PenCom issues new investment rules, says 50% of infrastructure fund must go to Nigerian projects

The National Pension Commission (PenCom) says at least 50 percent of the infrastructure investment fund must go into projects domiciled in Nigeria.

PenCom announced the new rule on Wednesday in a circular titled, ‘Revised Regulation on Investment of Pension Fund Assets’.

PenCom said pension fund investments in infrastructure projects through infrastructure funds must meet specific requirements.

According to the organisation, one of such requirements is that “the value of the infrastructure fund shall not be less than N20 billion”.

“The Infrastructure Fund shall have well-defined and publicised investment objectives and strategy as well as disclosures of pricing of underlying assets, including any other necessary information,” the commission said.

“All annual financial statements of the Fund shall be audited by independent firm(s) of chartered accountants registered by the Financial Reporting Council (FRC).

“The Infrastructure Fund shall have satisfactory pre-defined liquidity/exit routes such as IPO, sale to other Infrastructure Funds, Trade sale, sale to a strategic investor, etc.

“The Funds shall be managed by experienced Fund Managers, versed in infrastructure financing and registered with the SEC as Fund Managers.

“A minimum of 50% of the Infrastructure Fund shall be invested in projects within Nigeria.

“The key Principals, namely the Chief Executive Officer (CEO) and Chief Investment Officer (CIO), of the Fund Manager, shall each have at least ten (10) years of relevant and continuous experience in infrastructure financing or investment management.

“The key Principals shall not exit the Fund without prior notice to the PFAs, which shall not be less than 90 days from the exit date.

“This ‘exit clause’ shall be expressly stated as a condition in the investment agreement/ covenant between the PFA and the Fund Manager.

“Where an Infrastructure Fund does not have an eligible Sovereign Wealth Fund and/or MDFO as Limited Partners but the Fund Manager has a minimum Investment Manager Rating of ‘BBB’ issued by, at least, two rating agencies registered or recognized by SEC, the Fund Manager shall retain a minimum investment of 3% of the Infrastructure Fund.

“Where the Infrastructure Fund has an eligible Sovereign Wealth Fund and/or Multilateral Development Finance Organization as Limited Partners, the Fund Manager shall retain a minimum of 1% of the Infrastructure Fund.”

“INFRASTRUCTURE FUND SHALL HAVE ADVISORY BOARD’

PenCom further said the infrastructure fund shall have an advisory board with independent representatives of limited partners comprising the majority.

The commission added that prior to investment as well as during the tenor of investment in any infrastructure fund, the advisory board shall have responsibility over audit functions regarding transactions with parties related to the fund and compliance with the fund’s investment guidelines and policies.

In August, Ibrahim Buwai, the commission’s spokesperson, said the commission was planning to review the share of funds that can be invested in infrastructure and private equity.

The move will boost returns on retirement savings, Buwai said.