FG charge PFAs on infrastructure funding
Pension Fund Administrators, operating in the country have been directed to invest at least 60percent of the infrastructure fund in projects within Nigeria.
The National Pension Commission, in a revised regulation on investment of pension fund assets recently issued to PFAs also set the minimum value of the projects to be considered for investments with pension funds as N5billion.
The 2014 Pension Reform Act provides a legal backing for PFAs to now invest pension funds in infrastructure unlike before the amendment.
Section 86 of the Act provides that pension funds could be invested in real estate development, a provision which will enable Nigerians to have access to housing and close the gap in housing development in Nigeria.
With the regulation, pension fund assets can be invested in infrastructure projects through eligible bonds and Sukuk, as long as they are for core infrastructure projects, whose business plans and financial projections indicate that they are viable as well as economically and financially rewarding for investment by pension funds.
The bond or sukuk issued to finance the infrastructure project shall have credit enhancements, being guarantees by the Federal Government of Nigeria or eligible MDFOs and any agency backed by a Sovereign or Development Finance Institution; have a maturity date that precedes the expiration of the concession where applicable; and have a feasible and enforceable redemption procedure in the event of an adverse event such as project suspension and cancellation.
Where infrastructure projects are financed through Infrastructure Funds, the infrastructure fund shall have well defined and publicised investment objectives and strategy as well as disclosures of pricing of underlying assets, including any other necessary information.
However, the revised regulation has shown that PenCom is concerned with the safety of pension funds even as more PFAs invest in infrastructure.
The regulation is also concerned with who manages the infrastructure fund, mandating that PFAs must ensure that the key Principals, namely the Chief Executive Officer and Chief Investment Officer of the Fund Manager shall each have at least 10 years relevant and continuous experience in infrastructure financing or investment management and shall not exit the Fund without prior notice to the PFAs, which shall not be less than 90 days from the exit date.
The regulation mandated that the ‘exit clause’ shall be expressly stated as a condition in the investment agreement/covenant between the PFA and the Fund Manager.