Nigeria is making ready to revise its pension funding rules to permit a higher share of the nation’s $17 billion pension belongings to be allotted to infrastructure and personal fairness, in a strategic transfer geared toward boosting returns for retirees and supporting nationwide growth.
The Nationwide Pension Fee (PenCom) is within the remaining levels of reviewing the present 5% cap on pension fund investments in these various asset courses, based on Ibrahim Buwai, PenCom’s spokesman.
Whereas particular figures have but to be disclosed, Buwai indicated that the brand new limits could possibly be introduced earlier than the top of the present quarter.
Plans to Scale back Regulatory Requirement
Along with elevating the funding ceiling, the Fee plans to “considerably” cut back a regulatory requirement that mandates infrastructure funds should allocate no less than 60% of their portfolios to tasks domiciled in Nigeria.
This adjustment is predicted to broaden the scope of eligible investments and improve diversification alternatives for pension fund directors.
The proposed reforms come amid mounting strain from pension fund managers, who’ve referred to as for higher flexibility to speculate past conventional fixed-income devices.
At the moment, fixed-income securities account for 62% of pension fund belongings, however persistent inflation, hovering above 20% for 2 consecutive years, and a roughly 70% depreciation of the naira towards the U.S. greenback have eroded actual returns.
“We aren’t actually okay with returns the best way they’re as a result of inflation is having vital adverse influence,” Buwai mentioned. “We actually wish to see traction in these various belongings to enhance returns from the mounted revenue and the normal belongings.”
Position of Pension in Nigeria’s Financial Growth
In April, PenCom Director Common Omolola Oloworaran highlighted the rising position of pension funds in Nigeria’s financial growth. She revealed that pension fund investments totaling N5.51 trillion have been strategically deployed into infrastructure, non-public fairness, actual property, and subnational initiatives.
Oloworaran additionally reported a 22.65% year-on-year improve within the business’s Web Asset Worth (NAV), rising from N18.36 trillion in December 2023 to N22.51 trillion by December 2024. This progress was attributed to constant contributions and rising funding revenue.
Regardless of the progress, Oloworaran flagged a key problem: the restricted availability of investable devices that meet regulatory requirements. Solely 86 devices at the moment meet the required liquidity and free float standards, underscoring the necessity for broader reform to unlock new funding avenues.
What You Ought to Know
- Earlier in August, President Bola Tinubu named Opeyemi Agbaje as the brand new Chairman of the Nationwide Pension Fee, in a transfer anticipated to douse considerations across the governance of the fee.
- A seasoned skilled whose profession spans regulation, banking, academia, consulting, and public service, Agbaje brings a wealth of expertise and thought management to Nigeria’s pension sector at a time when the business is navigating progress, reform, and heightened public expectations.
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