The National Pension Commission (PenCom) has clarified that pension funds are not lent out but invested in FGN Bonds, Treasury Bills and other financial instruments yielding profit over time.
The funds which stood as at N8, 499,891.97 trillion as at November 2018 have depleted through borrowing to corporate entities, states among others.
A document exclusively obtained from PenCom by Blueprint showed the FGN Bonds gulped N4, 439,561.29 trillion, representing 52.23 per cent of the total amount, while investments in Treasury Bills amounted to N1, 685,453.27 trillion which is 19.83 per cent.
According to the document, total investments in FGN Bonds totalled N6, 162,999.71 trillion which is 72 per cent of the funds. Investment in domestic ordinary shares took N584, 321.06 or 6.87 per cent, while foreign ordinary shares got N60, 529.26 or 0.71 per cent.
N9, 407.22 or 0.11 per cent was invested in agency bonds, while N23, 919.32 or 0.26 went into Sukuk bonds. Also, Green bonds got N4, 658.60 or 0.05 per cent, as state government securities got N143, 841.37 or 1.69 per cent invested in it.
Similarly, corporate debts got N522, 511.51 or 6.15 per cent, corporate bonds got N515238.67 or 6.06 per cent investment, corporate infrastructural bonds got N7, 272.83 or 0.09 per cent and supra-national bonds got N6, 201.65 or 0.07 per cent investment.
The document further showed N705,786.76 or 8.30 per cent was invested in local money market securities, bank placements got N636,987.62 or 7.49 per cent investment, just as N68,799.14 or 0.81 was invested in commercial papers.
It was further gathered that foreign money market securities got N2, 914.14 or 0.03 per cent, while N15, 765.26 or 0.19 per cent was invested in mutual funds.
Open/close-end funds, PenCom said, got N10, 256.36 or 0.12 per cent investment during the period, while REITs had N5, 508.90 or 0.06 percent and real estate properties got N226, 289.65 or 2.66 per cent investment.
Others, as stated in the document were; Private equity funds N40, 415.75 of 0.48 per cent, infrastructure funds N15, 572.94 or 0.18 per cent of the total amount; and cash and other assets got N12, 742.93 or 0.15 per cent investment, bringing all to a grand total of N8, 499,891.97 trillion.
Commenting on the initiative, acting Director-General PenCom Aisha Dahir-Umar said to promote a stable and sustainable pension industry, the agency adopted zero-tolerance for non-compliance and consultative supervisory philosophy in the issuance of guidelines and the review of existing ones.
This, she said, was to further promote sound corporate governance in the industry and ensure the security of the pension assets.
“We believe this will promote better risk management in licensed pension operators,” she said.
The PecCom boss also said the commission released the framework and guidelines for the implementation of the micro-pension scheme in 2018.
“Similarly, circulars on pension enhancement and processing procedures of deceased benefits entitlement were also released by the commission.”
She further said monitoring and reporting of non-compliance remained part of the responsibilities of the compliance officers.
It’s welcome development –NLC scribe
Speaking on the development in an interview with Blueprint, General Secretary of the Nigeria Labour Congress (NLC) Comrade Peter Ozo-Eson described investing pension funds as normal practice globally.
He said it’s less risky investing in government security as against stock market which is volatile.
By this, he said this investment is not as if government goes directly into pension funds to borrow money, rather the Pension Fund Administrators (PFA) following the investment guidelines, buy and also sell the securities.
“There is nothing that is unusual that I see there, because pension funds have to be invested and the options for investments are governments’ security and this consists of some elements.
“It can be the savings bond of government, it can be Treasury bill and any other security that government issued to borrow money.
“This investment is not as if government is going directly into pension funds to borrow money. It is that the PFA following the investment guidelines buy and they can also sell the securities.
“These options are investment in stock market but that market is extremely volatile and therefore the guidelines limit the proportion of investment that you can put into such area.
“So, the long-term safest investment is in government security and that is why you have high proportion. It is normal with pension funds generally everywhere that they look for less risky investment, and the less risky investment is government security.
“So, I don’t see anything unusual with the borrowing. I am talking as an individual and an economist that is my reaction. Labour has not formally discussed this matter. It has not been an issue that has given us cause to debate in our organ.”
