Stories by Yinka Kolawole

The Pension Reform Act 2004 does not allow direct investment of pension assets in housing development or any commercial real estate development.

Director-General, Pension Commission (PenCom), Mr. Muhammad Ahmad, noted in interview with the News Agency of Nigeria (NAN) that the Commission restricted itself to real estate investment trust or mortgage bank securities because it believed that the market was not fully developed.

Section 5.2.6 of the Pension Act states that: “Pension Fund Assets can be invested in real estates, only through instruments such as Mortgage Backed Securities (MBS) and Real Estate Investment Trusts (REITS).”

According to the PenCom boss, “As at today, only 8 per cent of the pension assets are invested in real estate and these are indeed legacy assets. They were assets that had been invested before the pension reform took off. For now, pension assets can only be invested in intermediary assets; in order words we cannot invest directly on housing development or any other commercial real estate development.”

He said that it would help the Commission to invest sensible aspects of pension assets if the Federal Government implemented the recommendations of the World Bank document for financial system strategy 2020 fully. “The fixed income market is quite challenging, especially the corporate governance and corporate bonds. As at today, only 3 per cent of the pension assets are invested in corporate bonds,” he said.

Ahmad said that the process and initiative to improve the corporate bond market had been slow, adding that a committee was set up on it, but most of the issues were yet to be solved. He said though the commission had 35 per cent allocation for corporate bonds, only 3 per cent had been taken up by pensioners. “We hope that by the time the issues identified in this book are implemented, we may have emerged a vibrant corporate bond market,” he said.