Eleven years after it was created, the Federal Government and states have cornered over N5 trillion from workers’ pension contributions under the Contributory Pension Scheme for infrastructure development and other financial commitment.
The amount received through investment in their various capital market instruments represents over 70 per cent of the N8 trillion pension assets currently being managed by Penson Fund Administrators (PFAs) and closely monitored by the National Penson Commission (PenCom).
According to statistics released by PenCom, over 70 per cent of the contributions have been put into Federal Government securities, while another N161.42 billion has also been invested in state government securities.
Further breakdown of the investment shows that FGN Bonds has N3.97 trillion; Treasury Bills, N1.45 trillion; Agency Bonds, N5.98 billion and Green Bonds, N7.93 billion while Sukuk got N58.8 billion.
Also, some state governors have approached the capital market for funds through issuance of bonds to finance many projects in their regions, even though not many of them have found it worthwhile to fully commence the CPS programme in their states.
Of particular interest is the Sukuk bond, which the Federal Government recently deployed into infrastructure development, especially the rehabilitation and construction of roads across the country.
Last year, the Minister of Finance, Mrs. Kemi Adeosun, handed over N100 billion Sukuk bond proceeds cheque to the Minister of Power, Works and Housing, Babatunde Fashola (SAN), for the financing of 25 road projects across the country.
The minister had said that the oversubscription of the bond to the tune of N105.87 billion was a sign of confidence in the Nigerian economy and the government of President Muhammadu Buhari, adding that the Sukuk proceed would unlock the potential of Nigeria.
“This is the first Sukuk bond issuance for Nigeria. It is about financial inclusion and deepening of our financial markets. The proceeds will be used to support government capital spending for 2017 – the construction and rehabilitation of 25 key economic roads across the six geo-political zones of the country,” she said.
“The roads will ease commuting, spur economic activities across the country and further close our infrastructural gap,” she said.
The expectation was that each of Nigeria’s six geopolitical zones would receive the sum of N16.67 billion for road projects.
While the North-Central and South-South zones accounted for five each of the 25 key economic road projects, the North-East, North-West and South-East have four road projects each.
In the South-West zone, three projects were earmarked to receive funding from the Sukuk proceeds.
The Federal Government started the sale of an N100 billion ($326 million) debut sovereign Sukuk to fund road infrastructure last year.
The seven-year Islamic bond structured as a lease would yield a 16.47 per cent rental rate, payable semi-annually.
The Debt Management Office (DMO) had said the Islamic bond sale was part of plans to develop alternative funding sources for the government and to establish a benchmark curve for corporates to follow.
Prior to the take-off, the Central Bank of Nigeria (CBN) had worked to set regulatory ground rules for Sukuk and Islamic insurance (takaful) to try to emulate the success of the industry in Malaysia.
The bank has set up liquidity support systems to its non-interest lenders after it issued guidelines last year to enhance the quality of Sukuk instruments and grant the Islamic bond liquidity status at its discount window.