Banks Borrow N764.32bn From Pension Fund

  • Banks Borrow N764.32bn From Pension Fund

Nigerian banks borrowed N764.32bn from the total pension funds under the Contributory Pension Scheme as of the end of September this year.

Figures obtained by our correspondent from the National Pension Commission revealed that the amount translated to 19.16 per cent of the total pension assets, which stood at N8.34tn.

According to the report, the amount the Pension Fund Administrators invested in the banking sector was N409.48bn in January 2017.

Under the Pension Reform Act, the PFAs are required by law to administer the funds, while the Pension Fund Custodians keep custody of the assets.

The commission said the operators had invested a substantial part of the pension funds in the Federal Government’s bonds, treasury bills and state government securities.

The PenCom report stated that some of the money was invested in agency bonds, supra-national bonds, commercial papers, foreign money market securities, and open/close-end funds.

Other investment portfolios where the operators invested the funds are real estate investment trusts, private equity funds, infrastructure funds, cash and other assets.

PenCom also revealed that the number of contributors grew by 312,291 from 7.89 million in December 2017 to 8.27 million as of September.

The acting Director-General, PenCom, Aisha Dahir-Umar, said the CPS had facilitated a pool of pension funds which had consistently accumulated since its inception.

She said there was enormous potential for the growth of Nigerian pension funds to account for a significant proportion of the Gross Domestic Product.

Dahir-Umar said it planned to expand the coverage of the CPS to the underserved sectors of the economy through micro-pension and renewed enforcement of compliance.

“Our objective in this direction is to attain at least 20 million contributors by the year 2019,” she added.

The commission noted that the Pension Reform Act established a mandatory CPS for the employees of the Federal Government, the Federal Capital Territory and the private sector organisations with three or more employees.

According to it, unlike the former Defined Benefits Scheme, the CPS is contributory in nature, fully funded, managed and kept in custody by licensed private operators (the PFAs and PFCs) and is based on individual portable accounts, which are the Retirement Savings Accounts.

The commission noted that available statistics showed that the CPS had greatly improved access to retirement benefits for employees in both the public (Federal Government) as well as the private sectors.

PenCom added that it had also helped to improve the issue of funding even though more work was still needed in that regard.

The commission said it had released the guidelines on micro pension.

“This is the first step in giving effect to Section 2(3) of the Pension Reform Act (PRA), 2014 which provides that employees of organisations with less than three employees as well as the self-employed persons shall be entitled to participate in the CPS in accordance with the guidelines issued by the commission.”

According to the commission, there has been an appreciable progress in the implementation of the CPS, 14 years after its inauguration.

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York based Talk Markets and, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya; Email: [email protected]; Tel: +2347065163489.

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