N5.8trn Pension Fund Assets yet to attract viable projects

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By; Cobham Nsa, Abuja.
The National Pension Commission (PenCom) has decried the lack of viable projects to attract investment from the pension fund assets that now stands at over N5.8 trillion as at July, 2016.
For the Commission, having such enormous resources lying redundant in the face of huge infrastructure gap in the country is unacceptable and detrimental to efforts at sustainable growth and development at all levels.
Director General of PenCom, Mrs. Chinelo Amazu- Anohu said efficient deployment of these assets would impact positively on the Nigerian economy, especially in elations to good, viable, safe and secured investible infrastructure products in various sectors of the economy in the long term.
She said to change the current narratives for good, PenCom is already engaging with key stakeholders and government regulatory agencies, including the Nigerian Sovereign Investment Authority (NSIA) as part of efforts aimed at eliminating factors that limit government or corporate organizations’ capacity to develop viable and safe products to attract the pool of funds from the pension assets.
Mrs. Amazu- Anohu said due to unavailability of feasible and secure products in the infrastructure market, only about 4 per cent of the potential 40 per cent investment outlay by PenCom has been invested in infrastructure.
Speaking through the Head of PenCom Investment Supervision Department, Mr. Ehimeme Ohioma at at an interactive session with journalists in Abuja, the Director General said a whopping N1 trillion, comprising N492 billion for housing and N492 billion for infrastructure in the pension fund assets were available for investment to create wealth and improve the welfare of Nigerians.
In a presentation titled, “Using Pension Funds for infrastructural development to enhance inclusive growth”, Mrs. Amazu- Anohu said, “Globally, productive investments in infrastructure are majorly made possible by long term private funds/savings such as pension funds. Other sources are government revenues and bank loans. Pension assets in Nigeria today valued at N5.8Trillion as at July 2016, are currently the largest and only available pool of patient capital. Pension Fund investment in infrastructure is a reasonable proposition given the good asset/liability match, as infrastructure projects are long term investments that match the long duration of pension liabilities. Examples of similar jurisdictions, like Nigeria, that have effectively deployed pension funds for investment in infrastructure include Ghana, Kenya, South Africa, India and Brazil.”
According to her, every necessary step was being taken to ensure effective utilization of the pension funds assets that currently represent the largest pool of capital in the country towards stimulating the nation’ economic growth, regretting that Nigeria has a huge infrastructure deficit in key sectors because of population growth, urbanization and demographic change that presently drive increased infrastructure demand in the country.
The PenCom boss, who gave further insight on Nigeria’s inability to access the pension funds, said, “In 2016, the national budget significantly increased the allocation to capital expenditure, by up to 26.2% of the budget, which amounted to N1.59Trillion. The Ministry of Finance (MoF) estimates an annual infrastructure need of N7.3Trillion. Consequently, only 22% of the MoF’s estimated annual need for infrastructure can be accommodated by the 2016 budget. The Regulation on Investment of Pension Fund Assets issued by the National Pension Commission, allows for investment in Alternative Asset Classes e.g. Infrastructure “Bonds” and “Funds”; Private Equity Funds; Real Estate/Housing Development, Alternative Assets are the only investment class with guaranteed returns, which are consistently above inflation rates.
For her, the challenges or inability to access these pool of funds include: ”Availability of Products: Huge dearth of alternative asset products in the Nigerian financial markets;Liquidity Risk: Pension funds prefer low or no risk products, that are able to generate steady income from the onset; Political  Risk: Historical examples of project development challenges with governments – Policy inconsistencies; and Crowding Out: The consistently higher yields offered on FGN fixed income instruments had crowded out alternative assets.”
The Director General stated that PenCom was looking towards an era when the country would record about 40 per cent investment in viable products by year 2019 as against the present paltry four per cent threshold.
Similarly, Mrs. Amazu- Anohu that PenCom, in collaboration with the Economic and Financial Crimes  Commission (EFCC), has flagged off the process of sanctioning erring organizations that default in remitting employees’ contributions to their Pension Fund Administrators (PFAs) accounts, hinting that about N10 billion Naira has already been recovered from the exercise with prosecution in the offing for other defaulters.

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