President-elect Buhari eyes pension funds for power sector financing

Chuks Udo Okonta 

Barring a change of mind, the President-elect Muhammadu Buhari, has said he hopes to work with the National Pension Commission (PenCom) on how to use part of pension funds as soft loans to operators in the power sector.

He disclosed this in what he tagged: 'My 100 days covenant with Nigerians' he pledged to "Work with PenCom to consider giving soft loans to power sector operators."

 

PenCom had recently issued guidelines on how pension funds  can be invested in infrastructures. The regulator and operators main concern remains the security of the funds, and this has led to provisions of safety valves in the guidelines. They have always demand for guarantee from government on any kobo taken from the fund.

Section 5.2.3 of the Regulation   on Investment   of Pension Fund Assets outlines         the    investment    criteria    for   pension    fund    investments     in Infrastructure, as follows: the Infrastructure   project shall be: Not less than N5 billion in value and must be  awarded   to  a  concessionaire    with  a  good  track   record through   an   open   and   transparent    bidding   process   in accordance with  the  due  process  requirements   set out  in the Infrastructure Concession and       Regulatory Commission  (ICRC)  Act    and    any    regulation     made pursuant thereto and certified by the Infrastructure Concession  and  Regulatory  Commission   (ICRC)  and approved by the Federal Executive Council (FEC).

The regulation states that   fund can only be invested in core  infrastructure projects, whose business plans and financial projections indicate that they are viable as well as economically and financially rewarding for investment by pension funds.

 It said the  bonds   or   debt    instruments    issued   to   finance    the infrastructure project shall in addition, have robust credit enhancements  for example, Guarantees by the Federal Government   or   eligible    bank!    Development finance institution or MDFOs; Multilateral Development Finance Organisation for example,  International Finance Corporation (IFC), African Development Bank (AfDB) and so on.

Continuing it said the value of the Infrastructure Fund shall not be less than N5billion, while the   Infrastructure Fund shall have well defined and publicized investment objectives and strategy as well as disclosures of pricing of underlying assets, including any other     necessary    information.    All    annual   financial statements of the Fund shall be audited by reputable firms of chartered accountants.

" Also, the Infrastructure Fund shall have satisfactory pre-defined liquidity/exit routes, and  be managed by experienced   Fund managers,    versed    in    infrastructure    financing    and registered with the SEC as Fund Managers.

"A minimum of the 75 per cent of the Infrastructure Fund shall be invested in projects within Nigeria.The National  Pension  Commission   and the licensed  PFAs would  ensure that the pension  funds  are only deployed  into infrastructure   projects  that are safe and generate  stable streams of revenue to adequately  repay institutional  investors, such   as PFAs," it said.

Observers are of the belief that using part of the over N4.6 trillion pension assets to finance economic infrastructure will help jump-start the economic making it possible employers especially the envisaged informal sector to contribute and plan their future.