Pension Fund Administrators (PFAs) in Nigeria have disclosed significant investments in key projects, including the Dangote Refinery and Sukuku ventures, demonstrating a strategic approach to asset allocation. The PFAs directed a substantial sum of N300 billion towards Dangote Refinery, utilizing bill bonds issued by Dangote Industries in 2022 to facilitate the refinery’s completion. Additionally, they injected N127 billion into Sukuku projects across various states, seeking further diversification and growth opportunities.
This move aligns with regulatory guidelines permitting PFAs to explore dollar-denominated instruments, a strategy aimed at mitigating inflationary pressures. The objective is to optimize returns for retirees and workers whose savings are entrusted to these instruments.
Sa’ad Jijji, Managing Director of Pension Alliance (PAL) PFA Limited, revealed these insights during the fourth National Assembly Retreat 2024, convened by the Pension Fund Operators Association of Nigeria (PenOp) in Lagos. Jijji underscored the challenges faced by pension fund operators, particularly the restricted access to foreign exchange investment avenues, despite regulatory provisions allowing investments in dollar instruments. This constraint poses a significant hurdle in managing retirees’ funds optimally, resulting in below-inflation returns.
In addition to investments in federal government bonds and the Dangote Refinery project, the PFAs channeled N127 billion into Sukuku ventures, notably in critical infrastructure projects such as the Kano-Maiduguri Expressway, Kaduna Eastern Bypass, and others.
Furthermore, the PFAs diversified their portfolio by investing in infrastructural projects like the ACTIS Real Estate Fund, which includes acquisitions such as the Jambi Lake Mall and plans for the Ikeja City Mall. Notably, approximately N103 billion was allocated to the Nigeria Infrastructure Debt Fund (NIDF), the largest infrastructure fund in the country, focusing on diverse projects ranging from power infrastructure to student hostels.
Reflecting on the pension industry’s growth trajectory, Jijji highlighted a remarkable average annual growth rate of 16.3% between 2018 and 2023, culminating in pension assets valued at N18.36 trillion. By March 2024, pension assets under management surged by 7.14% to reach N19.67 trillion.
However, Jijji noted a concerning decline in the value of total pension assets in dollar terms, attributed to exchange rate fluctuations. He emphasized the imperative of addressing regulatory, operational, and technological challenges to ensure the long-term sustainability and efficacy of pension fund administration, safeguarding the retirement security of beneficiaries.
Hussaini Mohammed Jallo, Chairman of the House Representatives Committee on Pension, emphasized the pivotal role of PFAs in the pension ecosystem, highlighting challenges such as funding deficits, market volatility, and administrative inefficiencies. Addressing these challenges is essential for sustaining pension fund administration and securing beneficiaries’ retirement futures.
Oguche Agudah, CEO of PenOp, reiterated the importance of collaboration between legislators and pension stakeholders to enhance the pension system’s efficacy and transparency. By fostering dialogue and knowledge exchange, both parties can work towards optimizing the contributory pension scheme for the benefit of all stakeholders.
