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Government, others target N5.46tn pension funds

By on May 17, 2016

The total assets under the Contributory Pension Scheme keep rising and different segments of the economy are hunting for a share of the funds for various purposes, NIKE POPOOLA writes

More project initiators from different sectors of the nation’s economy seeking funds to finance their projects in the country are approaching operators of the Contributory Pension Scheme as the total pension assets under management rose to N5.46tn as of the end of March this year, investigation has revealed.

While most of the funds had been invested in Federal Government of Nigeria’s bond, the portion set aside for infrastructure fell to N1.02bn or 0.02 per cent of the total assets under management as of the end of March, according to the statistics from the National Pension Commission.

In January, the operators invested N1.33bn in infrastructure, and the amount rose to N1.34bn in February.

About N3.68tn or 67.47 per cent of the total pension assets was invested in Federal Government of Nigeria’s securities.

The operators invested N574.3bn and N469.9bn or 10.52 per cent and 8.61 per cent of the total assets in local money market securities and domestic ordinary shares respectively, while N212.2bn and N186.4bn or 3.89 per cent and 3.41 per cent were invested in real estate property and corporate debt securities in that order.

Similarly, N152.8bn and N67.9bn amounting to 2.8 per cent and 1.24 per cent were invested in state government securities and foreign ordinary shares respectively, while N59.299bn or 1.09 per cent of the funds was invested in cash and other assets.

The balance of the growing pension assets was invested in classes of business such as supra national bonds, foreign money market securities, open/closed end funds, private equity funds and other liabilities.

The Chairman, Pension Fund Operators Association of Nigeria, Mr. Eguarehide Longe, said the funds were active in different investment portfolios.

According to him, the bulk of the funds is invested in government bonds and some governments, which have taken the money invested them in infrastructure.

Ideally, he explained that money borrowed for reasonably long term should be used for long-term assets and not to fund recurrent expenditure.

“We are there to invest in a way that the funds will not be lost,” he said.

According to him, if the funds are used for infrastructure, this could have significant impact on the economy.

While noting that some investors had been approaching the pension sector to access the funds, Longe said the real sector was not a place where they could just invest huge amounts and that sectors like agriculture were areas that needed to be well understood before the funds could go there.

He noted that it was not the job of the operators to build infrastructure or spend the funds on extremely speculative areas.

Longe said there were provisions in the pension investment guidelines that allowed the funds to be invested in projects such as infrastructure, private equity and real estate.

He said the philosophy of managing the money was to add to it by investing it profitably.

“If you think about how pension funds should be used and what the objective is, you will find out that it is being developed and managed to the right objective so that when people retire, they earn their money seamlessly,” he said.

The pension operator noted that if the funds were used to create projects that were not adequately thought out, and rather than add to the money, it either disappears or bring no returns, there would be a problem.

“So, the objective really of investing this money anywhere should be how to create value and how to add to it; that is the first foundation as far as the pension funds are concerned,” he said.

The Director-General, National Pension Commission, Mrs. Chinelo Anohu-Amazu, said all investment of pension funds must follow laid down guidelines.

“The pension funds are not idle but we don’t just give out money arbitrarily. The PFAs are the investors of the fund and PenCom regulates the investment,” she said.

More than a decade after the CPS commenced, the director-general said no fraud had been recorded in the scheme.

“If we have not seen a lot of investments in the scheme, it is because most of the intending investors are not meeting the investment criteria,” she said.

Anohu-Amazu said the Pension Fund Administrators could invest substantial part of their assets in Federal Government bonds because they were safe.

Pension operators, however, said that the industry had made about N2.2tn as profit from investing the money from inception to December 2015, while part of the profit is usually reflected in the Retirement Savings Accounts of the workers.