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Govt stokes controversy with eyes on N5.4trn pension fund



Power sector to receive boost as FEC approves $5.792bn for Mambilla plant

The difficulty accessing funds has pushed government to explore all avenues of borrowing money to fund its budget, including the contributory pension scheme (CPS), now put at N5.4 trillion.

Officials hold that since the money is largely lying as idle fund, it should be accessed as internal loan.

This, if approved, will be against the current practice of accessing the fund through government bonds and other financial instruments.

Minister of Power, Works and Housing, Mr. Babatunde Raji Fashola was first to mute the idea of investing the fund to cushion the deficit in the nation’s infrastructural sector.

Though Director-General of the National Pension Commission, Mrs Chinelo Anohu-Amazu, commended the idea, she, however, stressed that the commission remains committed to protecting the interest of pensioners.

But pension experts differ on the feasibility of subjecting the fund to government use in an unstable economy.

Speaking on the issue, a retired insurance broker, who also served as a manager of the retirement portfolio in NICON Insurance, Mr. Emmanuel Odunze, said if government had changed its earlier position to allow National Pension Commission run the scheme unhindered, the fate of retirees will not be compromised.

“This money is contributed by only about 7 million registered contributors, representing 4 per cent of Nigeria’s 170 million populations. The concern of government should be on how to see more people key into the programme and not to think of borrowing from it,” he said.

Another expert, Mrs. Ronke Oduyemi, of Akinsoya Chartered Accountants, argued that contrary to popular view, the fund is not idle.

To her, “as a long-term the fund is for catering for the retirement needs of contributors, whatever will make the various pension fund administrators (PFAs) lose firm control of the scheme is another way of saying bye to the noble programme.”

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But others are of the opinion that given the down turn in the capital market, where most of the funds are currently being deployed for shares acquisition, if government bonds can be more secure and yield more dividends, it could be so used.

A school of thought also suggested investing the funds through real estate, described as better secured with relatively high yield-investment asset than government bonds.

But with housing policies being inconsistent and poorly coordinated, this may not be better off either.

Eric Fajemisin, CEO, IBTC Pension Managers, said lack of political commitment and differing approaches between sovereign and sub-national entities were part of the policy challenges that could make real estate less attractive.

But some PFAs seem to be favourable tilting the argument in favour of any other portfolio investments, other than government borrowing the fund.

Other investors, see opportunities in the housing sector which, apart from being supported by favourable demographics, also presents investment opportunity valued at N56 trillion by the Federal Mortgage Bank of Nigeria (FMBN).

Having a population of over 170 million with about 80 per cent living in unplanned settlements; and only 11 million housing stock with 5 per cent in the formal mortgage bank, makes the housing sector an investors’ haven in the country.

This has made stakeholders more inclined towards investing the idle pension funds in the sector, rather than borrowing it out to government.



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