Ebere Nwoji
After many years of low investments of pension funds in infrastructural development by pension fund managers and custodians due to fear of risks that may emanate from such investments, pension fund operators said they now believe that infrastructure was the most attractive alternative asset class to invest in.
To this effect, pension fund operators under the aegis of Pension Fund Operators Association of Nigeria (PenOp), have launched a report titled “Pension Funds and Infrastructures in Nigeria” to educate the public on investment of pension funds on infrastructural development.
PenOp, in the report, noted that though Nigeria has a huge infrastructure deficit, to the extent that World Bank estimates indicated that Nigeria required annual investments of about $100 billion in infrastructure every year for the next 10 years, the use of pension funds as alternative means of infrastructural financing has not been given consideration.
PenOp said as a result, pension funds investments into infrastructure has continued to be largely untapped market and below one per cent of the sector’s Assets Under Management despite steady growth in pension assets.
“The use of pension funds for financing infrastructure remains untapped as a source of financing even when the investment guideline permits them to invest up to 10 percent of the fund into infrastructure,” the report stated.
The report attributed this to the fact that over the years, PFAs feared that investment of pension funds in infrastructural development would sink contributors’ funds due to lack of safety.
It, however, said the PFAs had planned to invest heavily in infrastructure effect from this year believing that infrastructure was key to transformative power in Nigerian economy.
The report said infrastructure represented those capital projects or goods that would serve as the basis for the enhancement of industrialisation and economic growth of a nation which included paved road, a good railway system , constant electricity , operational seaport , good communication networks , effective financial system among others.
The report highlighted reasons pension fund managers got interested in infrastructures, saying it guarantees long term and stable cash flows, protects fund against effects of inflation, infrastructural assets are essential and resilience , it has long economic life span , it gives diversification benefits and has the potential to create positive social and environmental impact.
Explaining the reason for the report, PenOp Head Research and Investment Relations, Mr Akintola Akintola, said PenOp was aware of its role of aside advocacy, educating the public, regulators, and other financial market stake holders as well as policy decision makers on making the best decisions.
He said as such the association took the decision to make the report to fulfill the mandate because there have been a lot of talks on infrastructure since the past few years.
“People said the roads are bad, no hospitals, no street lights, if you are moving round Lagos there is no rail so no car no movement.”
According to him, against this backdrop, PenOp said: “How can the pension sector which is the largest pull of investible capital help to invest in infrastructure sector and invest in a way that it will help pension fund grow by making more returns than normal. That was why we decided to do the report so we wanted to look at it from the perspective of pension fund what they will like to see from people who want to do infrastructure project, what they will like to see from them that will make it bankable and give the pension fund the comfort to invest in the area bearing in mind that the contributed funds needs to be protected,” he explained.
He said the PenOp infrastructural investment report was really meant to educate and form discussions for policy and deepen financial market in a way that it could be readily available and pension fund ready to invest.
He added the report was meant for other people in the financial market.
Leave a comment