The Federal Government has denied reports that it planned to access to pension contributions for infrastructure development.
The Minister of Finance and Coordinating Minister for the Economy Wale Edun, in a statement, assured Nigerians their “hard-earned savings and pension funds are safe”.
The Minister emphasised the stringent regulations governing the pension industry.
He noted: “There are rules and well laid out limitations about what pension fund assets can be invested in, and what it cannot be invested in.” These regulations serve as safeguards to “protect the pensions of workers.”
Edun clarified the purpose of a recent announcement at the Federal Executive Council (FEC) meeting.
He stressed that the announcement was purely informational and did not seek approval for any action.
The purpose was to initiate a collaborative effort “drawing in all the major stakeholders in the long term savings industry.”
This initiative aims to explore innovative ways, “within the rules and regulations set by the law,” to maximize the impact of long-term savings on the economy.
The Minister outlined potential benefits of this collaborative effort.
He emphasised the desire to “drive investment in key growth areas including infrastructure, housing,” and facilitate “affordable mortgages” for Nigerians.
He reiterated that “there is no attempt, nor is it being considered to offer unsafe investments for pension funds.”
The overarching goal is to “boost growth in the economy” without compromising the security of pension funds.
The statement acknowledged the government’s capacity to “provide guarantees where stocks are needed in order to unlock funding that will lead to growth, creation of jobs and alleviation of poverty.”
Edun framed the initiative as a collaborative challenge “for the best and the brightest in the financial industry to come up with solutions” that “safeguard the long-term savings” while also promoting economic growth.
The Nigerian Pension Act does not allow for the Federal Government to directly access money from the pension fund to finance infrastructure projects.
The pension funds are managed by Pension Fund Administrators (PFAs) and held in trust for contributors to the pension scheme. These funds are meant to be invested to generate returns and provide retirement benefits to contributors.
However, the Pension Reform Act of 2014 allows for the investment of a portion of the pension funds in infrastructure projects. Section 86(1) of the Act provides guidelines for the investment of pension funds in various instruments, including infrastructure funds.
This provision allows Pension Fund Administrators (PFAs) to invest a portion of the pension funds in infrastructure projects through infrastructure bonds, funds, and other vehicles approved by the National Pension Commission (PenCom).
In this way, the pension funds indirectly support infrastructure development in the country by investing in infrastructure projects that have been vetted and approved by the regulatory authorities.
This ensures that the pension funds are prudently managed and invested while also contributing to the development of critical infrastructure in Nigeria.
