NKECHI NAECHE-ESEZOBOR—The proposed plan by governors of the 36 States of the federation last week to borrow N17 trillion from pension funds, have been described by expert as practically impossible and laughable.
Dr. Mark Adeyeye Oguntade, an investment analysts disclosed this to BusinessToday Online that investment of pension fund must follow approved PenCom guidelines on investment.
He maintained that the pension Reform Act 2014 explained in details how and where pension funds can be invested and this includes specialist investment funds and other financial instruments the Commission may, from time to time, approve anything rather that this is impossible and laughable.
According to him the PFAs and CPFAs are majorly responsibility to manage the funds they hold in trust for their contributors and also invest for better returns.
The guidelines for investment, he maintained is aimed at safeguarding pension funds and ensure adequate return on investment not to borrow to governors or any other person.
He said it was rather unfortunate that most of those in authority are not conversant with the workings of the Pension Industry specifically the Contributory Pension scheme (CPS).
It would interest you to know that the total value of the pension funds under management as at September 2020 stood at N11.56 trillion. Besides pension funds are not borrowed but rather invested in line with the investment regulations issued by the National Pension Commission.
The investment regulations allow pension funds to be invested in asset classes such as Bonds, Sukuk, Treasury Bills, Global Depository Notes and other securities issued by the Federal Government of Nigeria, provided that the securities are guaranteed by the Federal Government of Nigeria.
The investable assets also include Bonds and Sukuk issued by eligible State and Local Governments provided that such securities are fully guaranteed by Irrevocable Standing Payment Orders (ISPOs) and subject to the fulfilment of the conditions set out in the Commission’s Circular on “Minimum Requirements for the inclusion of State Bonds as Investible Instruments in the Pension Industry’’.
The Commission had deemed it necessary to prescribe that pension funds may be invested only in the Bonds floated by states that have fully complied with the CPS. This however does not guarantee pension funds investing in the state bonds, as Fund Administrators are required to conduct several risk analyses to decide if investing in such bonds meets expected yields and risk appetite. Accordingly, Fund Administrators may wish not to subscribe to a state bond.
From the fore going it is clear that though governors may have the intention to borrow pension funds and SERAP had raised the alarm, the realization of this intention is really not practicable.
It is noteworthy that one of the major achievements of the Pension Reform is the establishment of robust legal and institutional frameworks for the administration of pensions in Nigeria. In addition to the legal safeguards and institutional checks and balances, the Commission, as the regulator of all pension matters in Nigeria, has entrenched good corporate governance practices, high ethical standards instituted through rigorous supervision and regulation of the industry.
