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Pension Fund Operators Invest N5.5trn In FG Securities



With the nation’s total pension fund rising to N7.79 trillion as at the end of February 2018, pension fund operators have invested N5.5 trillion, about 70 per cent, of the pension assets in federal government securities.

Of the N5.5 trillion invested in FGN securities, N3.9 trillion representing 50.98 per cent of the total pension fund was invested federal government bonds.

This implies that the federal government has borrowed a whopping N5.5 trillion from the pension fund since the inception of the Contributory Pension Scheme (CPS) in 2004, thus becoming the major beneficiary of the pension pool.

LEADERSHIP investigations showed that the money was loaned to the government by the pension fund managers to fix its infrastructural deficits as well as meet its financial obligations as and when due.

While the money has enabled government to build new roads, repair the rail system, fix some of the power challenges, pay salaries of its workforce, it also led to economic growth and development.

This means the pension industry has granted, as loans, 70 per cent of the pension assets to the federal government through bonds and treasury bills.

And since federal government bonds and treasury bills are less risky and gives better returns on investment, the pension operators decided to invest heavily in them, even as the new scheme has generated about N2.5 trillion as investment income from some of the investments Pension Fund Administrators (PFAs) have made.

Latest figures on the performance of the pension assets sourced from the National Pension Commission (PenCom) by our correspondent at the weekend also showed that the pension assets grew by N280 billion between December 2017 when the Fund was at N7.51 trillion and February 2018.

A sum of N311.1 billion was invested by pension fund operators in corporate debt securities, while investing N632.8 billion in local money market.

The Deposit Money Banks (DMBs) equally borrowed N565.8 billion from the pension assets in the last 13 years.

The reason for the constant growth in pension assets, LEADERSHIP learnt, is not unconnected to the fact that pension contributions are made on a monthly basis to the Retirement Savings Account (RSAs) of employees, while the Pension Fund Administrators (PFAs) also make a lot of profit from investment of these funds into federal government bonds, stock market and other less risky investment windows, which also goes into the pension fund pool.

Moreover, with some states starting the process of joining the Contributory Pension Scheme (CPS), as well as the readiness of the federal government to settle some of its arrears, as well as PenCom going after defaulting employers, analysts said these indicators will continue to push the fund upward.

The consistent increase in the volume of pension funds has allowed pension fund operators invest more in the nation’s economy.

Also, compliance with the monthly pension remittance of employees by employers as stipulated in the Pension Reforms Act (PRA) 2014 by the private sector players seems to have improved with more private firms now remitting on a consistent basis and more firms joining the CPS, thereby leading to increase in the total pension fund.

Although there are pockets of employers who have refused to comply with the pension Act, these defaulters are currently being trailed by PenCom to remit their workers contribution or be taken to court.

However, that cannot be said of government at the federal and state levels as both tiers of government are still lagging behind in prompt remission of monthly pension contribution into the pension accounts of government workers.

While federal government has been remitting, but not as prompt as expected, state governments are the major culprits with 22 states yet to commence the implementation of the new pension scheme.

But despite government resistance, market observers believe that as long as the compliance level of the private sector keeps improving and more private sector players now ready to join the CPS and PenCom going after defaulting employers, these indicators will continue to push the pension funds now at N7.79 trillion, upward.

Speaking on investment of pension fund in government securities, immediate past chairman, Pension Funds Operators of Nigeria (PenOp), Mr. EguarekhideLonge, said, “With about N5 trillion invested in infrastructural development through bonds, It shows you that the pension fund has been active. So, the philosophy of managing this money is to add to it. It means that the money has been used profitably.”

“There are ample provisions in the investment guidelines that allows for investment in projects, so to say, infrastructure, private equities and real estates, bonds, among others.  But what has happened is not that the money is idle in the PFAs or that the fund managers have not looked for those projects.

“It is not their jobs to go and create projects, but we have actively sort the investment banking community to develop products that we can invest in.”

Speaking on the improved compliance of the private sector to CPS in an exclusive interview with LEADERSHIP, managing director of AXA Mansard Pension Fund Administrator, Mr. DapoAkinsanya, applauded the feat of the private sector, saying it is encouraging.

He added that all over the world, defined benefits scheme is currently facing challenges, which necessitates the call for defined contributory scheme.

While advising state governments to gradually transit to CPS, he urged the federal government to reduce its financial burden and devote more to pension of its workers.