Chiamaka Ajeamo, [email protected]
The Nigerian pension industry in the last decade grew remarkably both in accumulation and investment of pension fund assets.
For instance, with the Contributory Pension Scheme (CPS) which began in 2004, contributors have grown to 8.85 million while the pension fund assets increased to N9.58 trillion as at September 2019 while in October 2019 it soared to N9.81 trillion. The assets grew by over 100 per cent in one year when compared with the N8.4 trillion recorded in October 2018.
However, this giant stride was accomplished by the capture of only workers in the formal sector.
According to the National Pension Commission (PenCom) the fund assets gained N23 billion between September and October in 2019, even as N6.91 trillion of the assets was invested in Federal Government of Nigeria securities.
PenCom in its monthly summary of pension fund assets, stated that pension fund operators invested N4.58 trillion amounting to 46.66 per cent in FGN bonds; N2.23 trillion in treasury bills (22.82 per cent); N5.40 billion in agency bonds (0.06 per cent); N71.13 billion in Sukku (0.72 per cent) and N15.85 billion in Green bonds, (0.16 per cent) among other investments recorded.
Even with this accomplishment, the commission still witnesses challenges in compliance as it declared that 11 states in the country are yet to embrace the CPS due to resistance from labour unions and state government of the states.
Mr. Babatunde Philips, Head, States Operation Department, PenCom, disclosed this at the 2019 Journalist Workshop in Benin, Edo State, adding that only 25 out of the 36 states in Nigeria have enacted the CPS law.
Philips said that despite the 25 states announced by the commission only Lagos, Kaduna, FCT, Ondo, Edo, Anambra, Ekiti, Osun, and Delta state are actively implementing the scheme while nine states including FCT have commenced implementation and remittance of both employer and employee pension contributions.
He noted that lack of political will by the state executive governors, inadequate funding, knowledge gap and partial implementation are the challenges hindering the implementation of the CPS in these states.
Commenting on steps towards ensuring full implementation of the CPS in states he said includes; “the enactment of the state pension law, establishment of state pension bureau, commencement of actuarial valuation to determine accrued rights of employees, opening of Retirement Saving Account (RSA ), for all eligible employees, issuance of retirement benefit bonds to eligible employees amongst others”.
Also reports have it that a major setback for the commission as regards the CPS is the nonpayment of pension to retirees of the Federal Government as and when due that has been the practice since 2015.
A media report stated that presently, retirees who retired from December last year till date have not been paid their pension and this is as a result of nonpayment of accrued rights into Retirement Savings Accounts (RSA) account of employees by the Federal Government.
According to the report, “some private sector employers fail to remit their employees’ contributions to their RSA account as stipulated by the Pension Reform Act (PRA) 2014.
“Another setback for the commission is the non-compliance and adequate enforcement on the mandatory 18 per cent monthly pension contribution rate for workers. Both the government and private sector employers are in breach of the law as they still remit based on the old rate of 15 per cent. Besides, many do not remit the 15 per cent to their workers RSA account.
“This has led to agitations by workers, retirees and stakeholders asking that the President, Muhammadu Buhari should priotise pension. Stakeholders have called on the President to pay more attention to the pension industry and alleviate the suffering of retirees.
“They claim that the country is gradually regressing to the old pension system as pensions are no longer paid as and when due,” the report noted.
As part of efforts by the federal government to boost the growth of the pension industry and ensure that the informal sector keys into financial inclusion, to bring about a diversified and inclusive economy, President Muhammadu Buhari in March 2019, launched the Micro Pension Plan (MPP).
The MPP is an initiative of PenCom, specifically planned to broaden pension coverage and eliminate old age poverty through the provision of financial services to the informal sector workers which includes self-employed persons and employees of organizations with less than three staff members who are not mandatorily covered under the CPS.
The benefits of the MPP are numerous, aside from seeking to guarantee financial security for informal sector players, it aims to boost the country’s pension assets to over N20 trillion by 2020 and also benefit the government with its potential to generate a pool of investible long-term funds that can drive economic development.
Despite the advantages this scheme offers to its target audience, it is saddening to know that it is faced with several challenges which has led to its low uptake.
According to Mr. Abisola Onigbogi, Executive Director, Technical, ARM Pension Managers, one of the biggest challenges of signing up for the MPP is the issue of identity as many informal business operators do not have valid means of identification thereby facing an uphill task in the process of registration.
Onigbogi added that other challenges hindering the informal sector from keying into the MPP includes; lack of institutional trust, banks issues, low public awareness, low income, financial illiteracy, poor savings culture, unemployment among others.
Delivering a paper on ‘Driving the micro pension plan: Operators perspective, he said that leveraging on the informal sector can deepen micro pension penetration as the informal sector constitutes 17 million number of businesses, 70 percent of the labour force and contributes 57.9 percent to the Gross Domestic Product (GDP) of the economy.
In his recommendation, Onigbogi said that mobile technology should be leveraged on in deepening the MPP among the informal sector as an average Nigerian has a mobile phone.
He said, “We have about 172 million mobile subscription penetration which is 87 percent of the country’s population. Internet users are 112 million and active social media users are 24 million which is 12 percent of the population. Social media should be utilised to get to the younger population of 18 years. So, mobile phones should be used in capturing the informal sector so as to drive micro pension in Nigeria”.
Also, the MD/CEO Achor Acturial Services Limited, Pius Apere, speaking at a conference in Lagos in 2019, said that a major challenge hindering the growth of the micro pension in the informal sector is the fact that potential micro-pension contributors may already have alternative ways of meeting their retirement needs.
Apere explained that prospective micro pensioners may have bought lands, properties, invested in equities and real estate for their long term cash flow generation, while women buy gold that they use as collateral for loans or resell them when the need for cash arises and some other pensioners depend on their children for old age support; a culture which is rampant in developing countries.
He stated, “Bottlenecks that have hindered appetite for savings, include weak economic growth, rising unemployment, poor access to funding for business, declining standard of living among households and high inflation”.
He added that low public awareness and negative perceptions about pension products and management being backed by government have led to the low uptake of micro-pension plan since the scheme is also voluntary.
Commenting on these developments, Aisha Dahir-Umar, the Acting Director General, PenCom, said that the commission over the years has remained focused in its objective in ensuring the conclusion of the pension industry transformational initiatives.