Experts have called for more efficient ways to utilise and manage the pension funds as a buffer for infrastructure development in the country.

The session put together by DETAIL Commercial Solicitors and Africa Infrastructure Investment Managers (AIIM) had last Wednesday, hosted an IPFA Nigeria briefing titled: Investing Pension Funds in Infrastructure Projects: the Key Drivers which attracted many dignitaries in the industry.

The briefing was held in conjunction with UK Trade & Investment, and the International Project Finance Association in Lagos.  Mike Purves, Director of Trade of UK Trade & Investment, speaking on behalf of the Deputy High Commissioner, stressed the importance of the briefing as a means of bringing key stakeholders in the infrastructure financing sector to discuss pension funds as an alternative to infrastructure financing.

Nigeria has a considerable infrastructure deficit and one of the major challenges faced by project developers is securing project financing. The briefing addressed the opportunities and challenges relating to tapping into the trillions of naira of Pension Funds in the Nigerian market.

Ehimeme Ohioma of National Pension Commission, Andrew Johnstone of AIIM and Ayuli Jemide of Detail Commercial Solicitors gave presentations on the regulatory, commercial and legal aspects respectively of investing pension funds in infrastructure projects.

Andrew Johnstone who spoke about the increasing global trend in utilising pension funds for infrastructure development, noted that pension funds are particularly suited to infrastructure projects because of their long-term nature.

In the same vein, Ayuli Jemide of  DETAIL Commercial Solicitors discussed the issue of capacity of pension fund administrators to assess project risks and the importance of having an understanding of the nature of infrastructure projects, as each project presents a different set of risks.

While Mr. Ohioma, the Pencom representative, highlighted that Pencom has released an exposure draft of revised Guidelines on Regulation of Investment of Pension Fund Assets, he assured the briefing that Pencom has been and will continue to be very aware of and responsive to developments in the market to ensure pension funds can be invested in a diversified manner.

Also speaking, Mr. Taiwo Dauda, Executive Director of Finance and Administration at The Infrastructure Bank, led the team of expert panelists who discussed how pension funds can be invested in critical infrastructure and what needs to be done to de-risk PPP projects to enable them to access investment from pension funds.

The panelists,  including Wale Shonibare (Managing Director of UBA Capital Limited), Demola Sogunle (Managing Director of Stanbic IBTC Pensions Managers Ltd) and Patrick Mgbenwelu (represented by Tonna Ejiofor) of FBN Capital, spoke about the factors that hinder investment of pension funds in infrastructure projects. Their discussions centred on a lack of bankable projects, high political risks and the inherent risk-averse nature of pension fund administrators.

Also discussed was the fact that the current volume of pension funds (N2.3 trillion) is still a lot less than the amount needed to close the infrastructure gap. Mr. Sogunle mentioned that the target is to increase the percentage of people who remit pensions (currently 5 million Nigerians), as this will significantly increase the volume of pension funds available.

Panelists discouraged the concept of instituting a requirement for pension funds managers to invest a minimum amount of pension funds in infrastructure projects, as there are insufficient ‘bankable’ projects to invest in.