By Maduka Nweke
Usman Suleiman is the Managing Director/CEO of Future Unity Glanvils Pensions Limited, (FUG Pensions), one of the frontline pension fund administrators (PFAs) in the country. A graduate of Business Administration from the Ahmadu Bello University Zaria, Suleiman has gathered a lot of experiences in various spheres of life especially in the financial sector.
A specialist in Investment Banking, Development Finance and Pension Fund Management, Suleiman is the pioneer Managing Director/CEO of FUG Pensions. He was appointed to the position after successfully leading a technical committee that was charged with the responsibility of setting up the company and obtaining the PFA License.
In this interview with Sunday Sun, he said the industry has grown to the extent that the N1 billion capitalization is no longer adequate for operators especially beginners. He noted that in order to sustain the competitive tempo in the industry and expand spheres of business, operators might likely go into mergers and acquisitions.
In your 10 years of uninterrupted operations, what are your challenges?
It has been quite challenging but an interesting journey. When we came in June 2007, we had already lost the advantages of being early movers in the market. The market then was basically a public sector market, comprising federal ministries, departments and agencies. These had already been taken by the earlier licensees. Then, you have the organized private sector with few multi nationals and major corporations and these had also been taken effectively, meaning that we had to come up with strategies and be ready to face challenges of creating business in the middle and the lower segments of the market. So, it was quite tough, challenging but from day one, we were determined to survive and succeed. I am delighted to say that the result is what you are seeing today.
What are your achievements within the period under review?
Within that period, we had to move from zero level in 2007 to above N52 billion in assets under management and we also moved from reporting annual losses and accumulating those loses to being a profitable company. I am glad to say that in 2016 for example, we had achieved a profit before tax of over N240million.
What’s your volume of assets, RSA holders as well as your company’s net worth?
Retirement Savings Accounts holders are about 150,000, comprising both active and retiree accounts. We have a paid up share capital of N1.5 billion. This is 50 per cent above the required statutory minimum.
Could you give us a glimpse of your growth plans for the next 10 years?
In the first 10 years, our vision was to be the most trusted pension firm in this industry and our mission was to achieve competitive returns for our clients. I’m happy to say that over the past 10 years, we have actually been able to achieve that. We are indeed, a highly trusted firm within the industry and among all stakeholders, our clients, our regulators and competitors. We have also, not only been able to achieve competitive returns on investments, we have actually been achieving returns at the upper echelon of the market.
Over the past three years, returns on our RSA fund has not been below the top three in the industry. Hence we decided that for the next ten years, our mission is to achieve outstanding returns on investment and efficient benefit administration for our clients by employing world-class management expertise and technology. This is our current mission, while the vision remains to be the most trusted and also the pension fund administrator of choice.
How do you determine that we are the most trusted and the PFA of choice in the market? The answer is that we definitely survived the first 10 years as an entity against all odds and when we meet in the market you see FUG being the choice of prospective clients.
We have now repositioned ourselves for the next 10 years. In that period, we are not only looking at achieving further growth and being the most trusted pension funds administrator, we are also looking at breaking into the topmost echelon of this market. By the end of the next 10 years, we wouldn’t want to see ourselves anywhere below the top five PFAs in this industry.
What are your expectations in the pension management sector in 2017?
2017 is a crucial year for various reasons. The economic situation has been very difficult within the past 18 months. The recession has persisted beyond expectation. However, from all indications, we expect that the economy will stabilize and recovery turn around will commence over the next 18 months.
The year, 2017, is therefore, a crucial year for economic managers and business entities. The recession has meant that the rate of growth in employment generation has gone down significantly while job losses are rife. This has impacted negatively on our industry. However, there are quite a number of initiatives that the industry is working on. These include bringing the informal sector and micro pension into the scheme. In addition to that, there is a very high possibility that the transfer windows will be opened towards the end of this year and these are going to make substantial differences.
Actually, the industry expects the commencement of the micro pension to frog-jump participation in the contributory pension scheme. We are looking at moving from six million account holders to a minimum of 20 million over the next three years and the key is the micro pension and the integration of informal sector.
What role does investment of pension funds play in infrastructural development?
