The National Pension Commission (PENCOM) said on Tuesday it planned to deploy at least 40 per cent of the total pension funds in the country (about N2.32 trillion) into investments in infrastructure development by 2019.
Total pension assets in Nigeria stood at N5.8 trillion as at July 2016, and accounted for about 6 percent of the country’s gross domestic product (GDP).
The Director General of PENCOM, Chinelo Anohu-Amazu, said in Abuja this was part of the Commission’s five-year strategy to enhance inclusive growth and generate better value for contributors.
Mrs. Anohu-Amazu was represented at the 2016 conference for finance correspondents by the Head, Investment Supervision department of the Commission, Ehimeme Onuorah.
The DG, who noted the current huge infrastructure gap in the country across critical areas of the economy, said there was high correlation between the level of infrastructure development and level of economic growth and performance.
She attributed the large infrastructure deficit in key sectors of the economy to population growth, demographic changes and urbanization, which have increased the demand for infrastructure in the country.
“Infrastructure is a potential avenue for pension funds to reap higher and consistent returns on investment,” she said. “If adequate policies, structures and regulations are instituted, pension fund investments in infrastructure and real estate development, provide veritable avenues for portfolio diversification as well as properly match pension assets with their future liabilities.”
Although the federal government’s allocation in the 2016 to capital expenditure increased to 26.2 per cent, or about N1.59 trillion, she said the Federal Ministry of Finance annual infrastructure needs estimate was about N7.3 trillion.
The only way to attempt to bridge the gap, she said, was through the use of part of the pension funds to execute projects to add value to the quality of life of the people.
The regulation on investment of Pension Fund Assets by PENCOM, she explained, allowed for investment in alternative asset classes, including Infrastructure “bonds” and “funds”, private equity funds, real estate/housing development.
“Alternative Assets are the only investment class with guaranteed returns, which are consistently above inflation rates,” she explained.
As part of the strategy, the PENCOM boss said a monetary funds investment structure was currently before the President for approval.
Once the approval was given, she said the micro pension department created to coordinate the pensions funds for the informal and private sectors to commence the use of the funds for investment development.
The Commission said it would collaborate with Central Bank of Nigeria (CBN) and the Sovereign Wealth Fund (SWF)/Infrastructure Concession Regulatory Commission (ICRC) towards the implementation and execution of model projects in the country.
Under the arrangement, it said a financing structure and credit enhancements/guarantees (for Bonds) would be developed with the CBN, SWF and the Debt Management Office (DMO) for the execution of the projects.
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