The Pension Fund Operators Association of Nigeria (PenOp) has disclosed that the federal government has borrowed over N2.23 trillion, being 60 per cent of the N3.72 trillion pension assets so far mopped up in the country, using various bonds.
The umbrella body for pension fund operators in the country also observed that persistent calls by some Nigerians for the deployment of part of the remaining 40 per cent of accumulated pension assets totalling less than N1.49 trillion for infrastructural development were misplaced, since this would amount to extending further credit to the same person for the same purpose.
The PenOp President, Mr. Mohammed Yola, made these clarifications during a two-day training for journalists covering the pension beat under the auspices of the National Association of Insurance Correspondents (NAICO) in Lagos recently.
Also, the clarifications came on the heels of recent confirmation by the acting Director General of the National Pension Commission (PenCom), Mrs. Chinelo Anohu-Amazu, that accumulated pension assets in the country stood at N3.72 trillion as at October 2013.
Yola confirmed that the federal government has borrowed 60 per cent of the pension assets under the custody of pension fund operators in the country worth N2.23 trillion, using various bond instruments.
According to him, rather than calling for the investment of more pension assets, out of the remaining N1.49 trillion already invested in different sectors of the economy and totalling 40 per cent of accumulated pension assets for infrastructural development to be invested in infrastructure; Nigerians should ask the federal government to exhaust borrowed pension funds on infrastructure before making the call.
He therefore, ruled out the possibility of pension operators investing a higher percentage of assets under their custody for the development of infrastructure in the near future, saying such calls were misplaced.
Before now, the PenCom introduced four new types of funds to take care of the various investment needs of different categories of workers and retirees, such that pension contributors could determine the instruments in which accumulated retirement savings should be invested.
“We created fund 1, which is the Aggressive Fund. If you are not up to 40 years, you can ask your PFA to invest in aggressive fund. Now in that bucket, we said PFAs can invest up to 50 per cent of that fund in equities or rather in floating or variable instruments.
“Then we went to the next one, which is more of a neutral one, which is where the 25 per cent comes in; then we moved to another one that is basically for somebody who is close to retirement.
“Retirees cannot afford to have their investments in floating because of the fluctuations in returns and they will not have time to accumulate or correct any possible fall in return, so substantial part of the fund will be invested in fixed income.
“The fourth fund we created is the Ethical Fund including Sharia-compliant funds. There are people who will not want their contributions or savings to be invested in certain instruments or businesses, so we created an ethical fund which will be based on demand,” the commission explained.
Also, with regard to investment of pension assets in government bonds, Section 5.2.3 of the “Amendment to the Regulation on Investment of Pension Fund Assets,” said pension fund assets could be invested in infrastructural projects through eligible bonds or debt securities, subject to some restrictions including that the infrastructure project shall be not less than N5 billion in value.
Also, the projects must have been awarded to a concessionaire with good track record through an open and transparent bidding process in accordance with the due process requirements set out in the Infrastructure Concession and Regulatory Commission Act (ICRC Act) and any regulation made pursuant thereto and certified by the Infrastructure Concession and Regulatory Commission (ICRC) and approved by the Federal Executive Council (FEC).
In addition, the business plans and financial projections must prove that the projects are viable in addition to being economically and financially rewarding for investment by pension funds.
The above regulation was updated by the pension regulator to give Pension Fund Administrators (PFAs) more options for the investment of the pension assets under their management.
This was in furtherance with the commission’s decision to create more investment options for pension assets in response to stakeholders’ complaints that fund managers were not given a free hand to invest pension assets using their skills and experience to maximise returns on funds under management.
Major highlights of the regulation, which took effect last December, include the introduction of Exchange Traded Funds (ETFs) as allowable instruments; and incorporation of Guidelines on Global Depository Receipts/Notes (GDRs/GDNs) and Eurobonds, amongst others.