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PFAs Made N2.2tn Profit on 15 Investment Portfolios — Operators

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The Director General of the National Pension Commission (PenCom), Ms
  • PFAs Made N2.2tn Profit on 15 Investment Portfolios

Since the inception of the Contributory Pension Scheme, operators have made about N2.2tn profit from the investment of the funds in 15 different portfolios, according to reports.

Over the years, governments and private investors have been eyeing the growing pension funds for loans to execute some of their projects.

Many people, especially those who believe that the pension funds are idle funds, are of the opinion that the money should be released to finance the development of infrastructure as well as cushion the effects of the economic recession that the country has been grappling with.

Since the commencement of the Contributory Pension Scheme in 2004, the funds have grown to the tune of N5.96tn.

The Head, Benefits & Insurance Department, National Pension Commission, Mr. Lana Loyinmi, says that the major objective of the Pension Reform Act, which gave birth to the CPS, is to ensure that every worker receives his or her retirement benefits as and when due.

Loyinmi, who notes that the scheme is contributory and mandatory, says the employer contributes 10 per cent while the employee pays eight per cent of the annual emolument into the Retirement Savings Account.

He explains that contributed funds are remitted into an individual’s RSA, which is fully funded and has a 100 per cent asset backing.

According to him, RSAs are privately managed by Pension Fund Administrators while the custody of assets is maintained by Pension Fund Custodians.

Retirement benefits payment is the last stage of the whole process under the CPS, says Loyinmi.

Investment portfolios

The total assets under the CPS grew from N4.05tn in 2013 to N4.61tn in 2014 and rose to N5.3tn as of the end of 2015, according to figures obtained from PenCom

The report also shows that the funds have increased to the tune of N5.96tn.

The commission says the funds are not lying idle, but have been invested in at least 15 different investment portfolios, with the bulk of the money going into the FGN securities.

PenCom specifically says that 58 per cent, totalling N3.49tn of the money, has been invested in the FGN bonds while N683.91bn, or 11.47 per cent of the funds, has been invested in treasury bills.

The operators have also invested 8.80 per cent of the funds, totalling N524.72bn, in domestic ordinary shares while N413.17bn or 6.93 per cent of the money has been invested in local money market securities.

According to PenCom, the operators invest N294.3bn or 4.94 per cent of the funds in corporate debt securities while N214.8bn or 3.6 per cent of the money has gone into real estate properties.

The operators also invest N137.78bn, N85.49bn and N45.8bn, which translate into 2.31 per cent, 1.43 per cent and 0.77 per cent, in state government securities, foreign domestic shares and cash/other assets, respectively.

According to the report from PenCom, the remaining funds of N23.96bn, N18.75bn, N12.48bn and N1.8bn, which represent 0.4 per cent, 0.32 per cent, 0.21 per cent and 0.03 per cent, have been invested in private equity fund, open/close-end fund, supra-national bonds and infrastructure funds, respectively.

Investment guidelines

PenCom has produced investment guidelines, which regulate how the operators should invest the funds; and these regulations are subject to review when necessary.

The commission notes in the guidelines that the Pension Fund Custodians should only take written instructions from licensed PFAs with respect to the PFAs investment and management of pension fund assets held in the custody of the PFCs on behalf of the contributors.

It says that in discharging their contractual functions to the PFAs, the PFCs should not contract out the custody of pension fund assets to third parties, except for allowable investments outside Nigeria.

The commission states that the PFC must obtain an approval from the commission before engaging a global custodian for such foreign investments.

“The PFAs, in discharging their contractual functions to the contributors, shall not contract out the investment/management of pension fund assets to third parties, except for open/close-end/hybrid funds and specialist investment funds allowed by this regulation,” says PenCom.

The Head, Investment Supervision Department, PenCom, Mr. Ehimeme Ohioma, says that the regulation of investment of pension fund assets issued by PenCom was amended in 2010 to allow for investment in alternative asset classes such as infrastructure bonds and funds, private equity funds and real estate/housing development.

Returns on investment

Since the inception of the CPS, the operators have made about N2.2tn as profit from the investment of the funds in their custody.

The Chairman, Pension Fund Operators Association of Nigeria, Mr. Eguarehide Longe, confirms this, saying the N2.2tn is the profit made from the total contribution of over N3tn from workers and their employers in both public and private sectors of the economy, who subscribe to the pension scheme.

Longe says, “Of the total funds, not less than N2.2tn is the investment income. So, it means that the managers of that money have received the amount piecemeal, over the last 11 years, which is over N3tn. They have added N2.2tn to that as profit, which shows that the money has been active.”

