• Adonri: Market too risky, volatile for pension fund investment• PFAs invest ₦74.54bn in infrastructure, CBN eyes funds for InfraCorp• 22 states responsible for low enrolment
However, at less than 15 per cent of the country’s Gross Domestic Product , the NGX has continued to trail behind those of other countries in volume, liquidity and depth. Other investment portfolios where the funds were invested include domestic and foreign ordinary shares; corporate debt securities comprising corporate bonds, corporate infrastructure bonds, corporate green bonds, and supranational bonds.
While pension assets have become a major source of domestic capital formation, with a large chunk of it invested in treasury bills and bonds, findings have suggested that PFAs have continued to distance themselves from the equities market. This is said to have been partly responsible for the low level of liquidity. A total of ₦11.36 trillion or 88.9 per cent of the assets is invested in public debt instruments.
This coincides with the decision of the Chinese government to stop further loans to the Federal Government. Specifically, government is seeking to obtain the facility to finance transport sector projects between 2021 and 2025, hoping that the pension sub-sector would provide a leeway. On PFA’s apathy for the equities market, president of Standard Shareholders Association, Godwin Anono, said the increased volatility and illiquidity witnessed in the stock market since the global financial crisis of 2008 and 2009, followed by PFAs’ poor patronage of the equities market have continued to trigger a persistent downturn in the NGX, raising more questions regarding the timeframe for the end of the weak performance.
Unfortunately, this has been the case and the main reason for an underperforming state of the nation’s stock market. Further, he called for the review of the PenCom regulation on investment of pension fund assets, which pegged 30 per cent as a maximum cap that will go into the nation’s bourse, whereas some countries permit PFAs to invest as much as 50 per cent of pension assets in equities.
Most of the funds end up in government coffers and are used to fund recurrent expenditure and some of the capital projects slated in the budget, thereby starving the Nigerian economy of capital market activities in the stock market, which is a key source of capital formation in any economy. Consequently, to attract investment of more pension assets to equities, he noted that the yield must surpass the one on debt. According to him, the fundamentals of equities must be sound to increase their profitability and safety.
MEANWHILE, PFAs invested ₦74.54 billion in infrastructure from the ₦13.76 trillion under the Contributory Pension Scheme as of the end of February 2022. This was contained in the latest figures obtained from PenCom. THIS is as enrolment of new members into the Contributory Pension Scheme fell by 38 per cent in five years to 257,462 in 2021 from 411,258 in 2017, driven by persistent non-compliance in 22 states.
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