August 10, 2023

Volatile climate stunts pension investment into Infrastructure Fund

Nigeria’s pension assets grow by over 3%

By Rosemary Iwunze

Due to the unpredictable and volatile investment climate, Pension Fund Administrators, PFAs, have restricted their exposure to the Infrastructure Fund.

According to the June 2023 monthly report released by the National Pension Commission, PenCom, PFAs have invested only N127.4 billion or 1.3 per cent of the N16.8 trillion total pension assets into Infrastructure Fund, contrary to the 15 per cent benchmark mandated by the Pension Reform Act, PRA, 2014.

Earlier in May, PFAs invested just N123.4 billion or 1.2 per cent of the N16.1 trillion total pension assets into Infrastructure Fund.

According to economy analysts, infrastructural development remains grossly inadequate relative to the nation’s requirements due to lack of funds, which was why PenCom mandated PFAs to invest up to 15 per cent of the pension assets into Infrastructure Fund to stimulate long-term financing for infrastructure development in the country.

Speaking on the development, Chief Executive Officer, Pension Fund Operators Association of Nigeria, PenOp, Mr. Oguche Agudah, also noted that the lack of commercially viable investment vehicle has been a challenge in the investment of pension fund into infrastructure.
He said: “Pension funds remain a potential source of private financing to fund infrastructure in Nigeria, but the funds could only be invested indirectly through structured instruments, such as bonds and funds. It must be commercially viable and self-financing, that is, generate cash flows to repay itself overtime; and bid/concession processes must be open and transparent.
“There must be availability of bankable, commercially viable projects; full repayment guarantee by the Federal Government, especially in the early stages of projects financing; and strong political will and consistency in formulation of policies to retain investors’ confidence.”
He noted that there must be a legal and commercial framework in place for any proposed infrastructure fund.
Agudah said: “There have been various discussions spanning months regarding how best to structure the funds to invest in infrastructure development and also attract local pension funds, local and international investors.
“The industry has also been engaging with various parties on how best to individually and collectively fund infrastructure in a sustainable and responsible manner with a commercial return for the benefit of all stakeholders. The industry has recorded some success on some infrastructure funding across the country directly and through funds, investing in power plants, student accommodation, roads, and telecommunication infrastructure, among others.”