pension fund for infrastructure development, as long as it is structured in a manner that the fund is secure and available when it is needed”.
Paddy Ezeala, analyst and public commentator, in a document titled ‘Liquidity Squeeze and the Traction of Pension Funds,’ said the various tiers of government have been eyeing the pension funds as a possible source of funding for infrastructure and other development projects.
Ezeala said there must be an airtight policy framework for investment, to ensure that risks are reduced to the barest minimum. “Pension funds are held sacrosanct, in view of the fiduciary relationship that exists between the Retirement Savings Account (RSA) holders and the Pension Fund Administrators (PFAs).”
Ezeala stated that pension funds are well-positioned to play a critical role in economic development in Nigeria, however adding that excitement must give way to reason, to ensure proper application of the funds.
“It is important to note that the investment of pension funds in infrastructure development requires some measure of capacity building to achieve the desired results. We have to shore up our expertise across the entire chain. We can achieve this through specialised training and collaborative efforts with countries that are way ahead of us in this regard.”
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