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‘Pension funds as equity will boost mortgage finance, housing, others’


Pension funds as equity

Industry regulator, the National Pension Commission (PenCom), has said there will be a significant development in Nigeria’s housing sector if contributors devoted a percentage of their Pension Fund Assets (PFA) under management as equity injections for residential mortgages.
According to the Commission, this will accelerate the development of both the mortgage finance and housing sectors, as well as make affordable housing accessible to registered contributors.
Recently, the Bankers’ Committee resolved that banks will support the pension industry to release up to 25 per cent of the pension funds to their contributors as equity injections towards owning houses, saying the funds can be used to stimulate demand for mortgage loans in Nigeria.
In her remarks, Chief Executive Officer, FSDH Merchant Bank, Hamda Ambah, explained that: “It was agreed that the Central Bank of Nigeria (CBN) would talk to fellow regulators, and also work with government of various states to make the process of land transfer and titling a lot easier so that many more people across the nation can access mortgage financing to stimulate demand in our economy.”
Speaking to The Guardian, Acting Director-General, PenCom, Aisha Dahir-Umar, said one of the major inclusions in the Pension Reform Act (PRA) 2014, was the introduction of Section 89 (2), which allows registered contributors under the Contributory Pension Scheme (CPS), to apply for a percentage of their pension assets as equity contribution for residential mortgages.
She noted that the initiative is significant, saying: “The Commission has drafted Guidelines, which are in line with the Framework of the Mortgage Guaranty Company (MGC), being proposed by the Central Bank of Nigeria.
“The objective of the MGC is to support mortgage originators such as Primary Mortgage Banks (PMBs), and commercial banks to increase mortgage lending by guaranteeing or partially guaranteeing equity contributions to secure a residential mortgage. The Commission is working with the CBN and the guidelines are to be disclosed before the end of the year.”
Meanwhile, Dahir-Umar said the total pension fund investment in infrastructure hit N150.71 billion as of June 30, 2019. Broken down, she said investment in Sukuk Bond took N86.10 billion, Infrastructure Funds N29.17 billion, Infrastructure Bond N11.49.92 billion, Green Bond N12.13 billion, while Agency Bond took N11.82 billion.
She explained that Sukuk was deployed for road infrastructure, while the Infrastructure Funds consist of Investments in ARM Harith Fund, which invested in the Azura-Edo independent power plant (IPP) project in Edo State, and Afri plus Fund that invested in the Constructions of 1,200 hostel rooms at the University of Calabar, Cross Rivers State.
Speaking further, she said the proceeds of the Infrastructure Bond (Vaithan Infrastructure Bond) were invested in the Akute Power Plant, Island Power Plant, Pipp Genco, and Gasco Marine Limited’s power projects in Lagos State.
However, she noted that pension assets in Nigeria, valued at N9.05 trillion as at April 30, 2019, are currently the largest available pool of capital, saying pension funds are adequately suited for investments in infrastructure, as it is a potential avenue to reap higher and consistent returns on investments if adequate policies, structures, and regulation are instituted.

“Several countries in Europe, Latin America, and Africa have successfully utilised part of the accumulated pension funds by investing in new infrastructure projects or renewing dilapidated ones. Globally, productive investments in infrastructure are majorly made possible by long-term funds and savings such as pension funds,” she added.

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