PenCom: Lack of Guarantee Hindering Investment of N6trn Pension Fund

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James Emejo in Abuja
The National Pension Commission (PenCom) has said existing conditions are still inappropriate for the investment of pension assets in infrastructure as widely canvassed.

The Head of Investment Supervision Department, PenCom, Mr. Ehimeme Ohioma, pointed this out at the just-concluded seminar for pension, insurance and labour correspondents and business editor, which was organised by the commission.

Speaking on “Pension Funds for Economic Development: Investing Pension Funds in Infrastructure”, Ohioma noted that there were currently no guarantee for the safety of products that were seeking financing from pension assets, which had accumulated to about N6 trillion under the Contributory Pension Scheme (CPS).

He said though pension assets were a potential source of private financing to help fund infrastructure in the country, the funds could only invest indirectly in infrastructure through structured instruments, such as bonds and funds for now.
Obioma indicated that the dearth of alternative asset products in the Nigerian financial markets and current liquidity risks were challenges for pension funds investment in infrastructure.

Other major constraints to pension funds commitment to infrastructure, according to him, include policy inconsistencies characterised by historic examples of project development challenges with government as well as the consistently higher yields offered on ‘risk-free’ FGN fixed income instruments which had further crowded out alternative assets.

He explained that for pension assets to be invested in infrastructure, there must be availability of commercially viable projects, full repayment guarantee by the federal government especially in the early stages of projects financing.
Furthermore, he added that strong political will and consistency in formulation of policies to retain investors confidence were also critical.

He said there must be an open and transparent transactions’ procedures and processes, in terms of biddings process, contractors’ selection, pricing, stressing that government should institute policies to attract global infrastructure advisors and managers, in order to build capacity and facilitate knowledge/skills transfer to Nigerians.

According to him, the funds would not be compromised on the minimum requirements/criteria for pension fund investments in infrastructure, as stipulated in the investment regulation as well as adequate safeguard for pension fund assets.
Among other things, Ohioma said listing and prioritising infrastructure projects by the National Planning Commission and Federal Ministry of Finance would be a right step in the right direction.