PenOp Statement to clarify Governors borrowing or using Pension Funds for Infrastructure
Pension Fund Operators Association of Nigeria (PenOp), released a statement to clarify a number of points on the media reports about the government/governors borrowing trillions of Naira from pension funds to finance infrastructure.
Below is the statement;
The headline of these reports are sensational and do not capture the full thrust of the issues, What is being referred to is a proposed infrastructure fund to be professionally managed by the Nigeria Sovereign Investment Authority (NSIA).
There have been various discussions and proposals spanning months regarding how best to structure a framework to invest in infrastructure development and also attract local pension funds and other investors – local and international.
The discussions have centered around coming up with a structure that has a legal and commercial framework in place for this proposed infrastructure fund. To the best of our knowledge, this is still in the proposal stage, and not finalized. When and if the fund gets finalized, pension funds managers can decide if they will invest in the fund or not based on their individual risk appetite.
It is important to note that the Contributory pension scheme we run in the country which was enacted by law in 2004 makes provision for every contributor to the scheme to have a retirement savings account (RSA) which houses the individuals contribution and their employers’ contribution. The sum total of these individual RSA balances makes the total pension assets in the scheme.
Furthermore, There are currently 22 (Twenty Two) Pension Fund Administrators (PFAs) and Six (6) Closed Pension Fund Administrators (CPFA). Each of these 28 entities have their individual boards, investment strategies, investment appetites, investment committees, etc. It is going to be difficult to compel all 28 of them to invest by fiat in something that does not suit their individual strategies or risk profile.
So, whatever investment proposal has to appeal to a large number of the professional fund managers. In addition, whatever, investment these entities make has to follow the laid down PenCom guidelines on investment of pension funds. These entities have risk managers and committees that monitor and decide on investments for their firms.
The PFA and CPFAs have a fiduciary responsibility to manage the funds they hold in trust for their contributors so that when they retire, they will have decent funds to fall back on. They have carried this function out successfully for the past 16 years.
Having said that, 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, telecommunication infrastructure, among others.
The industry also continues to engage with a number of parties and is looking to partner more in infrastructure funding in ways that are beneficial to all stakeholders. The intended benefits include delivering a commercial and sustainable return for contributors, helping to grow the economy, create jobs that will fuel more contributors for the industry and by its investment activities improve the governance of projects and companies involved in this space.
Below are all the links referenced in Everything you need to know about Governors borrowing N17 Trillion from Pension Funds
Everything you need to know about Governors borrowing N17 Trillion from Pension Funds
Extract from Nigerian Governors’ Forum Communiqué which revealed Governors plan to Borrow N17 Trillion From NSIA & Pension Fund
SERAP letter to Buhari to stop Governors from borrowing N17trn from Pension Fund
NLC warns Governors that Workers’ Pension Fund is not for borrowing
PenOp Statement to clarify Governors borrowing or using Pension Funds for Infrastructure
Minimum Requirements for PFAs to Invest in State Bonds.
Status of Contributory Pension Assets as at end of August 2020
Status of Implementation of CPS in States as at September 2020 here
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