PFAs shun T’bills, invest N1.6tn in banks, commercial papers

Pension fund administrators have gradually reduced investment of pension funds in the Contributory Pension Scheme in treasury bills, findings have revealed.

Data obtained from the national pension commission revealed that the operators have increased their investments in commercial papers and bank placements.

Latest statistics from PenCom showed that the PFAs reduced their investment of the funds in FGN treasury bills from N2.26tn in September 2019 when the total fund was N9.51tn, to N1.36tn in February 2020, when the total fund was N10.5tn.

The operators increased investment of the funds in local money market securities, which included bank placements and commercial papers from N1.15tn in October 2019 to N1.6tn in February 2020.

The bulk of the funds of N5.6tn, however, remained in FGN bonds, which were investments with longer years tenor.

Commercial papers are gradually becoming alternative options for investors to invest funds that were hitherto stashed in treasury bills, experts have said.

Commercial paper is an unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts payable and inventories and meeting short-term liabilities.

Treasury bills, which used to yield up to 14 per cent interest in recent years, and gradually crashed to 10 per cent, now offer investors between 3.3 per cent and 4.5 per cent interest.

Teslim Shitta-Bey, the managing editor, Proshare (investment analysts), noted that while there were very limited investment options, investment in commercial papers was still a good option.

Shitta-Bey recalled that many years back, yields on treasury bills were low, but moved up as the government borrowed more, increased interests and thereby encouraged people to lend.

He said, “Currently, if you see what government is doing, it is trying to do more of foreign than domestic borrowing; do Eurobond and sell the debt abroad rather than in the domestic market so that it does not prevent banks from lending to the private sector.”

Dr Oladimeji Alo, the managing director, Excel Professional Services Limited, also said commercial paper was another option, which some very notable companies were floating.

He said, “The yield of one floated recently is as high as 10 per cent. It is like a company is borrowing through the capital market; and it can borrow, usually for one year.”