Insurance and pension experts have said insurance and pension funds can be useful to address the infrastructural challenges battling the country.
The experts, who spoke at the June edition of the Chartered Insurance Institute of Nigeria (CIIN) breakfast meeting in Lagos, last week, noted that, although these funds are available for government to borrow for infrastructural development, it must put in place proper structure to guarantee repayment of the borrowed funds.
President, CIIN, Mrs. Funmi Babington-Ashaye, said, the Annuity and Pension Funds are useful funding instrument in providing good transportation system, communication, water and electricity. Believing that insurance and pension sectors have a great role to play in the provision of infrastructure in the country, she urged government and relevant stakeholders to work together to appropriately deploy these funds to optimum use.
According to her, “Annuity and pension funds constitute a major source of institutional investments in Nigeria, and such funds, because they are long term in nature, can be channeled for development of much needed infrastructure in Nigeria and such infrastructures include transportation, communication, water and electric systems.”
Moreover, she implored the National Pension Commission (PenCom) to increase enforcement of the Pension Reforms Act (PRA) 2014, especially, on group life insurance and monthly pension contribution, adding that these two avenues will create more business for the insurance industry.
On her part, acting director-general, PenCom, Mrs. Aisha Dahiru-Umar, said the pension law gives room for 20 per cent of the N8 trillion pension fund, translating to N1.6 trillion to be invested in infrastructure, but that, government is yet to fully utilise this window. Sadly, she said, only about five per cent of the N1.6 trillion earmarked for infrastructure has, so far, been accessed.
Dahiru-Umar, who was represented at the event by the head, contribution & bond redemption department, PenCom, Mr. Olulana Loyinmi, added that pension fund is available for development of infrastructure as the fund remains a veritable tool to enhance economic development.
To her, at least, 20 per cent of pension portfolio is available for infrastructure financing, with infrastructure bonds having 15 per cent while Other Funds have five per cent.
“The problem is, there are few qualified infrastructure projects and instruments, such that allocated funds are under-utilised. Low liquidity; inadequate credit risk rating; crowded effects among others, affected the growth of local corporate bonds, hence, pension funds concentrated in government securities.
“There is the need for creation of more investment outlets, such as, infrastructure bond/funds with appropriate credit enhancements for government and other borrowers to fully utilise the pension assets as a funding window for provision of infrastructure,” she pointed out.