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Operators Raise Pension Fund Investment in Infrastructure to N1.82bn

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The Director General of the National Pension Commission (PenCom), Ms
  • Operators Raise Pension Fund Investment in Infrastructure to N1.82bn

The pressure by the government and other investors on the Pension Fund Administrators to invest the growing pension fund in infrastructure to cushion the effect of recession on the economy seems to be paying off as the operators have steadily increased the value of the fund in infrastructure bond.

In May 2015, the operators invested a sum of N568m in infrastructure for the first time; they increased it to N1.35bn at the end of December 2015.

By September 2016, they had invested N1.82bn in infrastructure bond out of the total assets that currently stand at N6.2tn.

The assets under the CPS have been recording a stable growth despite the recession.

Some operators, who spoke to our correspondent, said they were ready to increase the level of investment in infrastructure during the current recession in the economy if the portfolios made available to them could meet the specifications of the pension regulatory guidelines.

It was gathered that investors, who could not access the fund due to the stringent measures introduced in the investment guidelines by the National Pension Commission, had been seeking the Federal Government’s backing to get the pension operators to invest part of the funds in their projects.

According to the operators, the fund is safer for investments if fully backed by the Federal Government securities.

According to the operators, the fund is not lying idle but has been invested in different portfolios, which are the FGN bonds, treasury bills, domestic ordinary shares, local money market securities, corporate debt securities, real estate properties, state government securities, foreign domestic shares and cash/other assets.

The fund is also being invested in private equity fund, open/close-end fund and supra-national bonds.

The Chairman, Pension Fund Operators Association of Nigeria, Mr. Eguarehide Longe, said the pension fund was making notable societal impact.

He noted that there had been calls by stakeholders in the public and private sectors that the fund should be used to address the infrastructural gap in the country.

He explained that the draft investment guidelines, which specify to the operators how to invest the fund, led to a cut in the requirements on how much pension fund might be invested in specialised instruments, such as infrastructure and private equity securities within the country.

Longe said that the pension fund was being optimally invested and professionally managed by the PFAs.

“The investment guidelines are broad and comprehensive enough to include assets that will make notable societal impact,” he said.

Longe explained that the PFAs could be more adventurous in the asset classes they reviewed, developed and invested in, adding that the CPS provided a positive opportunity over the long haul to improve the general wealth environment of the country.

The Head, Investment Supervision Department, National Pension Commission, Ehimeme Ohioma, said there was a huge infrastructure gap, cutting across critical areas of the economy, which had impacted on the level of the country’s economic growth/performance.

“The pension reforms and introduction of the CPS have significantly enhanced savings mobilisation, capital (equity and bond) market development, economic growth and macroeconomic performance,” he said.

According to him, infrastructure is a potential avenue for pension fund to reap higher and consistent returns on investment if adequate policies, structures and regulations are instituted.

He observed that several countries in Europe, Latin America and Africa had successfully utilised parts of their accumulated pension funds by investing them in new infrastructure projects or renewing dilapidated ones.

Globally, he said, productive investments in infrastructure were made possible by long-term private funds/savings and other sources like government revenues and bank loans.

“Pension fund investment in infrastructure is a reasonable proposition given the good asset/liability match, as infrastructure projects are long-term investments that match the long duration of pension liabilities,” Ohioma said.

According to him, Nigeria has a large infrastructure deficit in all key sectors largely due to population growth, demographic changes and urbanisation, which have driven increased demand for infrastructure.

He explained that the regulation on investment of pension fund assets issued by PenCom was amended to allow for investment in alternative asset classes such as infrastructure bonds.

PenCom, however, noted that the challenges of pension fund investment in infrastructure included availability of products and dearth of alternative asset products in the Nigerian financial markets.

The challenge also include liquidity risks, as pension funds prefer low or no risk products that are able to generate steady income from the onset.

The Director-General, PenCom, Mrs. Chinelo Anohu-Amazu, stated that there was a need for the government to provide adequate guarantees to secure investment of the pension fund in infrastructure.

She said while the commission was not opposed to the idea of deploying the pension fund in infrastructure, adequate mechanism must be put in place to ensure its safety.

The PenCom boss explained that the pension fund alone would not be able to address the infrastructure needs of the country, adding that other sources of funding such as public-private partnership arrangements should be explored.

She said, “Today, pension and social security systems serve as catalysts for generating pool of long-term investible funds that can be used to develop necessary ingredients for economic development such as infrastructure.

“Given the current global economic challenges occasioned by the drop in commodity prices, the funds generated under viable pension schemes have become veritable sources of financial intermediation.”

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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Guinness Nigeria Postpones Spirits Importation Exit, Extends Deal with Diageo

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Guinness - Investors King

Guinness Nigeria Plc has announced a delay in its plan to halt the importation of spirits as it extended its agreement with multinational alcoholic beverage company Diageo until 2025.

The decision, communicated through a corporate notice filed with the Nigerian Exchange Limited on Tuesday, cited a longer-than-expected transition period for separating its business from Diageo’s.

Initially slated for discontinuation in April 2024, the importation of premium spirits like Johnnie Walker, Singleton, Baileys, and others under the 2016 sale and distribution agreement with Diageo will now continue for an additional year.

