By Rosemary ONUOHA

If the Federal Government is serious about using some part of the pension fund to revamp the power sector, there is need for a tripartite partnership involving the National Pension Commission, PenCom, Pension Fund Operators, PenOp, and the federal government.

Accordingly, any collaboration with government to turn the power sector around must be through such public/private partnership.

Chairman of PenOp, Mr. Dave Uduanu, who made this assertion, said that power projects must be guaranteed by government if PenOp will be involved.

Uduanu said “Specifically, on infrastructural development, what we asked for is that it must be public private partnership projects and those projects must have a guarantee from the federal government. Those are pre-conditions that must be met, before pension funds can be used for infrastructure. If those pre-conditions are not in place, the fund cannot be used for infrastructure.

A major power grid

“It is also in the PenCom guideline that the projects must be guaranteed by the federal government because we know that in this country, one government can give you a concession and another government could come and revoke it. We want an irrevocable guarantee from the federal government that these projects cannot be changed.”

Uduanu added that pension funds can go into infrastructure either through a bond – a dedicated infrastructure bond that is tied to a specific project, adding “Take for example, Lagos/ Ibadan Expressway is a project that is adjudged to be viable because of the traffic on it.

“If the federal government says it wants to do the road and would give it to a project manager who is reputable, who would employ a contractor, and the government says it wants to issue infrastructure bond of N100 billion to finance the project, and we know that when the project is finished there would be toll which would enable them collect the money, of course, pension funds can be deplored to such a project.

“Like what they did in Chile, they used pension fund to finance the national housing deficit, but it was through mortgage bonds that were issued and guaranteed by their government. Those bonds meant that pension funds put money in a pool and people borrowed this money to build houses, particularly those that were contributors to the scheme. But there was a guarantee that the money would not be lost. Pension fund can invest in those kinds of projects,” Uduanu said.

According to Uduanu, the number one objective of PFAs is to ensure that when a contributor retires, there is money to finance his pension.

“PenCom came up with guidelines on how the pension fund should be invested. The first guideline that was issued was very conservative. It was only money market and bonds with some equities. The guideline has been reversed three times and we are going to the fourth revision. The last revision includes all sorts of instruments. There was inclusion of infrastructure, private equity, mortgage backed securities, real estate investment trust.

“The challenge we have is that in Nigeria, people do not care to read those guidelines before they make pronouncements. People say we want pension fund to be used for housing, the law has said we can invest in mortgage backed securities and real estate investment trust. However, there are clear guidelines that must be met before we can do that, so that the pension assets are protected,” he said.