Chuks Udo Okonta
Pension Fund Administrators (PFAs) in search of high returns on investment have pulled over N135 billion from the volatile capital and money markets, Inspen has learnt.
A report by the National Pension Commission (PenCom) states that investment in capital market declined by N30.80 billion and money market N105.11 billion in the first quarter of 2015.
PenCom noted that Federal Government Securities have continued to dominate in pension fund investment as it account for 66.22 per cent.
“The FGN securities continued to dominate total pension fund investment. This asset class accounted for 66.22 percent of total pension fund investments during the quarter. This could be explained by the uncertainties that characterized the stock market in 2014 and the persistent volatilities in the stock market. Hence, operators saw FGN securities as ‘flight-to safety’ strategy.
“There was a divestment from ordinary share, which declined by N30.80 billion as a consequence of the volatilities in the stock market. The local money market securities also witnessed a large decline of N105.11 billion as the proportion share of this investment decrease,” it said.
The Chairman, Pension Fund Operators Association of Nigeria (PenOp) Misbahu Yola, has canvassed the design and development of safe and workable system to ultimately channel the over $ 25 billion pension funds for real economic development.
He said this at a forum in Lagos, stressing the need for the creation of an enabling environment to facilitate evolvement of quality investible products and alternative asset classes through which the pension assets can be invested safely, with high returns for the contributors.
He noted that as at May 31, 2015, Nigeria’s contributory pension scheme had approximately 6.6 million contributors and assets in excess of $25 billion.
He said the pension industry had only covered less than one tenth of the working population; with assets less than five per cent of Gross Domestic Product (GDP) and the effect on economic development is still at embryonic stage.
Yola maintained that to effect significant changes, it is imperative that the Regulator, Pension Operators and other key stakeholders work together to build a strong and sustainable pension system that works for our environment.
“An enabling environment that facilitates the creation of quality investible products and alternative asset classes through which the pension assets can be invested safely, but with relatively high returns for the contributors must be encouraged. Included in these areas of consideration are private equity, infrastructure bonds and funds, and real estate backed instruments.
“It is important to mention here that financial intermediaries have done some work in this regard. However a lot more needs to be done with regards to enlightenment, capacity building to give pension funds comfort in terms of risk and safety. In addition, to make matters more challenging for the alternative asset class, plain vanilla asset classes have remained very attractive in terms of risk return profile,” he said.