‘Want to access pension funds for infrastructure, meet investment guidelines’

The objective of the Contributory Pension Scheme (CPS) is to ensure that those who contribute to the scheme have access to their pensions at the point of retirement. In ensuring that this objective is realised, the managers and regulators of the scheme are conscious of this promise, particularly in making investment to make sure that not only does the fund generate fair returns, it is readily available when it’s needed.

Takingdecision therefore on where this fund should be channelled, the players are cautious and so operate within the stipulated investment guidelines irrespective of whatever pressure from any quarter.

The regulator on the other hand is watchful, and regularly monitoring operators level of compliance to stipulated investment guidelines, and so are always ready to sanction to the extent of withdrawal of license on serious breach of the law, that in whatever form put to risk the contributionsof workers.

While the regulator, the National Pension Commission (PenCom) says it’s not in any way a toll gate to access pension fund for infrastructure or whatever available instrument, the Commission believes that every decision in this regard is guided by the law to which nobody can influence.

“The contributory Pension Scheme is guided by law on where the pension fund can be invested and neither the PFAs, nor the government, nor PenCom or anybody can step outside of those parameters.”

Chinelo Anohu-Amazu, director general, National Pension Commission (PenCom) made the remark while responding to questions by journalist on recent clamours by government and politicians on utilisation of accumulated pension assets put at N5.3 trillion for infrastructure development.

Anohu-Amazu stated that the Commission is willing to see pension funds support the economy, develop infrastructure and enhance the welfare of Nigerian workers and the citizens as whole, as long as the money will notbe found wanting when their owners need them.

“We in the Commission don’t constitute a toll gate for the pension fund. So, if you have to call me to intervene for a PFA to invest in your infrastructural vehicle, it them means you did not meet the guideline.”

It is not an arbitrary decision or what anybody can wake up one morning and change. PenCom has been given the power to issue guideline and this follows the dictates of the law without deviation.

According to her, every available money in pension today is already invested, as there is no one kobo lying idle anywhere, as people are speculating. Today, about 75 percent of the N5.3 trillion is invested in Federal and State Government bonds as well as treasury bills, while the rest is distributed in other asset classes including equities both public and private, as well as real estate investment trusts, she sated.

“There is no money lying ideal anywhere, not even one kobo, they are all invested.” This money is also not with PenCom, and with TSA today it’s easy to know how much any agency is having, Anohu-Amazu observed.

“One of our jobs, through our investment department is to ensure that investment is optimally done. There is a requirement for daily returns on what the money is used for on-day-to day basis. And if we find any breach of the law, the PFA is queried right away and if there is non-compliance with the guidelines, there is sanction.”

According to the draft investment guideline issues by the Commission in 2015, the PFAs shall invest pension fund assets with the objectives ofensuring safety and maintenanceof fair returns.

PFAs shall not invest Pension Fund Assets in instruments that are subject to any type of prohibitions or limitations, on the sale or purchase of such instrument, except for open/close-end/hybrid funds and specialist investment funds allowed by theRegulation.

PFAs are to ensure that appropriate legal and financial due diligence are undertaken on all Prospectus/Offer Documents of eligible debt securities and other allowable instruments prior to investment.

Pension Fund Assets can be invested in infrastructure projects  through eligible bonds,sukuk, subjectto the following requirements:The infrastructure project shall not be less than N5 billion in value; be awarded to a concessionairewith good track record through an open  and transparent bidding process in accordance with  thedue process requirements set out in the Infrastructure Concession and Regulatory  Commission Act (ICRC Act) and any regulation made pursuant  thereto and certified by the Infrastructure Concession and Regulatory Commission (ICRC) and approved by the Federal Executive Council(FEC). The business plans and financial projectionsmust indicate that they are viable as well as economically and financially rewarding for investment by pension funds.

The bondsor sukukissued to finance the infrastructure project shall  in addition to the requirements abovehave robust credit enhancements e.g. guarantees by the Federal Government or eligible bank/development finance institution or MDFOs;  have a maturity date that precedesthe expiration of the concession; andhave a feasible and enforceable redemption procedure in the event of project suspension, cancellation or, in the case of regulated sectors, when changes in regulatory or policy decisions make the project to differ significantly from its original financial projections, among other conditions.

Meanwhile, managers of pension funds are very critical about safety of the funds particularly when making decisions on investment of the funds. The idea is to ensure that the money is available to pay retirees or owners of the fund at their point of retirement.

This therefore informs operator’s stance that pension investment vehicles must be securitized for safety, such that it is guaranteed by government bonds in case of the unexpected.

In this vein, National Pension Commission (PenCom) has advised investment managers who would like the accumulated pension fund in the country to be channelled towards funding of specific industries and projects across the country to provide certain guarantees.

The Commission said stakeholders must securitize such investments in such preferred projects in addition to ensuring accountability and transparency in the management of invested pension assets.

The regulator said the securitization of investment to attract pension funds, is a challenge for Market operators, Financial Advisers, Leasing Houses and Estate Managers, and so should go back to the drawing board and develop instruments to enable PFAs mobilise funds under their custody for this purpose.