Besides investing in infrastructure like roads and the power sector, finance experts have advocated investment of pension funds into short term government securities.
Speaking at the end of the World Pension Summit in Abuja, they called for discipline and the engagement of experts in managing the funds.
What must be done to reform the pension system in Nigeria and Africa, often characterized by delayed payment upon retirement or non-enrollment, after years of meritorious service, came to the fore at the event.
The Director-General, National Pension Commission, Chinelo Anohu-Amazu, said that key decisions were being made on how to reverse the trend and ensure that the funds are channelled into ventures that are worthwhile.
Other speakers at the summit also spoke about protecting depositors’ funds that would guarantee a secure future for retirees.
While pension assets in Africa is put at over 400 billion dollars, it still has an infrastructure deficit of 75 billion dollars. This huge resources, according to the experts, could turn the economic development of the region around if well harnessed.
An Associate Fellow at the Centre for Infrastructure, Policy, Regulation and Advancement (CIPRA), Dr Ese Owie, has advocated for a cloning of the global practice of partnerships between the private sector and the Government to fast track infrastructure financing looking at the limitations of Nigerian banks.
Dr Owie was speaking on Channels Television’s business programme, Business Morning.
With reference to a pension reserve of about 4 trillion naira, he called on pension regulators to find the best way to “engage with the Pension Fund Administrators (PFAs) and set out a clear regulation of how to invest these funds to finance infrastructure”.
He, however, noted that the Nigerian Pension Commission, as a regulator, “is to drive responsible investment because you have to balance the desire of our country to utilise the fund for infrastructure, with the need to also protect the fund for the retirees to draw upon when the time comes.”
Also speaking on the Business Programme, the Country Representative, International Institute for Investment Promotion, Mr Ogbonna Ukuku, noted that there was need for alternative funding of infrastructure because people all over the world are seeking ways to come out of normal buying and government bonds to areas where they can get higher profit. He noted that “when retirees get to the level when they want to start getting back their funds, the money that would have accrued to them would be able to sustain them at their retirement.”
They both praised recommendations reached at the just concluded World Pension Summit, Africa Special.
The Lagos State Governor, Babatunde Fashola, has again said that the job of securing the lives and property of citizens becomes easier when the people become more interested in their own safety.
Governor Fashola was in the Abuja studios of Channels Television as a guest on the Wednesday edition of the breakfast programme, Sunrise Daily.
Speaking about the security of Lagos amidst the state of insecurity in the entire country, Fashola maintained a usual view that ensuring security in the state was dependent on the level of awareness of the citizens.
“We’ve been taking precautions for the past four years”, Fashola said, as regards protecting the state from insurgents, but warned that misinformation of the public and spreading of panic messages through access to new media tools was not helping matters.
Citing several habits that people have to change in order to protect themselves from being easy target for unscrupulous persons, “Terror feeds on fear and panic and also publicity”, he said.
There were recent reports of an explosion in Apapa area of Lagos and Governor Fashola said that it would be irresponsible to go ahead and assume that it was an attack on the state as it was not.
Speaking further, the Governor called on all residents to register for the State Residents Registration programme, as it was one of the major tools to help the government in providing security for its citizens. He said, “We must know everybody, nobody can afford to be anonymous again.
“I can’t guarantee that somebody entrusted to that data will not abuse it but it does not obviate the need for the data, it doesn’t obviate the necessity to keep it.
“The Lagos State Residents Registration Law is a model that I will commend because we did a lot of research, we looked at what was obtainable across the continent where there were models like this, we looked at South Africa, India, we looked at some of the states in the United States where this kind of practise was obtainable.
“Of course every law is as good as what the people who sit down to debate its policy content do at the time they do so. Challenges that emerge in the next 10 years will necessitate that the next set of people should look at that law again and say ‘is this law behind today’ and modify as we go along.”
The installation of CCTV in Lagos State was also discussed and Fashola stated that the surveillance cameras have been effective but their effectiveness has been hampered because of their dependence on power, an amenity that remained inconsistent in the country.
