By Favour Nnabugwu
NATIONAL Pension Commission (PenCom) may have been exploring untapped areas in infrastructure within the ambit of the laws to plunge pension funds for profit as the Commission says investing in prisons is a profitable venture.
The Director-General of PenCom, Mrs Chinelo Anohu-Amazu, said pension-fund investment into infrastructure is a key target, citing international successes.
She said that up to 15 percent of the total value of pension fund assets can be invested into infrastructure bonds and another 5 percent through infrastructure funds
“The reason for the criteria in the guideline is to make sure that the funds are safeguarded, shrouded from the vagaries of human discrepancies and all. Countries like Singapore and Canada have utilized their pension funds effectively for their citizens. It is not something that is outlandish; the key thing is: How did that utilisation happen?
Investment in infrastructure
In the same tune, the Head, Investment Supervision Department, Mr. Ehimeme Ohioma while delivering a paper on Pension Funds for Economic Development: Investing Pension Funds in Infrastructure at the recent the Commission’s workshop for Journalists in Calabar
Ohioma said pension funds can be invested in prisons like countries such as Ghana, Kenya, South Africa, India and Brazil that have effectively deployed pension funds for investment in infrastructure
He said, “Investing in prisons is actually a good venture because it is a profitableHe investment.”
“Infrastructure is a potential avenue for pension funds to reap higher and consistent returns on investment, if adequate policies, structures and regulators are instituted.”
He believed that investment in prisons cannot be a waste as he explained that investment in infrastructure is in two folds, hard and soft investment.
“Hard Infrastructure refers to physical/tangible assets necessary for society to function e.g. roads, rail, power/energy, real estate, airports, seaports, telecom infrastructure while he said soft Infrastructure refers to the institutions which are required to maintain the economic, health, and cultural and social standards of a country.
With pension assets in the country valued at N5.96Trillion as at September 30, 2016, are currently the largest available pool of patient capital.
Not without its own challenges, Ohioma however said investing pension fund in Infrastructure are faced with the availability of Products meaning that huge dearth of alternative asset products in the Nigerian financial markets.
Liquidity Risk: Pension funds prefer low or no risk products that are able to generate steady income from the onset worsened by the country’s current infrastructure situation places it at a competitive disadvantage globally.
“The current stock of infrastructure is inadequate to support the present and future socio-economic needs of the country, including the current imperative to diversify the economy away from oil in the shortest possible time, he added.”
He also put forward that the availability of long term financing is a critical factor – it is clear that private finance is needed to supplement government’s constrained financial resources
“Pension Funds are a potential source of private financing to help fund infrastructure in Nigeria. However, for now Nigerian pension funds can only invest indirectly in infrastructure through structured instruments, such as Bonds and Funds.”
“The minimum requirements/criteria for pension fund investments in Infrastructure, as stipulated in the Investment Regulation is very robust and provides adequate safeguard for pension fund assets.”
He cited, “Several countries in Europe, Latin America and Africa have successfully utilised part of the accumulated pension funds by investing in new infrastructure projects or renewing dilapidated ones.”