By Ologeh Joseph Chibu
The National Pension Commission, PENCOM, has said investment in bonds are not loans to Nigerian authorities.
The Commission said Funds in Securities of the Federal Government of Nigeria (FGN) should not be misconstrued as loans.
The clarification was made by the Director-General of PenCom,Aisha Dahir-Umar
He clarified that the Commission did not provide a N10 trillion loan to the Federal Government.
Dahir-Umar emphasized that the PFAs’ investments in FGN securities, facilitated through bonds and treasury bills, were authorized by relevant government agencies, including the Debt Management Office (DMO) and Securities and Exchange Commission (SEC). These investments are traded on recognized capital markets such as the Nigerian Exchange Limited and FMDQ OTC Securities Exchange
Dabir-Umar stated, “Investments by the PFAs in the securities of the Federal Government of Nigeria (FGN) are not loans as erroneously portrayed, but investments in securities, through bonds and treasury bills, as approved by the relevant government agencies, in this case the Debt Management Office (DMO) and Securities and Exchange Commission (SEC).” They are traded on authorized capital markets, that is the Nigerian Exchange Limited and FMDQ OTC Securities Exchange.
Furthermore, she dispelled the misconception that PenCom has N15 trillion locked away, highlighting that pension fund assets are managed by licensed PFAs and held in custody by licensed Pension Fund Custodians (PFCs). The PFAs are entrusted with investing pension fund assets in permissible asset classes, including FGN debt instruments, with a focus on safety and fair returns, in accordance with the Pension Reform Act 2014 and the Commission’s regulations.
“Pension fund assets are not managed by PenCom. I have said it repeatedly that when we say pension assets have grown to N15 trillion.”
Dahir-Umar underscored that referring to the investments as a “loan to FGN” is inaccurate, clarifying that it is a form of investment in FGN securities, aligning with practices observed by other institutional investors such as banks, insurance companies, and asset managers.
Addressing concerns about the delayed payment of retirement benefits to some federal government retirees, Dahir-Umar attributed the issue to insufficient and delayed funding for the payment of Accrued Pension Rights for those who served before the introduction of the Contributory Pension Scheme (CPS) in 2004 when PenCom was established. The release of funds by the federal government is necessary for settling these liabilities, and while the Commission has actively engaged the Federal Ministry of Finance for additional funds, the challenges stem from government budgetary constraints.
Dahir-Umar, said it is an international best practice to invest in investible instruments issued or backed by the sovereign authority and that the FGN securities meet the objectives of safety and fair returns. “The FGN has consistently met its repayment obligations, both principal amount and accrued interest, for all investments in bonds and T-bills to all investors including pension funds. The information is always in the open and accessible on our website, www.pencom.gov.ng”