He, however, also noted that despite the high standard of security intelligence in the United States, their systems have been breached several times by terrorists, an indication that there was more to ensuring security that the installation of devices.
He emphasized the identification of its citizens and keeping a database of all persons the state is expected to provide for and protect as the foundation to creating a safe state.
Apapa/Oshodi Expressway Menace
The need to protect citizens also necessitated a conversation about the harrowing traffic experiences of Lagos residents especially in the Apapa axis of the state. Governor Fashola said:
“I must apologise that citizens are going through what is clearly an avoidable experience in terms of commuting, but without any doubt at all, the pain comes from two sets of actions.
“First, it comes from the way we are managing the distribution of petroleum products, it comes secondly from the way we are managing port activities; these are two activities that the state has no control of, these are Federal Government responsibilities.
“All of the petrol that is available in Nigeria today is pumped from the tank farms in Apapa, that’s a fact. So if you stop any activity there the whole country will not have fuel.
“So apart from the inefficiencies that characterise that system, the cost of commuting and having fuel in your generator is also the harrowing pain that citizens go through today and we can be much more efficient than that.”
He decried the manner in which tankers have taken over the roads, stating that there was need to review the way fuel is being supplied in Nigeria, as it was unacceptable to have little or no space left for vehicular movement.
On his recommendations, he said; “You can’t depend on tank farms to supply 90% of a nation’s need. Even if the tank farm was out in the desert, it’s still not a sustainable system; there are pumping systems across the world to do this.
“How many nations still truck all of their fuel on the road? Why can’t it go by rail? There’s a rail system that the Europeans left when they were managing our oil industry and our ports, the tracks are there. When I was Governor-elect, I checked and it was going to require only about 250million dollars, at that time, to put the rail track back into operation from Lagos all the way to Kaduna.”
He insisted that the manner in which the fuel business and port business in the state had been managed has been a major factor adversely affecting other businesses.
Pension Scheme Initiative
Governor Fashola had been in Abuja, the Federal capital territory attending the World Pension Summit Africa and he also spoke about the progress made by Lagos State in this regard.
The Governor said that his state had been operating two pension schemes; the old Defined Benefit Scheme which, based the 2004 law, the state has been trying move away from and the new Contributory Pension Scheme which the state passed into law in March 2007 just before he was elected as Governor.
This is because there were still retirees in some parastatals running on the old scheme and the state decided not to enforce migration but rather let it fade out gradually “until the last member of that scheme.”
He disclosed that the State Government’s 7.5% contribution on the new pension scheme for its employers had risen to about 61billion Naira with the employees also contributing their 7.5% and with the “wonderful job” done by the Lagos State Pension Commission, about 25billion Naira has been remitted to retirees in the state.
He stated that the compliance level in Lagos State has been “extremely high” despite the initial and current challenges but the Defined Benefit Scheme has been the most challenging with the state having to fund it from the budget.
He reaffirmed that pensioners do not queue for their benefits anymore in Lagos State as the state has involved its Local Governments in the disbursement of the funds and also introduced technology to ensure convenience.
Financial market operators in Nigeria have described the ongoing World Pension Summit, Africa Special, holding in Abuja as an opportunity to address the concerns of the finance industry.
Speaking on the potentials of the pension fund for economic development on Tuesday, the Director General of the Security and Exchange Commission (SEC), Arunma Oteh and an economist, Bismark Rewane, agreed that if States and Federal governments could remain on the same page on the allocation of the pension fund Nigeria would experience remarkable economic growth.
Oteh pointed out that it was absolutely important for all states in Nigeria to key into the Contributory Pension Scheme initiative, emphasising the importance of focusing on the well-being of Nigerians later on in their lives.
“It is important that when people have worked very hard that they also will enjoy a good retirement and part of enjoying a good retirement is saving for when you are not as able to work as hard.
“What is happening at the Federal Government level must happen at the state level and even must happen at the private sector. I believe that what we have seen over the last 10 years can be consolidated,” she said.
The Director General of SEC expressed optimism that with the enforcement issues that had been put into the current pension law would result in greater contributions.
