Pension Fund Operators Association of Nigeria, PenOp, has recommended inflation indexed bonds for investment of pension assets to hedge against devaluation of the assets.
According to PenOp, issuing inflation indexed bonds will also protect the savings of the country from inflation and devaluation.
Uduanu stated: ‘’Government should issue inflation indexed bonds to safeguard the country’s savings. In other countries there are bonds that government issue where the coupon tracks inflation rate. For instance, if you issue inflation indexed bonds, indexed at inflation plus two per cent, if inflation is 14 per cent, the bond will yield 16 per cent. If by government management or otherwise of the economy, inflation goes to 23 per cent, the bond will yield 25 per cent. That means the savings of the country is protected from inflation and devaluation.”
Uduanu also said that government can create more infrastructure funds to invest the pension assets as real estate assets can hedge against inflation.
Also speaking , Managing Director of PAL Pensions, Mr. Sa’ad Jijji, stated that challenges confronting PenOp in the investment of pension assets are that they don’t have access to foreign exchange even though investment regulations allows PFAs to invest in dollar instruments.
He added that limited viable investment opportunities as well as below inflation investment returns are also challenges confronting investment of the pension assets.
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