UBA ads

The way different people perceive and interpret pension funds’ involvement with financial products issued by the Federal Government has always been a battle of semantics or nomenclature. While some see it as an investment by the pension funds in FGN Bonds and Treasury Bills, a great majority see it as borrowings from the pension funds by the Federal Government.

I do think that each school of thought, in this argument, is correct. It is much like someone seeing the cup as half-empty and another seeing it as half-full. Invariably, they are giving different interpretations to their perceptions of what they see in the cup. It seems like the way people see and interpret things depends on their dispositions towards optimism and pessimism. While the optimist sees a cup that is half-full, the pessimist will see a cup that is half-empty.

For the records, I am an optimist. However, for this article, I have decided to look at it from the point of view of both schools of thought by using their semantics interchangeably.

FGN Borrows More: Analysis of data from the National Pension Commission indicates that pension funds bought Federal Government issued Treasury Bills worth N264 billion in addition to buying FGN Bonds worth N9 billion, thereby totaling N273 billion. Within the period, however, our analysis shows that FGN Bonds worth N86 billion matured and were redeemed or repaid by the issuer, leaving the net additional borrowing by the Federal Government or investment by the pension funds at N187 billion. That brings the total borrowing by the Federal Government from pension funds to N6.395 trillion as at the end of the first quarter of 2019. The borrowing comprises of N1.9 trillion in Treasury Bills and N4.45 trillion in Federal Government Bonds.

What this means is that out of the N9.03 trillion pension fund assets, 70.8% is invested in financial instruments issued by the Federal Government of Nigeria ( ie 49.4% in FGN Bonds and 21.4% in Treasury Bills).

Risk Management Strategy: The fact that pension funds are overweight Federal Government issued financial products can be seen as a covert or overt risk management strategy aimed at preserving pension fund capital while making some modest returns without undue exposure to the volatilities of the market and its consequent risks. This is quite understandable, given the increasing importance of pensions.  As a very important source of retirement income, the need for capital preservation should be paramount in the minds of fund managers. It, therefore, comes as no surprise that they are investing mostly in secure but conservative financial assets. The strategy seems to be paying off as the pension funds continue to make gains, though in trickles, without losing any of its principals.

Not an Unusual Event: Government borrowing from pension funds is not an unusual event. It is not peculiar to Nigeria alone either. In 2011 and 2013 when the Obama administration in the US lost its ability to borrow due to its debt obligation level nearing  the debt ceiling set by Congress, the then Treasury Secretary, Timothy F. Geithner, hinted that the US Government would borrow from federal retiree programmes to help keep the government afloat pending when the debt ceiling was raised.

In 2012, the state of New York had to borrow from pension funds. In the same year, Baltimore County in the US borrowed $25 million from its pension system to upgrade recycling facilities. Even in Africa, some Governments had either contemplated borrowing or actually borrowed from their pension funds. In 2012, for example, the Ugandan Government of Yoweri Museveni, “considered borrowing about $400 million from the country’s sole statutory pension fund to finance the construction of roads”. In what looked like a different scenario, in 2015, the Tanzania Government halted borrowing from pension funds as part of the pension reform that took place in that country then. The Tanzanian government must have been borrowing from its pension funds before halting the borrowing.

Standard chartered

What Matters is ultimate Realisation:  Whether you see it as borrowing by the Federal Government or investment by the pension funds, it is an economic activity that adds value to all parties affected as long as the investment or loan is realized at maturity.

Uchenna Ndimele is the President of Quantitative Financial Analytics Ltd. MutualfundsAfrica.com and mutualfundsnigeria.com (both Quantitative Financial Analytics company website) is a leader in supplying mutual fund information, analysis, and commentary on African mutual funds. We provide reliable fund data; and ratings information that will add value to fund managers, the media, individual investors and investment clubs.


  1. I’m sorry, but your first two paragraphs hugely contradicts with the penultimate one. While in the former, you opine that investments by PFAs in TBs and Bonds can be seen as borrowing by the FG, in the latter, you give examples of actual borrowings by Governments from PFAs.

    These two scenarios are incomparable, for what it’s worth!

    • Hi Mayowa,

      I think you missed where the author asserts..

      “However, for this article, I have decided to look at it from the point of view of both schools of thought by using their semantics interchangeably.”

  2. PENCOM is ‘senior’ to PFA! Except PENCOM releases funds to PFA, the PFA cannot perform their obligations to the Retirees! Currently, Retirees under PENCOM wait for not less than fourteen (14) months before they can be reimbursed by PFA! So this is the reason why Retiree suffer in an undue manner in a country where their investment in Stocks and Shares have hit the rocks for those looking for alternatives, and TSA has made Staff Cooperatives a moribund organisations as retirees cannot have access to the hard earned money they saved for the rainy day after retirement and no-one can do anything about it. Yet some retiree are still training children, stipends to qualified graduates as children, extended family members without jobs, no house to move to as no functional Staff housing plan … Let the government give unto Ceaser what is Ceasers and that is the best way to fight corruption to a standstill!

  3. With appreciation to the initiatives of government at all level including civil servants & people in the private sector, I like to know why Pencom under your esteemed management placed embargo on released of fund of National Assembly Legislative Aide Staff that are contributors of pension scheme, through IEI-Anchor Pension management?


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.