Mr Rewane stressed that in a mature or growing economy the importance of involuntary savings was very critical, explaining that a consideration of the relationship between voluntary and involuntary savings in Nigeria showed that the involuntary savings are over four trillion Naira while the voluntary savings are less than one trillion Naira.
He further observed that fact that involuntary savings stay for a longer duration made it the bedrock for investments.
The World pension Forum Started on Monday with participants looking to resolve the challenges Africa is facing in its pension reform.
Nigeria transited from pension deficit of about 2 trillion Naira (about 12.9 billion dollars) in 2004 to accumulate pension assets of over 4.21 trillion Naira (about 27.2 billion dollars) by March 2014.
In his speech at the opening of the two-day summit, President Goodluck Jonathan made it clear that the protection of pension funds’ retirement benefits remains top priority of his administration.
“Pension as globally recognised occupies a strategic place in national socio-economic development. It is not only a vital component of social security but also a veritable vehicle for nation building. Indeed, investment in pension has profound impact on the well-being of pensioners, the society and the economy at large” he said.
Nigeria’s Finance Minister, Dr Ngozi Okonjo-Iweala, said Africa is yet to harness the potentials of the pension scheme in the continent, with a current asset base of funds capable of addressing the continent’s infrastructure challenges.
At the opening of the World Pension Summit, Africa Special on Monday, Dr Okonjo-Iweala called on African countries to switch to the Contributory Pension Scheme currently operational in Nigeria, which she said had immense benefits.
She stressed the need to improve pension fund contribution among the working class in African countries, advising public and private companies to key into the contributory scheme.
“We are happy to have this Africa Pension Summit because the contribution of African pension funds to the growth of Africa’s economies is still rather low. It is a low percentage of the GDP in many countries but it is improving.
“We need to capture a significant proportion of our workforce especially those in the income sector into our pension systems. We need to encourage countries to switch to the contributory pension scheme,” she said, stressing that the huge long-term funding gaps in infrastructure development could be addressed with such funds.
Delta State Governor, Emmanuel Uduaghan on Tuesday restated his belief that the World Pension Summit will sufficiently unlock pension assets for national development.
“From the presentations, it is obvious it (World Pension Summit) will address these issues”, adding that “you have a lot of money lying down there, about N4 trillion and yet developers are struggling to get money from the banks at a very high interest rates” he said on Sunrise Daily.
He also advocated for the provision of long term loans for local, state and national developers “because most of the funds from the banks (now) are short term funds” insisting that “the only way we can provide long term funds is through monies like this”.
“And because they are short term funds in the bank, the interest rates are very high. But if this money is made available, it will reduce the interest rate and people can now borrow more and be able to develop”, he noted.
He allayed fears that pensioners might lose their money to investors/developers who access the monies as loans, advising that pension custodians and government should not only return loaned money but share the interest that accrue from it with the pensioners.
He disclosed strides taken by his administration in pension contribution, adding that they have exceeded the proposed 15 per cent pension contribution by employer and employee to implement a 17 per cent contribution.
“We actually started with 16 per cent and it was heavy on us. At that time the law was 7.5 per cent.
He noted that, due to the weight it bore on the state, “we actually reduced it to 10 per cent. For us, the new law just confers with what we have been doing” since “the government pays 10 per cent and the employees pay 7.5 per cent.
“So in Delta State, we have been doing 17.5 per cent, not even the 15 per cent” required by law, adding that “what we will just do now is to increase that of the workers to 8 per cent to make it 18 per cent”, he said.
Mr Uduaghan, who noted that though it is a big financial burden to any state involved, urged other states to reconcile the differences between the old and new schemes and create legacy funds to pay beneficiaries between the old and new schemes.
He also noted that the new pension scheme has been designed to stop fraudulent activities from occurring as it is contributory, by employer and employee, and can be monitored by the beneficiary unlike the old system where it was solely operated by the government under the Pay As You Go system.
Mr Uduaghan also hoped that the World Pension Summit will come out with some recommendations that will ensure that the funds are better managed, where players and beneficiaries will benefit from the scheme.
