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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.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Investment

Union Bank Launches Investment App M36 for Fixed-income Products, Others

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M36, a new digital platform designed to deliver a wide range of investment products directly to individuals, has launched in Nigeria.

Through an innovative, user-friendly app, M36 offers investment options not typically available on self-service digital platforms including foreign currency transactions, commercial papers, local and foreign denominated bonds, treasury bills and other fixed income products.

M36 also offers bespoke solutions for both new and experienced investors as well as a 24-hour lifestyle concierge service to meet the needs of discerning customers.

In a rapidly evolving environment with changing consumer behavior fueled by technology and growing access to information, M36 is looking to expand opportunities for investors at all levels, while also simplifying the process of investing.

M36 was developed by Union Bank as part of its strategic focus on delivering superior customer solutions leveraging technology and innovation.

The Bank partnered with several asset management companies to deliver the broad range of investment products on the M36 platform.

Chuka Emerole, Head, Treasury at Union Bank said about M36:

“M36 eliminates the traditional barriers to investing and offers investors direct access to financial instruments that would usually require the service of an investment or relationship manager.

“We’ve designed M36 to ensure simplicity in the onboarding and investing process while also empowering the customer to make sound investment choices based on their financial objectives.

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Investment

United States Firms Operating in Nigeria Plans to Invest $2.4 Billion in Nigeria – Report

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United States Firms Operating in Nigeria Plans to Invest $2.4 Billion in Nigeria – Report

A report compiled by the American Business Council, the United States Embassy, Verraki, KPMG and PwC showed American firms operating in Nigeria plans to invest $2.37 billion in the country in the next three years.

In the 2020 Nigeria Economic Impact Survey, the impact of US firms on the Nigerian economy was analysed while changes in business revenue, foreign investment, job creation, gross value added and plans for expansion were measured.

45 United States companies operating in Nigeria were surveyed and data obtained analysed, according to the report.

The report revealed that US companies in Nigeria created over 30,000 indirect jobs in 2019, a decline from three million in 2018 and over 13,100 direct jobs, down from 18,000 in 2018.

The firms realised N1.08 trillion in revenue in 2019, representing a decline from N1.47 trillion when compared to N1.47 trillion generated in 2018.

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Investment

Afreximbank, AAAM to Drive Automotive Investment

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Afreximbank

Afreximbank, AAAM to Drive Automotive Investment

The African Export-Import Bank (Afreximbank) and the African Association of Automotive Manufacturers (AAAM) have entered into a Memorandum of Understanding (MoU) for the financing and promotion of the automotive industry in Africa.

President of Afreximbank, Prof. Benedict Oramah and President of AAAM/Managing Director of Nissan Africa, Mike Whitfield, signed the MoU in early February, according to a statement yesterday.

The deal formalised the basis for a partnership aimed at boosting regional automotive value chains and financing for the automotive industry while supporting the development of enabling policies, technical assistance, and capacity building initiatives.

Oramah, said, “the strategic partnership with AAAM will facilitate the implementation of the Bank’s Automotive programme which aims to catalyze the development of the automotive industry in Africa as the continent commences trade under the African Continental Free Trade Area (AfCFTA).”

Under the terms of the MoU, Afreximbank and AAAM will work together to foster the emergence of regional value chains with a focus on value-added manufacturing created through partnerships between global Original Equipment Manufacturers (OEM), suppliers, and local partners.

The two organisations plan to undertake comprehensive studies to map potential regional automotive value chains on the continent in regional economic clusters, in order to enable the manufacture of automotive components for supply to hub assemblers.

“To support the emergence of the African automotive industry, they will collaborate to provide financing to industry players along the whole automotive value chain. The potential interventions include lines of credit, direct financing, project financing, supply chain financing, guarantees, and equity financing, amongst others.

“The MoU also provides for them to support, in conjunction with the African Union Commission and the AfCFTA Secretariat, the development of coherent national, regional and continental automotive policies, and strategies.

“With an integrated market under the AfCFTA, abundant and cheap labour, natural resource wealth, and a growing middle class, African countries are increasingly turning their attention to support the emergence of their automotive industries.

“Therefore, the collaboration between Afreximbank and AAAM will be an opportunity to empower the aspirations of African countries towards re-focusing their economies on industrialisation and export manufacturing and fostering the emergence of regional value chains,” the statement added.

“The signing of the MoU with Afreximbank is an exciting milestone for the development of the automotive industry in Africa. At the 2020 digital Africa Auto Forum, the lack of affordable financing available for the automotive sector was identified as one of the key inhibiters for the growth and development of the automotive industry in Africa and having Afreximbank on board is a game changer and a hugely positive development,” CEO of AAAM, David Coffey said.

“It is wonderful to have a partner that is as committed as the AAAM to driving the development and growth of our sector on the continent; this collaboration will ensure genuine progress for our industry in Africa,” Coffey added.

Other areas covered by the MoU include working with the African Union and the African Organisation for Standardisation to harmonise automotive standards across the continent and developing an automotive focused training program for both the public and private sector.

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