AFEX, PFA to expand pension fund investment in commodities sector

AFEX and the Pension Fund Administrators (PFA) have concluded plans to expand market participation in the commodities sector by driving pension fund investments.

This is just as AFEX stated that the domestic agriculture sector has long faced challenges across low capital and lack of investments, which has only reduced in the past couple of years, owing to the risk and volatility of the industry.

This was disclosed recently at an executive roundtable held in Lagos with key stakeholders from the pension industry aimed at unlocking the immense potential of the commodity sector.

AFEX noted that government allocation to the sector has been drastically dropping from 3.61 per cent in 2019 to 1.51 per cent in 2020, 1.92 per cent in 2021 and a record low of 1.05 per cent in 2023.

AFEX also cited the first half of 2023 report released by the National Pension Commission (NPC), that showed the total asset under management stood at N16.8 trillion, which was mainly invested in Federal Government securities (65 per cent), local money market securities (18 per cent), corporate debt securities (eight per cent) and domestic ordinary shares (eight per cent).

AFEX stated that with this, the pension industry represents a significant pool of long-term and patient capital essential for driving sustainable development in the agriculture sector.

Speaking, the Vice President, AFEX Commodities Exchange, Oluwafunto Olasemo, said there is perhaps no better time to drive investment in the commodities sector than now.

She said food inflation and demand have hit an all-time high, noting that the direct implication is a pressing need to shore up agricultural productivity to meet household consumption and processing demands.

“Over the years, we have built a track record of facilitating efficient commodity trading through the exchange and our innovative basket of instruments, which has significantly de-risked the sector. This robust infrastructure provides investors with the security and transparency needed to navigate the commodity sector with confidence,” she stated.

Olasemo said last year, AFEX recorded a significant milestone in the journey to unlocking pension capital for the commodities market by signing a Memorandum of Understanding (MoU) with PenOp to deepen liquidity and participation in Nigeria’s commodities market.She said the signing also sets the foundation for creating an ecosystem where smallholder farmers, traders, and institutional investors can thrive.

On his part, the Managing Director of PenOp, Aguda Oguche, said the pension industry would always prioritise diversified and sustainable investments for its members, adding that the roundtable is a critical step in fostering collaboration between key stakeholders. He said the pension industry will explore innovative solutions that can bridge the gap between pension fund capital and the vast opportunities within the Nigerian commodity sector, thereby ultimately contributing to economic diversification and shared prosperity.

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