He says the pension funds are invested optimally and managed professionally by the PFAs.

Longe notes that the investment guidelines released by PenCom are broad and comprehensive enough to include assets that will make notable impact on the society.

According to him, the PFAs can be more venturesome in the asset classes that they develop and invest in.

“The CPS provides a very positive opportunity over the long-haul to improve the general wealth environment of the country,” he says.

He notes that the money is being managed in accordance with the guidelines so that when people retire, they can receive their pensions seamlessly.

“If you then decide that you are going to utilise that money to create projects that are not adequately thought out, rather than add to the money, it disappears or brings no return, you then have a problem,” he says.

He also notes that the increase is regularly reflected in the balance of the RSAs of the contributors to the scheme.

Recession

Since Nigeria’s economy plunged into a steep recession this year, there has been agitation that the funds should be used in some critical sectors in order to improve the living standards of the people.

Specifically, there have been increased requests that the funds should be used to solve the country’s infrastructural problems.

The Chief Executive Officer, RiskGuard Africa Nigeria Limited (Pension & Insurance), Mr. Yemi Soladoye, says pension funds are long-term funds and that part of the reasons for creating the pension scheme is to finance national development projects.

“As long as you can guarantee the safety and security of the funds, it is okay to borrow the government’s part of the funds, because that it part of the reasons why we generate long-term funds,” Soladoye says.

He also supports investing the bulk of the funds in government securities, stressing that it will be safe there as long as the country is safe for investment.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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TotalEnergies Chooses Congo Over Nigeria, Announces $600 Million Investment

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TotalEnergies

French multinational oil company TotalEnergies has decided to steer its investment focus away from Nigeria to bolster its exploration in the Republic of Congo by $600 million.

This decision marks the second time TotalEnergies has overlooked Nigeria in favor of other African nations amid policy inconsistencies and other concerns within the Nigerian oil and gas sector.

Patrick Pouyanne, CEO of TotalEnergies, said the company is investing $6 billion in Angola over Nigeria.

Pouyanne highlighted policy uncertainties and related issues in Nigeria as factors influencing the decision.

In light of this strategic redirection, TotalEnergies has unveiled plans to inject $600 million into the Republic of Congo’s oil production and exploration endeavors, reaffirming its commitment to the African continent.

The investment aims to fund exploration activities and maintain production in Congo’s deep offshore Moho Nord field, a key contributor to the nation’s oil output.

A press statement released by TotalEnergies underscores the significance of this investment, indicating its potential to unlock economic opportunities not only for Congo but also for the broader African region.

The Moho Nord field, where a portion of the investment will be allocated, plays a pivotal role in Congo’s oil production, accounting for approximately half of the country’s total output, equivalent to roughly 140,000 barrels per day.

Expressing optimism regarding the investment’s impact, TotalEnergies CEO Patrick Pouyanne anticipates significant developments in the Moho Nord field, with the arrival of two drilling rigs signaling active exploration efforts.

Pouyanne remains hopeful that these efforts will yield promising discoveries by the year’s end, further solidifying Congo’s position in the global oil market.

Commenting on TotalEnergies’ investment, NJ Ayuk, the executive chairman of the African Energy Chamber (AEC), emphasized the potential for Congo’s oil and gas sector to drive industrialization and alleviate energy poverty across Africa.

Ayuk highlighted the importance of partnerships with companies like TotalEnergies in achieving these objectives, underscoring the pivotal role of foreign investments in Africa’s energy landscape.

In addition to TotalEnergies’ investment, the Republic of Congo stands to benefit from a new strategic partnership with Algeria in the hydrocarbons and energy sectors.

A memorandum of understanding signed between the two countries paves the way for enhanced collaboration, including the development of a roadmap for bilateral relations and the exchange of expertise between Algeria’s Sonatrach and Congo’s SNPC.

The agreement also signifies broader support for the establishment of an African Energy Bank, aimed at directing investments toward oil and gas projects across the continent.

As TotalEnergies redirects its investment focus to Congo, Nigeria faces the challenge of addressing policy inconsistencies and regulatory concerns to attract and retain foreign investment in its oil and gas sector.

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Nigeria Calls on UAE to Modernize 50-Year-Old Oil Pipeline Infrastructure

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Gas-Pipeline

Nigeria has extended a call to the United Arab Emirates (UAE) for strategic investment.

The Federal Government of Nigeria said there is a need for the renewal and reconstruction of its more than 50-year-old oil pipelines.

