PenCom sets criteria for investing pension funds in infrastructure
- The National Pension Commission (PenCom) has said any infrastructure project where funds from the Contributory Pension Scheme (CPS) 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.”
He further stated that:
- 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.
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.
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.
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.
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.
- 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.
In conclusion, he said that there must be open and transparent transaction procedures and processes, in terms of bidding process, contractors’ selection, pricing, among others.