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Nigeria to Channel More Pension Funds to Corporate Bonds

Nigeria plans to amend investment rules to channel more of the country’s $26 billion of pension funds into corporate bonds, Nigeria Pension Commission Director-General Chinelo Anohu-Amazu said.

Pension administrators, including Stanbic IBTC Pension Managers Ltd. (STANBIC) and ARM Pension Managers Ltd. (ARMAGGW), are currently investing only 2 percent of funds in corporate debt, well below a 35 percent limit, according to data released by the commission also known as Pencom. This compares with 65 percent invested in federal and state government bonds and 13 percent in equities.

New rules are being considered to encourage more investments in corporate bonds, thereby making long-term capital available to fund infrastructure projects, Anohu-Amazu said in a June 5 interview in the capital, Abuja. “We have a huge amount which can go into the development of infrastructure, but what we have now is an under-utilization.”

Africa’s largest economy needs at least $14 billion annually to bridge its infrastructure gap, according to Finance Minister Ngozi Okonjo-Iweala. The country of about 170 million people loses at least 2 percent of potential gross domestic product growth annually due the shortfall, mainly in power and transportation, according to the minister. Its economy is estimated to expand 6.75 percent this year.

A major slice of pension assets are now in government bonds, the “safest place,” according to Anohu-Amazu. With an average growth rate of 30 percent over the last four years, pension funds are seeking new investment options in equities and other outlets that are safe and offer higher returns.

Infrastructure Funds

Nigeria increased the limit for pension funds’ investment in equities to 50 percent from 25 percent of assets in November 2012 to help boost trading in stocks. As an additional investment outlet, infrastructure funds could take as much as 15 percent of pension assets, Pencom said at the time.

“Whether it is power, real estate, roads, railway, all sorts of infrastructure, we are interested in the format in which the pension funds go into these projects,” Anohu-Amazu said. “Our overriding objective is to ensure that the retired workers receive their payments when due.”

Nigeria will host the World Pension Summit’s “Africa Special” edition from July 7 to July 8, seeking to explore opportunities for improving its pension administration and investment, Anohu Amazu said.

To contact the reporter on this story: Elisha Bala-Gbogbo in Abuja at ebalagbogbo@bloomberg.net

To contact the editors responsible for this story: Dulue Mbachu at dmbachu@bloomberg.net Ben Holland, Antony Sguazzin, John Bowker

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