Nigeria’s timid pension industry
There is no doubt that the National Pension Commission (PENCOM) was put on the right footing by the competent and focused leadership provided by its widely respected first DirectorGeneral, Mr. M. K. Ahmad, an unassuming but efficient financial management technocrat from Gombe State.
The Management team he led and the PenCom Board chaired by Alhaji Fola Adeola, nurtured the Commission with absolute commitment. They laid a solid foundation for success and strong regulatory regime that made owners of Retirement Savings Accounts confident that their savings are protected and are likely to grow through earnings from wise and prudent investments and continuous savings until retirement.
As it became more important as a source of succor for pensioners, the pension industry in Nigeria is being closely scrutinized and assessed by stakeholders, whose views and verdicts on its performance and in terms of meeting their very high expectations are mixed, to say the least.
It may surprise readers to know that there is no single Pension Fund Administrator that specifically and regularly informs Retirement Savings Accounts owners the income their savings earned as a result of investing the money in the various instruments approved by the regulator. This ambiguity is an aberration and should be remedied; otherwise pensioners would continue to be in the dark regarding their appropriate share of the profit made through investing their money gainfully.
Beside the incomprehensible failure to clearly state the share of the earnings payable to the savers in terms of percentage from the total amount gained, the industry’s timidity has been made very obvious by the inability to find productive ventures to invest N1.6 trillion which PenCom said is idle in a country where teeming youths are looking for jobs or capital to start small businesses. If investment in start-ups is not feasible, the idle money can be invested in interest-yielding deposits, and it could generate a minimum of N80 billion per annum at an interest rate of just 5 per cent.
Granted that the provisions of the Pension Reform Act 2004 as amended, periodic guidelines issued by PenCom, prudence, due diligence and other criterion for investing pension funds must guide the investment decision and process, it is difficult to convince the average RSA holder and investment experts that there are no bankable investment proposals worthy of consideration and approval by the pension funds regulators and managers.
It is normal practice in the world’s pension industry to create special investments instruments in infrastructure, real estate and private equity to fuel economic growth in a given country. For instance, entrepreneurs can access such funds to invest in railway lines, roads and airports to boost the transportation sector. Some lines can even specialize in the haulage of cargo, including livestock. Is the proposed National Career not a bankable preposition that can be financed with part of that N1.6 trillion? A special purpose vehicle can be created to do just that.
The Thinking Ahead Institute of Willis Towers Watson said in a document that the World Bank suggested regional and overseas investments as options, which is impossible at the moment because the total pension asset in Nigeria is just over US$23 billion. This is a tiny amount relative to the South African and global pension assets of US$258 billion and US$ 41.3 trillion respectively, as at 2017.
Many industry trackers point at the large-scale Dangote Refinery and Fertiliser Plant as appropriate for possible equity investment. Fertilizers and the expected outputs of the refinery have ready market as the country has given agriculture a top priority status in the quest to produce enough food for nearly 200 million people. There could be several potential clients that can convince the pension industry managers to lend them money from the idle N1.6 trillion for investment in productive economic activities in the country. The pension funds managers should identify and engage them. This is one way to end their timidity and make that idle N1.6 trillion productively busy.