The Delta State Governor, Dr Emmanuel Uduaghan, has urged employers of labour in Nigeria to key into the Contributory Pensions Scheme.
At the opening ceremony of the World Pension Summit for Africa taking place in the Federal Capital Territory, Abuja, on Monday, Governor Uduaghan emphasised that the scheme was beneficial to both the employer and the employee.
Dr Uduaghan told journalists that with the scheme, funding of infrastructure projects would be made easy for developers in Nigeria.
He said that Delta State had contributed over 60 billion Naira to the scheme.
The Delta State Governor expressed satisfaction over the way the scheme was handled by the administrators and mangers, expressing confidence that it will no longer be easy for pension frauds anymore.
Earlier, on the sideline of the summit, the Chairman for the World Pension Summit, Harry Smorenberg, said that by learning and sharing best practices, Africa could set a new pace by being a leader in social security and pension market development in the nearer future.
“The agenda for the pension market development for Africa is challenging and this is the first step where we provide a platform where we can exchange truly, expertise from not mainly African countries but also from outside Africa because in my view, Africa can really leapfrog on the development taking place in other countries,” he said.
Mr Smorenberg told Channels Television that there would be a lot of messages in the summit on strengthening the Social Security System as it was the base for securing people. He explained that it was all about managing people, having equal right and avoiding social unrest which makes pension market development crucial and important as people have to feel safe to save money for their future.
Chairman for the World Pension Summit, Harry Smorenberg, has said that Africa has the potentials of leapfrogging the developments taking place in other countries.
Smorenberg, who was speaking on Channels Television’s Sunrise Daily on Monday on the commencement of the World Pension Summit for Africa holding in Abuja, said that by learning and sharing best practices, Africa can set a new pace by being a leader in social security and pension market development in the nearer future.
“The agenda for the pension market development for Africa is challenging and this is the first step where we provide a platform where we can exchange truly, expertise from not mainly African countries but also from outside Africa because in my view, Africa can really leapfrog on the development taking place in other countries.”
He revealed that there would be a lot of messages in the summit on strengthening the social security system as it was the base for securing people. He explained that this was all about managing people, having equal right and avoiding social unrest which makes pension market development crucial and important as people have to feel safe to save money for their future.
On the credibility and transparency of the pension market development and measures to be put in place for a lot of people to buy in to the scheme, especially for a young Nigerian market, Mr. Smorenberg emphasized the importance of education and understanding that saving money for later is better.
“If we can educate people, which is where our financial literacy comes in, and have kids in school understand what interest is and the effect of inflation on your savings, which are complex things to understand, then it would be better.”
In what he described as ‘Personal Economy’, he reiterated that they were very simple basic steps which should continue each year at school for people to have the perfect enlightenment about the pension market development.
On how the scheme covers the informal market, Mr Smorenberge was of the opinion that the crucial part is the participation of the employers, “It will be essential, also in due cause in Africa, that labour is scarce and will become more scarce, so you have to cherish your assets and your people that are working for you. So you should also try to prepare for them a valuable pension build up”.
On whether it was possible to use two PFAs to manage one account, he believed that this would depend on technology, getting the insights and the alignment of the two funds. ”People should be able to physically have control over the two funds as it is about transparency and how they can exist”, he said, adding that there were various people with several pension build up in Western Europe and the essence of it is how one can aggregate such information to the individual or participant in order to have them gain control over the insight on their financial position.
Mr Smorenberg also spoke about how people who are artisans can benefit from the pension scheme. He disclosed that the pension fund is offering special programs for self-employed people. “It is a societal role and an obligation from the Government, from the employers of organization and the actors in the social feed to ensure that people are saving money for later”. He stated that Government should make it mandatory.
He, however, predicted that Nigeria and other African countries would go through the same phase that European countries went through at the early stage of the pension scheme but citizens would be better for it.
The World Pension Summit for Africa holds from Monday, July 7 to Tuesday July 8 in Abuja.
