PenCom sets criteria for investing pension funds in infrastructure

The National Pension Commission has said any infrastructure project where funds from the Contributory Pension Scheme will be invested must satisfy its stipulated criteria.
This was stated by the Head, Investment Supervision Department, PenCom, Ehimeme Ohioma, during his presentation on, “Pension funds for economic development: Investing pension funds in infrastructure.”
He specifically said, “It must be commercially viable and self-financing – generate cash flows to repay itself overtime; and bid/concession processes must be open and transparent.”
The total pension funds under the CPS stood at N5.96tn as of the end of September 2016.
Ohioma said that the investment in infrastructure would be beneficial to Nigeria and its citizens as adequate infrastructure development would improve the standard, create and sustain employment, promote entrepreneurship, enhance returns on pension fund investments as well as increase the pool of pension savings for economic development.
According to him, Nigeria’s current infrastructure situation places it at a competitive disadvantage globally.
The expert observed that the current stock of infrastructure was inadequate to support the present and future socio-economic needs of the country, including the imperative to diversify the economy away from oil.
He said that the availability of long-term financing was a critical factor, adding that it was clear that private finance was needed to supplement government’s constrained financial resources.
Ohioma also said that pension funds remained a potential source of private financing to fund infrastructure in Nigeria, but that the funds could only be invested indirectly through structured instruments, such as bonds and funds.
“He said the minimum requirements/criteria for pension fund investments in infrastructure, as stipulated in the investment regulation, are very robust and provide adequate safeguard for pension fund assets,” he said.
While mentioning major considerations to engender pension funds investment in infrastructure, he said there must be availability of ‘bankable’ (commercially viable) projects; full repayment guarantee by the Federal Government, especially in the early stages of projects financing; and strong political will and consistency in formulation of policies to retain investors’ confidence.
He also said there must be open and transparent transactions’ procedures and processes, in terms of bidding process, contractors’ selection, pricing, among others.
According to him, there must be policies to attract global infrastructure advisors and managers, in order to build capacity and facilitate knowledge/skills transfer to Nigerians.