Nigeria’s current 17.8 percent inflation rate exacerbated by foreign exchange scarcity and fall in commodity prices has eroded returns on investment (ROI) of the country’s flourishing pension industry, BusinessDay learns.
Figures emanating from the Surveillance Department of the National Pension Commission (PenCom), according to an industry egghead, indicating performance numbers as of July 31, 2016, revealed inflation almost doubled the rate of ROI for all classes of the pension fund assets.
According to the figures, the annualised ROI for Retirement Savings Account (RSA) stood at 9.48 percent, retirees fund 10.55 percent, transitional contribution funds (TCF) 9.49 percent and closed pension fund administrators (CPFA) fund 9.16 percent
Meanwhile, 177,000 workers who have lost their jobs, which increased phenomenally following the economic recession in Nigeria, have accessed 25 percent of the balance in their RSAs, which according to Olulana Loyinmi, head, Benefits and Insurance Department, PenCom, is a major issue for the pension industry today.
There is a lot of pressure and concern over assessment of benefits by employees over job losses, and many of such requests were still being processed, he said.
Eguarekhide Longe, chairman, Pension Fund Operators Association of Nigeria (PenOp), said pension operators were feeling the impact of the current economic recession in Nigeria both in terms of ROI, pension remittance, loss of job employment and contributions.
The operators are concerned about these developments and were being cautious on where to invest the funds, Longe said.
Chinelo Anohu-Amazu, director-general of the Commission, in her opening address Wednesday last week, at a two-day workshop for finance, labour and insurance correspondents in Calabar, said PenCom was targeting to grow contributors in the pension scheme to 20 million by 2019.
The theme of the two-day conference was “Understanding the new Corporate Strategy of the Pension Industry.”
Anohu-Amazu, represented by Abubakar Kaoje, a commissioner in the Commission, said part of the vehicles to drive this targeted growth was the expansion of the scope of the scheme to cover Nigeria’s huge informal sector economy.
According to Anohu-Amazu, PenCom is currently working out a structure to guide the informal sector’s enrolment in the scheme, and this is expected to be ready shortly.
About 7.2 million persons are presently captured in the scheme with total pension fund asset standing at N5.9 trillion to date, she said, “This figure, in a country with over 160 million population, is, however, seen inadequate and speaks to the poor penetration of the pension in Nigeria.”
To her, this huge fund also faces a challenge as over 177,000 contributors have been confirmed to have applied to withdraw 25 percent of their contributions over time due to loss of job.
She said however that “major success indicators in the scheme include the consistent growth in a large pool of pension assets of over N5.9 trillion, which are invested in structured and safe financial instruments; registration of 7.2 million pension contributors; 170,000 retirees under the CPS, among others.
“These modest milestones, notwithstanding, the implementation of the PRA 2004 was not bereft of challenges. Indeed, some issues were noted in the course of implementation since the PRA 2004 and this underscored the imperative for a comprehensive review of the PRA in order to consolidate on the Pension Reform.
“The re-enactment of the PRA in July 2014 provided a sound basis to guide the second decade of the Nigerian Pension Reform. The PRA 2014 sought to ensure that more tangible benefits accrue to retirees towards a more blissful retirement.”
She explained that some of the major developments introduced by the new law in 2014 include an increase in monthly pension contributions to 18 percent from the previous 15 percent, in order to ensure that retirement benefits were enhanced under the CPS for the benefit of contributors.
Others are the reduction in the waiting period for contributors to access their RSA in the event of temporary loss of job from six months to four months; stiffer penalties and sanctions for infractions; establishment of the Pension Transitional Arrangements Directorate (PTAD) to co-ordinate the smooth administration of the old Define Benefit Scheme of the public service, among others.