Minister of State for Petroleum (Oil), Heineken Lokpobiri, reiterated Nigeria’s vast investment opportunities during discussions held in Abuja with a visiting delegation from the UAE, led by Ambassador Salem Al Shamsi.

The discussions centered on the mutual interests of both nations in the energy sector, particularly in oil exploration and infrastructure development.

Lokpobiri emphasized the critical role of pipelines in transporting crude oil to export terminals, underlining their indispensable significance despite the advancements in alternative transportation methods.

He highlighted the outdated nature of Nigeria’s current pipeline network, most of which was established around the time of Nigeria’s initial oil discoveries in the late 1950s.

Acknowledging the enormity of the investment required, Lokpobiri assured potential UAE investors of attractive investment models.

He outlined a proposal where investors could recover their investments proportionately as crude oil is transported through the pipelines, thereby incentivizing their involvement in the modernization efforts.

Nigeria boasts abundant natural gas reserves, estimated at over 208 trillion cubic feet, positioning the nation as a significant player in the global energy landscape.

Lokpobiri emphasized the potential for further exploration and development in both gas and crude oil sectors, signaling Nigeria’s commitment to maximizing its energy resources.

The recent meeting also delved into the broader context of oil exploration and climate concerns. Lokpobiri reiterated Nigeria’s commitment to the Paris Agreement while emphasizing the importance of a balanced approach to energy production and transition.

He emphasized the need for strategic partnerships to facilitate the financing of Nigeria’s energy transition, highlighting the UAE’s potential role in this endeavor.

Responding to Nigeria’s call, Ambassador Al Shamsi expressed the UAE’s willingness to collaborate with Nigeria in addressing the challenges facing the oil and gas sector.

He affirmed the longstanding relationship between the two nations, spanning over 50 years, and reiterated the UAE’s commitment to supporting Nigeria’s developmental aspirations.

As Nigeria embarks on its journey to modernize its oil infrastructure, partnerships with countries like the UAE are poised to play a pivotal role in realizing its energy ambitions.

The call for investment signals Nigeria’s proactive stance in addressing its infrastructural challenges while leveraging its rich energy resources for sustainable development.

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Nigeria Offers 12 Oil Blocks and 5 Deep Offshore Assets to Global Investors

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Oil

Nigeria has unveiled plans to offer 12 oil blocks and 5 deep offshore assets to global investors.

The announcement was made during the ongoing 2024 Offshore Technology Conference (OTC) in Houston, United States, where Nigerian officials presented the country’s vast hydrocarbon potential to an international audience of industry stakeholders.

Addressing participants at the African Oil Industry Opportunities Session, a side event at the OTC, Gbenga Komolafe, Chief Executive of the Nigerian Upstream Regulatory Commission, outlined Nigeria’s significant reserves and emphasized the strategic importance of leveraging these resources for economic development.

With over 37.5 billion barrels of crude oil and condensate reserves, as well as 209.26 trillion cubic feet of natural gas reserves, Nigeria stands as a major player in Africa’s energy landscape.

Komolafe highlighted the government’s commitment to conducting a transparent and competitive bidding process, in accordance with the Petroleum Industry Act (PIA) and applicable regulations.

The 2024 Licensing Round, he noted, marks a significant milestone in Nigeria’s hydrocarbon development initiative, introducing 12 carefully selected blocks spanning diverse geological formations, from onshore basins to deep offshore territories.

Each block has been identified for its potential to enhance Nigeria’s reserves and stimulate economic growth, offering opportunities for investors to participate in the country’s oil and gas industry.

The bidding process, which commenced on April 29, 2024, is structured to ensure fairness, competitiveness, and transparency, with guidelines issued to guide prospective bidders.

In addition to the 12 blocks, Nigeria will also conclude the sale of seven deep offshore blocks from the 2022 Mini-Bid Round Exercise, covering approximately 6,700 km2 in water depths ranging from 1,150m to 3,100m.

This comprehensive offering underscores Nigeria’s commitment to maximizing the potential of its petroleum resources and attracting strategic investments to drive sectoral growth.

The bidding round, scheduled to conclude by January 2025, presents a significant opportunity for investors and companies to participate in Nigeria’s oil and gas sector.

The inclusion of both new greenfield blocks and assets from previous bid rounds reflects the government’s dedication to fostering innovation, technological exchange, and capacity building within the industry.

With criteria emphasizing technical competence, financial capacity, and viability, the 2024 licensing round aims to be conducted in a fair, competitive, and non-discriminatory manner, in line with the provisions of the Petroleum Industry Act.

As Nigeria positions itself as a prime destination for oil and gas investment, stakeholders are optimistic about the potential for sustainable growth and development in the sector.

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