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Review… The battle for Nigeria’s N5.4tn idle pension funds

Review...Battle for Nigeria's N5.4trn idle pension funds

The proposal by the Federal Government to invest the N5.4t pension funds in infrastructure development has attracted a lot of criticisms. The fear being expressed by stakeholders is that such investments could be misappropriated as past experience has shown.

Minister of Power, Works and Housing, Mr. Babatunde Fashola who mooted the idea, justified the need by citing the South Africa’s pension funds as a model. He said: “The question to ask is what is the ‘home based’ pension fund doing?  The “visiting” pension fund from South Africa has a total of $897million in our economy.”

The minister said such investment should be channeled towards the building of roads, hospitals, educational facilities, railways, inland waterways with the aim of generating employment for the people, creating wealth for the country and improving the standard of living for all and sundry.

Like Fashola, the Director General, Debt Management Office (DMO), Dr. Abraham Nwankwo said the country needs about $175 billion, equivalent to N34.56 trillion, over the next seven years to fund its infrastructure development.

Nwankwo spoke last Tuesday at a one-day workshop organised by DMO on “Public Debt and the Challenge of Financing Nigeria’s Economic Recovery” for Capital Market Correspondents Association of Nigeria (CAMCAN) in Lagos.

He said the Federal Government would commit the entire N1.884 trillion it plans to raise in debt financing this year to capital projects.

It may be recalled that in 2013 the Ministry of Works had proposed alternative sources of funding highway infrastructure. Among these sources include borrowing from multilateral agencies and pension fund for key economic highways infrastructure that can repay the capital, and float road bonds for highway projects.

Besides, the federal government wanted to explore conventional PPP finance contracts as well as create viability gap funding through the road fund.

However for many Nigerians who are still smarting from past experience, they are rather uncomfortable with the government’s intention.

Chinedu Okezie, a pensioner civil servant said the citizenry should rise up to the government to forestall a situation the pension funds would be misappropriated to the detriment of the suffering workers, especially the pensioners who rely on their pensions to feed at old age.

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The Director-General, National Pension Commission Nigeria, Mrs Chinelo Anohu-Amazu has, however, noted that all pension funds are invested according to the industry’s investment guidelines.

She said the industry’s investment guidelines specified how the funds are to be invested, stressing that some investors do not get funds from the industry because they fail to meet the requirements in the guidelines.

The PenCom boss urged those agitating for the deployment of pension funds to understand that the funds are held in trust for workers who definitely get their contributions at retirement, hence all investment are done with the workers in mind.

Speaking with Ripples Nigeria over the issue, Mr Eguarekhide Longe, Chairman, Pension Fund Operators Association of Nigeria (PenOp), allayed fears that the pension funds were under some kind of threat.

“The guidelines are very clear. You can have an equity investment in infrastructure and you can have a fixed income investment in infrastructure, debts. Now, with debts the government owes you an obligation, which is not different from what we’re doing currently with FGN bond. That is the direction that we have opted to engage government on with infrastructure,” he said.

Speaking further, he said his team has since advised the Federal Government on the need to float specific bonds targeted at infrastructure finance.

Longe who is Managing Director of AIICO Pension Managers Limited, recalled that: “We said to them if you want to engage going forward, you can raise specific projects bonds fresh that you can invest in. And those bonds would be contractual. You will give us their interest, they give us the time of their liquidation and so on and so forth. So it’s simply changing the FGN bonds to target basic infrastructure needs. That way you’re protected as a subscriber.  It is not different from what was been done before. We’re not looking right now to engage on the equity channel.”

Former deputy governor of Central Bank of Nigeria (CBN), Mr Obadiah Mailafia, said: “The margin should be 50. We cannot afford to make any loss of people’s fund. It could be invested in FGN bond. It will be invested in something that, in 50 years, will continue to yield returns.

“Normally, pension contribution is a huge source of long capital. There is hardly a secondary market. PenCom and Stock Exchange should work out modalities for investment; maybe use PPP to build a fast rail from Lagos to Abuja. It will pay its way back. It can only fail when people go into corruption”, he enthused.

 

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