Pencom to launch micro pension plan to boost Nigeria’s N5trn industry

The Nigerian Pension Commission (Pencom) is making necessary progress to launch a micro pension plan that would assist in bringing low-income earners into the contributory pension scheme to insulate them against old-age poverty.

Nigeria’s informal sector accounts for as much as 57.9 percent of the nation’s rebased GDP and there has been a huge challenge of getting them to participate in the contributory pension scheme, which has pulled as much as N5 trillion assets as of today.

Chinelo Anohu-Amazu, director-general of PenCom, said on Monday that the informal sector was ‘where the bulk of the Nigerian individuals reside,’ which explained why the Commission was now making efforts to engage them wherever they where.

“We are engaging the National Union of Road Transport workers and we will to go into the textile workers and to all of them and as we go along, and if need be we semi formalise so that they can be contributing no matter how little they earn,” she said, speaking at the second edition of the World Pension Summit ‘Africa Special’ (WPS-AS) that kicked off Monday in Abuja

She noted that the micro pension plan and the expected guidelines that would allow Retired Savings Account (RSA) contributors to use a portion of their saving to acquire their primary home were major outcomes of discussions at the last year’s summit.

World Pension Summit ‘Africa Special’ (WPS-AS) is an annual event organised by the Pencom, Nigeria and the WorldPensionSummit, the Netherlands, and has brought together leading players and decision makers in the pension industry in Africa as well as key figures in finance and pensions from across the world.

The theme of this year’s Summit – ‘Building sustainable pension systems in Africa’ is focused on entrenching enduring pension systems across the continent with a particular emphasis on channelling pension funds towards addressing its huge infrastructure deficit.

In her opening speech, Anohu-Amazu noted that Nigerian Pension Reform narrative could be situated within the context of Africa’s economic resurgence after the last quarter of a century.

“Indeed, from operating the old Defined Benefits System that had well over N2 trillion ($10bn) in deficit at the dusk of the last century, the new Contributory Pension Scheme (CPS) that was kick started in 2004 now has over N5 trillion (circa $27bn) in just over 10 years of operation,” she told participants, declaring the event open.

In his speech, Gerard Lyons, chief economist and global economic adviser, looked at Nigeria from a global, regional and national perspective and focused on the implications for the economy, infrastructure and pension funds.

Nigeria faces some challenging near term macro economic conditions, Lyons noted, but that he was positive about the outlook. ”I believe that Nigeria has a massive opportunity to play a leadership role not only with Africa but to be able position itself globally as well,” he stated.

To appreciate the domestic challenge, Lyons gave the foreign view of Nigeria, what is being said, and also where he felt it was right and wrong: “There is unease about corruption and concern about security. It is good therefore that the administration is addressing these head on. It is also important to remember that in a world of high debts, Nigeria’s debt position is a big advantage and gives it room for fiscal flexibility. Its market size, young sizeable population, entrepreneurial spirit, and the growth of its service sector are also key positives that should not be overlooked.”

Lyons advocated investing a portion of the country’s pension fund assets into infrastructure and emphasised the need for a stream of infrastructure projects, stating that the country should focus on hard, soft and institutional infrastructure, which in turn would help address social infrastructure. “Hard infrastructure opportunities include broadband and transport such as road and rail as well as housing and energy” he said.

“Soft infrastructure is building the skills and education needed, while institutional infrastructure is linked to openness and transparency, as strong institutions allow confidence, enable growth and greater investment and create stability. Regulations, rules and laws are also vital so Nigeria should be proud of the progress made by PenCom on this so far. However, it’s important that the country continues to build on this progress, embracing change and planning for the future,” he suggested.