The extension comes as the process of business separation between Guinness Nigeria, a subsidiary of Diageo, and Diageo itself faces unexpected delays.

In October, Guinness Nigeria had announced plans to cease importing spirits from Diageo, a move aimed at reducing its foreign exchange requirements.

However, the separation process has encountered unforeseen hurdles, necessitating the extension of the importation agreement.

The notice, signed by the company’s Legal Director/Company Secretary, Abidemi Ademola, highlighted the ongoing efforts by Guinness Nigeria and Diageo to implement the separation, originally scheduled for completion by April 2024.

The extension underscores the complexity of disentangling the businesses and ensuring a smooth transition.

Guinness Nigeria reaffirmed its commitment to the long-term growth strategy, aligning with Diageo’s decision to establish a new, wholly-owned spirits-focused business.

Despite the delay, both companies remain dedicated to managing the importation and distribution of international premium spirits in West and Central Africa, with Nigeria as a key hub.

The postponement comes amid challenges faced by Guinness Nigeria, including significant exchange rate losses, which amounted to N49 billion in the 2023 half-year operations.

Despite these setbacks, the company remains optimistic about its future prospects in the Nigerian market.

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Private Sector Warns: Interest Rate Hike to Trigger Job Cuts and Inflation Surge

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Private employers

As the Central Bank of Nigeria (CBN) announced a hike in the Monetary Policy Rate (MPR) from 22.75% to 24.75%, concerns have been raised by the private sector regarding the potential ramifications on job stability and inflationary pressures.

The move, aimed at curbing inflation and stabilizing the exchange rate, has prompted apprehension among business operators who fear adverse effects on the economy.

Representatives from the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) and the Nigerian Association of Small Scale Industrialists have voiced their worries over the increased difficulty in accessing affordable credit.

They argue that the higher interest rates will impede the private sector’s ability to borrow funds for expansion and operational activities.

This, they fear, could lead to a reduction in business investments and subsequently result in widespread job cuts across various sectors.

The Lagos Chamber of Commerce and Industry (LCCI) acknowledged the necessity of the interest rate hike but emphasized the potential negative consequences it may bring.

While describing it as a “price businesses would have to pay,” the LCCI highlighted the current fragility of the economy, exacerbated by various policy missteps.

They cautioned that the increased cost of borrowing could stifle entrepreneurial activities and discourage expansion plans critical for economic growth and job creation.

Experts have echoed these concerns, warning that the tightening monetary conditions could exacerbate inflationary pressures and hinder economic recovery efforts.

With inflation already soaring at 31.70%, the rate hike could further fuel price hikes, especially in essential goods and services, thus eroding the purchasing power of consumers.

However, CBN Governor Yemi Cardoso defended the decision, citing the imperative to address current inflationary pressures and ensure sustained exchange rate stability.

He emphasized the need to restore the purchasing power of ordinary Nigerians and expressed confidence that the economy would stabilize by the end of the year.

Despite assurances from the CBN, stakeholders remain cautious, calling for a more nuanced approach that balances the need for price stability with the imperative of fostering economic growth and job creation.

As businesses brace for the impact of the interest rate hike, all eyes are on the evolving economic landscape and the measures taken to mitigate its effects on livelihoods and inflation.

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Breaking Barriers: Transcorp Hotels CEO Shares Journey from Crisis to Success

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Dupe Olusola

Dupe Olusola, the Managing Director/CEO of Transcorp Hotels Plc, reflects on her remarkable journey from navigating the depths of a global pandemic to achieving unprecedented success in the hospitality industry.

Appointed in March 2020, amidst the onset of the COVID-19 pandemic, Olusola found herself at the helm of a company grappling with the severe economic fallout and operational challenges inflicted by the crisis.

Faced with a drop in occupancy rates from 70% to a mere 5%, Olusola and her team were confronted with the daunting task of steering Transcorp Hotels through uncharted waters.

Undeterred by the adversity, they embarked on a journey of transformation, leveraging creativity and resilience to navigate the turbulent landscape.

Implementing innovative strategies such as introducing drive-through cinemas, setting up on-site COVID-19 testing facilities, and enhancing take-away services, Transcorp Hotels adapted to meet the evolving needs of its guests and ensure continuity amidst the crisis.

Embracing disruption as a catalyst for growth, Olusola fostered a culture of collaboration and teamwork, rallying her colleagues to overcome obstacles and embrace change.

Through unwavering determination and a commitment to excellence, Transcorp Hotels emerged from the pandemic stronger than ever, breaking profit and revenue records year after year.

“It’s indeed been a great opportunity to learn and relearn, to lead and to grow. When you see success stories, remember it’s a journey with twists, turns, ups and downs but in the end, it will all be okay”, she said.

Olusola’s leadership exemplifies the power of adaptability and perseverance, inspiring her team to transcend limitations and chart a course towards unprecedented success.

As Transcorp Hotels continues to flourish under her stewardship, Olusola remains steadfast in her dedication to driving innovation, fostering growth, and breaking barriers in the hospitality industry.

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