As far as we are concerned, there are no contentious issues because issues that are there are clear. We are not project managers; we are fund managers, specifically pension funds managers. We have the funds; we are ready and willing to invest the funds. We are actually looking for assets to invest in and infrastructure is a major and interesting asset class. However, we have to have projects that are well structured, that meet all the regulatory requirements as well as our own individual internal requirements before we can invest. The structure will have to provide us with safety, security, liquidity, competitive returns and acceptable exit route. Both the operators and the regulator have been encouraging project managers, fund sponsors, investment promoters and other stakeholders to come up with vehicles that will qualify for these funds. We are anxiously looking for such vehicles.
I’m glad to say that there are some fund managers, private equity funds, project managers, and promoters who, in recent times, have been working very hard both locally and in partnership with other foreign interested parties trying to come up with various infrastructural projects that will qualify for pension funds. These are in the areas of transportation, power and urban regeneration and so on. Projects such as the Oshodi Interchange Centre. Trailer Park on the Snake Island, East-West Railway Line, the Fourth Mainland Bridge and various captive power plants are good candidates if well packaged. There are various project promoters that are working to come up with specific projects or vehicles that will meet Securities and Exchange Commission, (SEC) and National Pension Commission, (PenCom), requirements such that they will be able to access these funds. And for us, once an infrastructural project meets the regulatory requirements as well as international standards, which are common and known, we will be ready to fund it. These funds are supposed to be invested long term and serving the dual purposes of safety and security for the contributors and economic development of the country.
What’s your assessment of the regime of N1bn capitalization and the state of the economy?
First of all, the capital base you mentioned is the regulatory minimum requirement. However, in reality virtually all the operators in this industry are operating above it. I agree that any new entrant into this business today starting from scratch will likely find one billion very inadequate to start up. For existing operators however, there is no problem at all with this. This is because they have already acquired all the required assets for the business. It only becomes an issue if they want to go beyond the minimum requirement. At FUG Pensions for instance, we want to always be at the cutting edge and that is why we always upgrade our operation. At present, we are in the process of replacing our G7 servers with G9, which is the top of the game at present. This requires resources beyond the minimum. I will expect our competitors to be working in the same line. Of course, the regulator has requirements for provision of certain IT and non-IT facilities. If N1 billion cannot provide these, then you certainly have to go beyond that.
Is CPS under threat from government?
I will not say the Contributory Pension Scheme is under threat but I would say it’s facing some challenges. However, these challenges have actually been recognized by the regulator, the operators and government including the National Assembly. For obvious reasons, the government may not be in a position to be funding its pension liabilities as required. We are not talking about current and the ongoing, but the accrued, which the government is expected to be funding at about five per cent of the budgetary provision of the current wage bill.
From the Retirement Bond Redemption Fund Account, the commission will be funding the accrued right of those who are retiring. That is where the challenge is. But I believe government recognizes that and is trying to balance the various competing demands across all sectors of the economy and the public service. And it is not as if government is not funding at all but it’s not funding to the extent that will meet the obligations as they arise. The key thing is that the challenge is recognized by government and I am sure they are working on how to ameliorate the situation. So, I will not say the scheme is under any threat.
The private sector is not so challenging you said, but due to the circumstances of the economy, the private sector is facing a lot of difficulties. But as long as they are paying salaries they will pay pension. The challenge is the delay in payment of salaries and the down turn in employment itself. The growth rate of employment has come down. Not too many firms are employing, firms employ only when it’s absolutely necessary except perhaps for the high tech firms where certain types of skills are needed. Firms are also downsizing and as such, growth in pension funds will not be at the same pace as of the earlier period.
Also, we now have a higher rate of payout, because those who are laid off would come along to ask for 25 per cent of the balances in their account if they fail to get job after four months as stipulated in the PRA. And they are not likely to get jobs within the period of four months but for those who remain in employment and salaries are being paid, pension will be remitted. There might be no salary increment and promotions in a lot of places but salaries when paid, remittances are made.
The difference with the state government is that they don’t pay salaries regularly and when it accumulates they find a means of support by way of bailouts or some kind of support from the Federal Government before they pay. So, in such a situation, remittances are affected. For the private sector, I will say those at the first tier of the market, the multinationals and major corporations don’t fail in remittances. They have also come to understand that the Contributory Pension Scheme has lifted a huge burden off them, the burden of providing for or finding money to pay end of service benefits as the case used to be.