As the low-interest regime that characterized most of 2020 continues with no immediate sign of an increase, pension fund managers have also continued to rid their portfolios of treasury bill investments.

Analysis of the recently released September 2020 edition of Pension Fund assets, by the Pension Commission of Nigeria, PenCom, shows that pension fund managers reallocated their assets away from treasury bills to FGN Bonds.

READ: Nigeria’s Micro Pension industry: A gold mine waiting to be tapped

In the month of September 2020, according to the latest report, pension fund managers closed out of treasury bill positions worth N0.224 trillion while loading up on FGN bonds worth N0.254 trillion. Since the beginning of 2020, pension fund managers have moved out about N1.112 trillion of treasury bills investments into mostly FGN Bonds.

READ: FG posts 27% revenue shortfall in 2020 as budget deficit hit N6.1 trillion

At the beginning of 2020, total pension fund assets invested in treasury bills stood at N1.88 trillion, but that has fallen to N0.78 trillion as at the end of September 2020. Put in another way, as at the end of 2019, 18.4% of pension fund assets were invested in treasury bills but as at September 30, 2020, pension funds’ treasury bill investment stood at 6.7%

READ: Pension Fund Assets hits N9.3 trillion as investment in FGN securities drops

Implications for domestic borrowing and monetary policy

Treasury bills serve a whole lot of purposes for the government. They are used as a means for the government to borrow to cover short term budgetary deficits as well as a means for the Central Bank to manage the supply of money and its inflationary effects.

READ: Worry for PFAs as pandemic-induced unemployment lowers new pension accounts

With the increasing and seeming lack of interest by pension fund managers, who, usually are big players in the treasury bill market, the government may find it a bit problematic raising the much-needed domestic borrowing from them.

READ: Nigeria’s Eurobond yield hit 12.8% as investors flee emerging markets

In like vein, the Central Bank’s ability to implement monetary policies through treasury bills and others, open market operation, may also suffer. May be, fiscal policy may become a more potent instrument of economic management, if that happens.

The Finance Act 2020 was recently signed into law by President Buhari and became effective from January 1, 2021.

According to the provisions of the Finance Act 2020, the federal government can borrow from the pool of unclaimed dividends of quoted companies that have remained unclaimed for a period of not less than six years from the date of declaring such dividends.

Nairametrics earlier reported that the members of the House of Representatives had raised alarm over N200billion locked up in the unclaimed dividends pool.

READ: Reps to investigate alleged illegal withdrawal of $1.05 billion from NLNG account

The following steps would be quite helpful in redeeming your unclaimed dividends that are less than six years old in the pool:

Step 1: Check your names using the link – http://sec.gov.ng/non-mandated/ to obtain the list of shares relating to your names from SEC. It will display all the companies you have shares in and the registrars in charge.

Step 2: Take note of the registrar’s name for each of your company’s shares. A registrar is the company that keeps details of your shares/shareholdings.

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Step 3: Download and fill your registrar’s form which is usually beside the company’s name on the website.

Step 4: Submit your form to the registrar, with acknowledgement, most times, through your bank.

Quite a number of the companies would require that you visit your bank and get a bankers’ confirmation to be able to initiate e-dividend form for you. With e-dividend in place, your dividends can be automatically credited to your designated bank account.

READ: SEC advises defunct Skye Bank shareholders to process unclaimed dividends

Why this matters

• Over N200billion is estimated to be trapped in the pool of unclaimed dividends and this is quite huge.
• It is clear that as soon as the provision is fully applied and implemented, no shareholder will be able to claim their unclaimed dividends of at least six years old in the pool, in the short/medium term, as the funds would have been transferred to CBN under Unclaimed Funds Trust Fund to be borrowed by the federal government.

The Commissioner for Finance in Katsina State, Alhaji Kasim Mutallab, has revealed that the State Government is set to secure a 7-year bond from the Islamic Development Bank worth N55 billion.

According to sources from the News Agency of Nigeria, the Commissioner revealed that the bond will be judiciously used to bridge the infrastructural gap in key sectors of the state economy, such as education and health.

What they are saying

Commenting on the recent development, Alhaji Mutallab said:

• “Katsina state is looking to undertake a seven year bond, the bond will follow Islamic principles; there must be special purpose for securing the bond. We are looking at this bond because of the infrastructure deficits in the state in terms of roads, hospitals and education.”

What you should know

• The Islamic or sharia-compliant bond also called Sukuk, is an interest-free Islamic financial certificate that represents a portion of ownership in a portfolio of eligible existing or future assets. They can be considered as an Islamic version of conventional bonds.
• According to the Corporate Finance Institute (CFI), Sukuk does not represent a debt obligation. Upon its issuance, the issuer sells certificates to investors. Then, the issuer uses the proceeds from the certificates to purchase the asset, and investors receive partial ownership of the asset. The investors are also entitled to part of the profits generated by the asset.