Finance minister Wale Edun has clarified the government’s plan to utilize N20 trillion worth of pension funds in the country for infrastructure after his earlier announcement sparked outrage.
Speaking after Tuesday’s federal executive council meeting chaired by President Bola Tinubu, the minister had said while the government will seek foreign investment, it first would tap into domestic financial resources, particularly pension and life insurance funds, for infrastructure.
“And the fact is that even before we start looking to foreign investors, we start looking to foreign funding, there is available in Nigeria, long term funds to fund infrastructure projects, and it’s within the pension, the life insurance and investment fund industry generally,” he said.
“There is upwards of N20 trillion available, and much of it is in short-term funding that doesn’t need to be. Pension money is long-term.
“People save over their lifetime for their pension. And so, in conversation, in consultation, collaboration and cooperation with the private sector, we are now able to announce and with the full knowledge and support of all parties, that there will be an initiative to fund growth through investment in infrastructure, including housing, provision of mortgages, long term mortgages, 25-year mortgages at relatively low interest rates.”
Such a move would be illegal as Nigeria’s pension law, which bars investing more than 5% pension funds directly in infrastructure. Pension fund administrators invested only N130 billion in infrastructure by September 2023, a small percentage of the total.
Former Vice President Atiku Abubakar decried the plan, calling it illegal. Many Nigerians condemned the plan, afraid tampering with retirement savings may be problematic in future.
Yes, but within the law
Speaking in a video on Thursday, Mr Edun said the pension industry is strictly regulated and any government use of pension funds will be as the law allows.
“The pension industry, like most the financial industries, is highly regulated. There are rules. There are limitations about what pension money can be invested in and what it cannot be invested in,” he said.
“The federal government has no intention whatsoever to go beyond those limitations and go outside those bounds which are there to safeguard the pensions of workers.
“What was announced to the federal executive council was that there was an ongoing initiative drawing in all the major stakeholders in the long-term saving industry, those that handle funds that are available over a long period to see how, within the regulations and the laws, these funds could be used maximally to drive investment in key growth areas,” Mr Edun said.
He said the government has no plan to create additional risks for saved pension funds.
“Investments such as infrastructure, housing etc, and of course, to find a way to provide Nigerians with avoidable mortgages. Within this context, there is no consideration to provide less safe investment for pension funds, or insurance funds or any investment fund that are made available,” he said.
“No attempt to increase the risk, or lower the return that will otherwise be had.
“And we must remember that the federal government possesses the ability to provide guarantees where such are needed in order to unlock funding that will lead to growth, creation of job and alleviation of poverty.
“It is an ongoing conversation, a challenge and a test for the best and brightest in the financial industry to come up with solutions that while safeguarding the long-term savings of workers, do provide an avenue that can help to boost growth in the economy,” he added.
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