Against the backdrop of huge infrastructure deficit in the country, investment of pension funds into infrastuture has continued to hover around one per cent, falling far below the 15 per cent benchmark stipulated in the Pension Reform Act.
The development, according to experts, is due to non-availability of eligible instruments in the financial market, even as the investment climate in the infrastructure sector remained unattractive.
The pension industry report for August released by the National Pension Commission, PenCom, show that while total pension fund assets stood at N21. 1 trillion, investment into infrastrure funds stood at N172.5 billion, indicating a 0.82 per cent of total pension fund assets.
Further analysis show that in the month of July, investment into infrastructure funds was N169.7 billion, representing 0.81 per cent of the N20.9 trillion total pension fund assets.
In June, investment into infrastructure funds stood at N162.5 billion, which represented 0.7 per cent of the N20.5 trillion of total pension fund assets.
Meanwhile the bulk of the pension assets are invested into federal government bond borrowing which is risk free.
Investment into FGN bonds in August stood at N12. 6 trillion, indicating a 59.7 per cent of total pension fund assets.
In July, investment of pension fund into FGN bonds stood at N12.4 trillion representing 59.6 per cent of the pension assets, while investment in FGN bonds in June was N12.2 trillion representing 59.7 per cent of the pension assets.
Meanwhile, the Pension Reform Act 2014, stipulates that 15 percent of the total pension asset should be deployed to infrastructure.
Reacting to the poor investment in infrastructure fund, experts stated that the allocation pattern was informed by better security and yield in the FGN bond, while investment climate in the infrastructure sector remained unattractive.
According to PenCom, the main challenge inhibiting the Pension Funds Administrators, PFAs, from investing the pension assets for infrastructure development is the non-availability of eligible instruments in the financial market. "The Commission and the pension industry would support efforts at issuing eligible instruments for pension funds to support infrastructure development in Nigeria," PenCom stated.
However, PenCom emphasized that such investments must be done in safe and well-structured vehicles that align with the provisions of the Pension Reform Act and the Regulation of Investment of Pension Fund Assets.
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"This establishes transparency and fair valuation, thus removing all ambiguity on the real market values and tradability of the assets. PFAs can then readily buy and sell at prevailing market prices. The eligibility requirement ensures that the assets are real, liquid and within tolerable risk levels," PenCom stated.
Also speaking, Director Center for Pension Rights Advocacy, Mr. Ivor Takor, stated that pension funds are long term investable funds that can be leverage for economic development, given the right institutional and legal framework as well as economic conditions.
He said: "It is unfortunate that Pension Fund Administrators are contrained by non-availability of eligible instruments in the infrastructure sector to channel more pension funds into. If the reverse is the case, the huge infrastructure deficit we are experiencing in the country would have declined over the years."
