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PenCom to channel more pension funds to corporate bonds

By on June 12, 2014

The National Pension Commission (PenCom) said it plan to amend investment rules to channel more of Nigeria’s $26 billion (N4.3 trillion) pension funds into corporate bonds.

The Director General of PenCom, Chinelo Anohu-Amazu disclosed this in an interview with Bloomberg.

Pension administrators, including Stanbic IBTC Pension Managers Limited and ARM Pension Managers Limited currently invest only two per cent of funds in corporate debt, well below a 35 per cent limit, according to data released by the Commission.

This compares with 65 per cent invested in federal and state government bonds and 13 per cent in equities.

New rules are being considered to encourage more investments in corporate bonds, thereby making long-term capital available to fund infrastructure projects, Anohu-Amazu said in Abuja.

“We have a huge amount which can go into the development of infrastructure, but what we have now is an under-utilisation.”

Africa’s largest economy needs at least $14 billion annually to bridge its infrastructure gap, according to Finance Minister Ngozi Okonjo-Iweala.

The country of about 170 million people loses at least two per cent of potential gross domestic product growth annually due the shortfall, mainly in power and transportation, according to the minister. Its economy is estimated to expand 6.75 percent this year.

A major slice of pension assets are now in government bonds, the “safest place,” according to Anohu-Amazu.

With an average growth rate of 30 per cent over the last four years, pension funds are seeking new investment options in equities and other outlets that are safe and offer higher returns.

Nigeria increased the limit for pension funds’ investment in equities to 50 per cent from 25 per cent of assets in November 2012 to help boost trading in stocks.

As an additional investment outlet, infrastructure funds could take as much as 15 per cent of pension assets, Pencom had said.

“Whether it is power, real estate, roads, railway, all sorts of infrastructure, we are interested in the format in which the pension funds go into these projects,” Anohu-Amazu added.

“Our overriding objective is to ensure that the retired workers receive their payments when due.”

The Chairman, Pension Fund Operators Association of Nigeria (PenOp), Mr. Misbahu Yola, recently said the country’s contributory pension scheme currently has six million contributors. He had also noted that the pension reform Act 2004 was arguable the most critical step direction in reposition the industry.

 

 

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