Nigerians’ eroding pension fund

As the government continues to fiddle with the economy, experimenting with antiquated command and control economics that has long been abandoned by all progressive nations worldwide, the economic recession is biting real hard (with the GDP contracting by -0.36 percent in the first quarter, inflation rising to as high as 17 percent, benchmark interest rate at 14 percent, the Naira depreciating rapidly [N356/$ at the interbank rate and N470/$ at the parallel market], and companies that can no longer cope with the excruciating environment offload excess workers to keep afloat, fuelling unemployment and underemployment, which has reached 45% among the youth, worsening poverty and social malaise, and Nigeria’s misery index climbed to 47.7%, becoming the country with the 5th highest misery index in the world for the first half of 2016), every strata of the society is beginning to feel the pinch in real terms and not only in theory.

Prices of goods and services have all doubled or even tripled. Yet, income has reduced or at best, has remained stagnant, causing deep suffering and disillusionment to most Nigerians. Amid these challenges, we all tend to forget a real danger lurking around for Nigerians, especially those who have been saving frantically for their retirement. Nigeria’s pension assets is being eroded by a weaker naira and rising inflation. BusinessDay analysis shows that the dollar value of pension assets has dropped by as much as $10 billion between 2014 and August 2016.

According to the analysis, total pension assets as at December 2014 was N4.611 trillion and has increased by 28.3% to N5.91 trillion as at August 2016 but whatever gains the fund made have basically been wiped out by the depreciation of the naira and rising inflation which has also risen from single digits in 2014 to 17.9% in September. In dollar terms, the value of the country’s pension funds has declined 53% from US$29.3 billion in December 2014 to US$19.3 billion in August 2016. Analysts say that shallowness of capital market has hampered the ability of the pension fund managers to diversify risk and hedge against the depreciating naira and rising inflation. While pension assets have grown 12 percent from January to August 2016, inflation rose year-on-year to 17.9 per cent in September according to information from the National Bureau of Statistics. This means that any pension asset manager not making a minimum return of 18% on assets held is actually losing money instead of making money for contributing workers.

This portends real danger for Nigeria’s hard working population who were sold the idea of the contributory pension scheme as a sure way to securing their future and enjoying a comfortable retirement. Fortuitously, the various pension managers have done an excellent job in managing the funds made available to them. But as usual, the government is the greatest problem of the scheme. The government has been casting envious glances at the pension assets, especially since the fall in oil prices and the decline in federally distributable revenue. Not long ago, the government caused a storm by suggesting that the assets be turned over to the government to supplement for the shortfall in government revenues. Now, government’s management of the economy has effectively made nonsense of the scheme, depleting the value of the assets and consequently, jeopardising the future of hard-working Nigerians

The government must be made to realise that its shambolic handling of the economy is not only jeopardising Nigeria’s present but also the future and the savings of its workers. The government should learn from its myriad failures thus far and give up its quest to control the forex market. In many ways, the precipitate fall of the naira is a direct result of government’s actions and not the reflection of the naira. We believe that the naira will appreciate if allowed to compete freely in an open market. Similarly, we call for the inclusion of seasoned professionals in the economic team and a firm commitment to not only making good economic policies but implementing them to ensure that the economy picks up again, growth is restored and inflation is brought down.