The Pension Fund Operators Association of Nigeria (PenOp) has suggested the introduction of inflation-indexed bonds for investing pension assets to hedge against asset devaluation.
Thank you for reading this post, don't forget to subscribe!During the 4th PenOp National Assembly Retreat in Lagos, Dave Uduanu, a PenOp member and Managing Director of Access Pensions, advocated for the issuance of inflation-indexed bonds by the government. He explained that these bonds, which are issued in several countries, track the inflation rate and provide a return that outpaces inflation, thereby protecting savings from inflation and devaluation.
Uduanu stated, “Government should issue inflation-indexed bonds to safeguard the country’s savings. For example, if you issue bonds indexed at inflation plus two percent, and inflation is 14 percent, the bond will yield 16 percent. If inflation rises to 23 percent, the bond will yield 25 percent. This ensures savings are protected from inflation and devaluation.”
He also recommended creating more infrastructure funds to invest pension assets in real estate, which can serve as a hedge against inflation.
Additionally, Sa’ad Jijji, Managing Director of PAL Pensions, highlighted challenges in investing pension assets, such as limited access to foreign exchange and viable investment opportunities. He noted that investment returns often fall below inflation, further complicating the management of pension assets.
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