Nigeria’s sovereign investment agency to manage pension fund contributions

By Adesanya Alao

The Federal Government on Thursday said the Nigeria Sovereign Investment Authority (NSIA) would manage funds in the pension savings to bridge the infrastructure financing gap and ensuring that contributors get paid their entitlements as and when due in the years ahead.

The government also allayed stakeholders’ fears over the insecurity of the funds, saying that the involvement of NSIA in the prudent deployment of the fund to critical areas of national need would ensure that global best practices are adopted for efficient management of the investments.

Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala who disclosed this when she met the board and management of the NSIA in Abuja, said government was committed to seeing that the Sovereign Wealth Fund and other funds available for investments are prudently deployed to critical areas of national needs and efficiently managed in such a way that would impact positively on the economy and improve the well being of Nigerians.

To ensure this, she said that arrangements were in top gear to make the NSIA design appropriate mechanisms that would help in deploying the idle savings of over N3 trillion so far to core investment areas that would add value to ongoing national infrastructure capacity initiatives and at the same time contributors don’t suffer before drawing from their pension savings.

"One of the benefits we have from having the SWF is not in the plethora of organisations that want to co-invest but that they will also help us work along with our pension funds. They are designing at the moment a mechanism that will enable us, you know Mr President had asked that our pension funds be a bit more active in our investments. In other countries their pension funds invest in infrastructure and other things but how to do it to make sure that they are protected," she said.

"One of the things that we want to thank the NSIA is that they have got the expertise to be able to be able work with the pension funds to design a mechanism whereby they can also invest in infrastructure whilst still being protected because this is money that people have worked for. So, it has to be done very carefully so that they earn returns and then be able to carry on with their pension activities.

"So, this is also being put on the drawing board now and discussions are going on and they are designing that mechanism. Once it is done, you can imagine that that can even attract our own pension funds in a protected manner. I say protected because it is money people have worked for but it will also work for the good of the country. So, this is another benefit we didn’t have before, we didn’t have the expertise and now we have got it in this SWIA."

She explained that given the professional competencies of the NSIA management and local and international partnerships already established for the purposes of ensuring that Nigeria gets it right in using her SWF for leveraging national development drive, there are strong indications that Nigeria’s model, despite the fact that it is taking off with just $1 billion, would be used a s a reference point to other countries in terms of prudent and professional management as the years roll by.

On the implications of involving leading global fund management firms for the SWF resource base which is believed to be shallow, the Minister said partnership with such entities locally and internationally would not impact negatively on the fund, adding that the the fee negotiation was very competitive and fees are incredibly low for the type of service the country is getting from the services being rendered by the partners.

According to her, the consulting firms accepted to support the country’s SWF investments for two reasons namely, their faith in the NSIA given the professional expertise and cognate pedigrees of the members and because they also looked at the future of the country and they believe that these funds over time will grow

In his remarks at the forum, the NSIA Chief Executive Officer, Managing Director/Chief Executive Officer, Uche Orji, the SWF which had an initial $525million for the take-off of projects, said the Authority had identified seven focus areas for its operations. He listed these as road infrastructure, health care, housing, power, agriculture and water resources.

Orji, who said that high level discussions were going on with the global and local custodians on the modalities of how funds would be deployed to the identified sectors, said the specifics of how much is going to be deployed to which sector would be made public within the next three weeks.

The approved guidelines specifically provided that the Future Generations Fund and the Nigeria Infrastructure Fund will each get 32.5 per cent while Stabilisation Fund will receive 20 per cent. The balance of 15 per cent will be unallocated for now.

The SWF investment allocation formula stipulates that the Future Generation Fund and the Nigeria Infrastructure Fund would each get $325million, or 32.5 per cent of the $1billion seed funding of the Sovereign Wealth Fund (SWF), while $200 million, representing 20 per cent would be committed to the Stabilisation Fund, and $150million, or 15 per cent will go into the Future Generation Fund investment opportunities.

Source: WorldStage Newsonline