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Chiamaka Ajeamo
Economic headwinds including vulnerability to external shocks, forex volatility, infrastructure deficit, tough operating environment, regulatory challenges, policy uncertainty have been identified among others as being responsible for diminishing the investment prospects of Nigeria’s real sector.
Against this backdrop, economic experts have reiterated the imperative to de-risk the sector to attract sufficient private capital for insurance and pension industry as well as for foreign investors.
This was the submission of some experts who spoke at the 2020 Annual National Conference of the National Association of Insurance and Pension Correspondents (NAIPCO), in Lagos recently.
Keynote speaker and Director General, Lagos Chamber of Commerce and Industry (LCCI) Dr. Muda Yusuf, in his presentation on the theme “Promoting Bankable Investments Portfolio for Insurance and Pension Sectors,” said long-term funds needed for infrastructure financing are lacking thus posing a major challenge to the country’s economic development.
Yusuf noted that insurance and pension funds provide a good source of financing for infrastructure but the risks encountered in the real sector do not give them room to function as they ought to. He stated that ideally, the low yields on government securities ought to have spurred fund managers to explore viable investment opportunities in the real sector, but regretted that many fund managers are ignoring the real sector due to elevated risk despite quite a number of attractive opportunities.
“Fund managers’ exposure to investment vehicles in the real sector is extremely low due to the high level of risk involved. For instance, two per cent of pension assets is invested in real estate, and less than one per cent in infrastructure fund.
“Fund managers often complain that projects in the real sector are non-bankable. Hence, the low share of pension assets in the real sector.
“Investors’ participation have been weak in the real sector in recent years. About five per cent of foreign capital flows to Nigeria went into the real sector between January and June 2020, indicating poor investment sentiment towards the sector.
“The real sector needs to be totally de-risked to be able to attract adequate quantum of private capital for Pension Fund Administrators insurance firms, and foreign investors.”
Yusuf further stressed that de-risking the real sector will boost investor confidence and fund managers’ participation, attract more private sector investment, generate more employment opportunities, foster industrialization and economic diversification agenda as well as unlock more investment opportunities for the sectors.
Proffering solutions on how to de-risk the real sector, he advocated for policy and institutional reforms, better regulatory environmental, effective synchronization of fiscal and monetary policies, ease of doing business reforms, clear policy directions, amongst others.
Also speaking, the Chairman. Nigeria Social Insurance Trust Fund, (NSITF), Austin Enajemo-Isire, said there should be a deliberate policy by the regulatory authorities in addition to what is already obtainable, giving room to invest insurance and pension funds into sectors such as manufacturing, agriculture and aviation.
Enajemo-Isire added that the current restrictive nature of pension and insurance funds investment platforms calls for an immediate review and the constant plea from the Organised Private sector of Nigeria (OPSN) to create more access to investible funds deserves more attention.
The Chairman, Mutual Benefit Assurance Plc, Akin Ogunbiyi, on his part called on the government to support the growth of the insurance industry by purchasing policies and also ensuring the reduction of sharp practices to the barest minimum.
