By DAYO ADESULU
Experts Urge Policy Changes to Boost Infrastructure Funding from Pension Assets
Despite Nigeria’s pressing infrastructure deficit, investment of pension funds into infrastructure continues to languish at around one percent, significantly below the 15 percent target set by the Pension Reform Act. This underinvestment raises concerns about the country’s ability to address its infrastructural challenges.
Current Investment Landscape
According to the latest pension industry report released by the National Pension Commission (PenCom) for August, total pension fund assets amounted to N21.1 trillion, with only N172.5 billion allocated to infrastructure funds. This represents a mere 0.82 percent of total pension assets. A comparison with previous months reveals a slight increase from July’s N169.7 billion (0.81 percent) and June’s N162.5 billion (0.7 percent) for infrastructure investments.
In stark contrast, a significant portion of pension assets remains invested in federal government bonds, which are considered risk-free. As of August, investments in FGN bonds reached N12.6 trillion, accounting for 59.7 percent of total pension fund assets.
Challenges in the Investment Climate
Experts attribute the low allocation to infrastructure funds to a lack of eligible instruments in the financial market and an unattractive investment climate in the infrastructure sector. PenCom has acknowledged that the primary challenge for Pension Fund Administrators (PFAs) is the absence of viable investment options for infrastructure development.
“The Commission and the pension industry would support efforts to issue eligible instruments for pension funds to bolster infrastructure development in Nigeria,” PenCom stated. However, the agency emphasized that any such investments must be made through safe and well-structured vehicles that comply with the Pension Reform Act and investment regulations.
The Need for a Robust Framework
Ivor Takor, Director of the Center for Pension Rights Advocacy, highlighted that pension funds represent long-term investable assets that could significantly contribute to economic development if supported by the appropriate institutional and legal frameworks. He lamented the constraints faced by PFAs due to the unavailability of eligible instruments, stating that a more favorable investment environment could have helped reduce Nigeria’s infrastructure deficit over the years.
Conclusion: A Call for Action
With the Pension Reform Act mandating a 15 percent allocation of pension assets to infrastructure, there is an urgent need for policy adjustments and the creation of viable investment instruments. Enhancing the investment climate for pension funds in the infrastructure sector could provide a critical boost to Nigeria’s economic development and help close the existing infrastructure gap.
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