BusinessDay analysis of PENCOM Nigeria data reveals that the Pension Fund Administrators’ (PFAs) investment in Nigeria’s real estate sector decline by 1.25 percent year-on-year in November 2018.
In November 2017, the amount invested by PFAs in properties stood at N224.72 billion, a N2.82 billion decline when compared to the N221.90 billion it invested in corresponding period of 2018.
An analysis of the PFAs investment in the country’s property industry in the corresponding month since 2013 when BusinessDay started collating the data reveals that November 2018 figure is the third lowest compared to its highest of N231.25 billion in 2015.
Bode Adediji, the former President of the Nigeria Institution of Estate Surveyors & Valuers (NIESV) and Principal Partner, Bode Adediji & Partnership, had suggested that Nigeria should use the Pension Fund as a first tier finance for real estate development.
“Pension fund can be used to take care of short-term housing needs. As at a year ago, the Pension Fund managers were prohibited from engaging in long term investment,” Adediji said in a statement.
He said he believes that there can be improvement on that law by categorising “for instance, some real estate development that can take about 24 months as not too long a time to fit into the laws that set up the fund.”
Pension funds’ assets are defined as assets bought with the contributions to a pension plan for the exclusive purpose of financing pension plan benefits. The pension fund is a pool of assets forming an independent legal entity.
Meanwhile, the Assets Under Management (AUM) of Nigeria’s regulated pension industry increased by 14.76 percent from N7.41 trillion in 2017 to N8.50 trillion in 2018.
Cost of funds has made bank credit inaccessible, unaffordable and unattractive for real estate developers in search of patient capital to execute real estate projects.
Nigeria property industry was among the least attractive sectors to the country’s commercial banks as it got one of the smallest portions of loan in the third quarter of 2018.
The figures compiled from National Bureau of Statistics (NBS) shows that Nigeria’s property sector was only able to attract N710.2 billion in the third quarter of 2018 as against the N744.56 billion and N784.2 billion it got in Q2 and Q1 of 2018 respectively.
Meanwhile, at the end of the 9th month of 2018, the country’s real estate sector which is in need of more than 17 million housing units reported growth of -2.68 percent as against the -3.88 percent growth rate recorded for Q2, the 11th consecutive contraction since 2016.
The 14 years old National Pensions Commission was set up by Nigerian government to regulate, supervise and ensure the effective administration of pensions, including the Nigeria Social Insurance Trust Fund, and to issue guidelines on pension fund investments.
This includes making sure that eligible employers comply with mandatory contributions to retirement savings accounts set up by the Pension Reform Act of 2004.
Meanwhile, industry regulator, PenCom, has disclosed in its latest report in November 2018 that the number of contributors under the Contributory Pension Scheme (CPS) has grown to 8.38 million from 7.86 million in January 2018.
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