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The National
Pension Commission (PENCOM) said the recent review of its investment
guidelines for pension fund assets was done in order to allow for
investible funds to be channeled to critical sectors of the economy.

The revised
guidelines, which were released on December 16 last year, were designed
to enable pension funds to be used to intervene in correcting the
infrastructure deficit in the country.

According to the
review guidelines, the list of assets in which the funds can be
invested include bonds, debentures, redeemable/ convertible preference
shares, and other debt instruments issued by corporate entities,
including asset backed securities and infrastructure bonds.

Section five of the
reviewed guidelines states that pension fund assets can be invested in
infrastructure projects through eligible bonds or debt securities,
subject to the infrastructure project being “awarded to a
concessionaire through an open and transparent bidding process, is not
less than N5 billion in value, and managed by concessionaire with good
track record.”

According to
PENCOM, such projects must be in accordance with and meet due process
requirements of the Public Private Partnership (PPP) Policy, as
certified by the Infrastructure Concession and Regulatory Commission
(ICRC), and approved by the Federal Executive Council (FEC).

Investment in critical sectors

The Central Bank of
Nigeria (CBN) governor, Sanusi Lamido Sanusi, disclosed recently that
it was collaborating with PENCOM on ways to unlockthe huge pension fund
for investment in critical sectors of the economy. He said rather than
expose the Nigerian economy to cheap dollar loans, which could prove
costly in the long run, it was better to access cheap funds locally.

“Part of it has
been working with the Pension Commission to see how we can unlock some
of the N2 trillion we have in pension funds into infrastructure and
power in a manner that works.

“If we put up
guarantee worth N400 billion and the pension funds puts down N400
billion 20 year money into power and infrastructure, the maximum risk
it will take on the Central Bank balance sheet is N20 billion bond, and
N400 billion generates 4,000 megawatts,” Mr. Sanusi said.

The reviewed
investment guidelines said such funds can only be invested in
infrastructure bonds, subject to a maximum portfolio limit of 35 per
cent of the pension assets under management, with a maximum of 15 per
cent being in infrastructure bonds.

Such investment
shall have a maturity date that is prior to the expiration of the
concession and have a redemption procedure, in the event of project
suspension or cancellation.

The commission said
the review was done in order to give backing to any institution that
wants to invest in the infrastructure development.

“We do not have the
power to direct the PFAs on areas to invest. What we have only done is
to review the guidelines so that those who want to invest in the sector
can do so.”

A statement from
the commission said the emphasis of the review was to allow PFAs to
invest in bonds which would be floated by the CBN targeted at power and
infrastructure development.

“PENCOM did not sign any understanding directly with the CBN. What
we just told them is if you want to raise money for power sector, issue
bonds, and if it makes sense to the PFAs, they will invest in them.”