As Nigeria’s naira continues to lose value against the dollar, resulting in increased erosion of most investment assets including pension funds, Pension Fund Administrators (PFAs) are looking to dollarised investment windows to hedge against the devaluation of pension assets.
They are therefore engaging the industry regulator, the National Pension Commission (PenCom), to come up with a workable model that will enable PFAs to invest in dollar-denominated assets outside Nigeria, as provided in the pension law. This is so that in the medium to long term, contributors and retirees could have bolster to accommodate increasing devaluations of the local currency.
Jide Allo, head, Investment Management at Stanbic IBTC Pension Managers Limited, speaking on the future of pension funds amid increasing devaluation of the naira, says, “Devaluation of the naira is indeed a concern for pension administrators”.
Allo says the PFAs are working together with PenCom to develop a framework that will enable pension funds to be invested in dollar-denominated assets within and outside Nigeria. According to Jide, this will help sustain the value of the pension assets and for the benefit of the contributors.
PenCom in a statement on erosion of pension assets over depreciation of the naira notes that it is the duty of the PFAs to administer the contributions and invest in such a way that will ensure safe and reasonable returns on investment. PenCom said the reserved fund created by the PFAs under the Act would compensate for any erosion of the value of the contributions.
Source: Stanbic IBTC Pension Managers Limited
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