The Vice Chairman of the Fola Adeola Pension Reform Committee, Mr Timi Austen-Peters, on Monday berated the skepticism that trailed the establishment of the National Pension Bill in 2004 and noted that “nobody believed that pension is going to be real and sustainable.
“At a particular point labour was resistant to change because they didn’t believe that anything will come of it”, he said while speaking about the developments in the pensions market and how it is going to affect the African market as a next frontier market.
He however noted that “by virtue of the amount of work we put into the committee, they saw that all that we were doing was real and transparent; they contributed to everything and that is how we were able to get them on board.
“We able to escape the skepticism and develop the frame work of what we are talking about now”, he added.
Mr Austen-Peters, speaking on Business Morning on the side-lines of the 10th World Pension Summit holding for the first time in Africa, noted that safety of the retiree funds was uppermost in the minds of members of the Committee adding that “beyond that there was problem; when people were promised, pensions there was no money to back up that promise.
“We made sure that whatever framework we were going to put in place was something that was sustainable and backed up with cash to make sure that all promises were kept” he said.
He further noted that the Bill has also put in place risk management mechanisms that will see “someone who manages the money, someone who holds the money, that is the pension fund custodian and the regulator who makes sure that everyone is doing what they are meant to do”, adding that “that the essence of the framework is that there is money somewhere that is been supervised by a regulator and there are checks and balances built into the system”.
He said the scheme has gathered about $25 billion from 2007-till date, with only about 10 per cent of Nigeria’s work force contributing, insisting that “if Nigerians continue to contribute in this sort of sum, it is going to be significant, in terms of value, pension schemes in the world.
The World Pension Summit ‘Africa Special’ is billed to hold in Abuja between Monday, July 7 and Tuesday July 8, 2014.
The Chairman of the World Pension Summit, Mr Eric Eggink, on Monday called on Africans to be developing trustworthy pension schemes so they can be taken care of when they grow old.
Citing Nigeria as one of the leading economies in Africa, Mr Eggink noted that “the demographics show you that pensions will be very important for African countries”.
He urged Africans to “be aware of the importance of pensions and pension schemes” and stressed the need for “developing trustworthy pension schemes not only in Africa, but all over the globe” insisting that the pension is a global issue that must be tackled headlong.
He further stressed the importance for people to embrace the pension scheme, noting that by the year 2015, there will be 2 billion people that will be over 60 years old that “we have to take care of”.
He said discussants at the 10th World Pension Summit, holding in Africa for the first time in Abuja from July 7-8, will be sharing best and worst practices scenario of how pension schemes are being built from different sectors of the economy in different countries all over the world.
Mr Eggink further stressed the importance of choice of investment adding that firms need to convince investors of their credibility and safety of the funds.
“Pensioners should be aware of how you spread the risks”, maintaining that we “have to create a right of expectancy of what is going to be there and how we can create the right vision for the over age and the financing of the over age”, he said, adding that investors should not be made to believe that pension schemes are risk free.
Mr Eggink also spoke about the technological input of the scheme, revealing that “it is about technical schemes of how you build up a pension system and also about the technology of how you build the back office administration” insisting that “if you don’t have a good administration you can’t be transparent with what you are doing with the money”.
Mr Eggink, who was speaking during the Monday edition of Channels Television’s award-winning breakfast show, Sunrise Daily, maintained that for countries where a working social security is not in place “you would have a problem with the profiting because if you don’t take care of the poor people, then you have a problem; the kind of problems that we see happening everyday on the pages of newspapers”.
He also praised the advent of internet in the pensions industry noting that it has helped because people no longer listen to what companies or organisations say; they are intervening and having a dialogue on the internet on what they really need themselves.
Mr Eggink, a Dutch national, also spoke about the World Cup semi-final clash between the Netherlands and Argentina. He hailed the quality of the Argentinians and noted that they are equally as gifted and star-studded as the Dutch team.
He however predicted a win and qualification to the final of the tournament for the Oranje. The match will be played on Tuesday, July 9 at the Arena De Sao Paulo by 8PM.