‘Pension industry is moving towards consolidation’

After 10-years of successful operation as a pension fund administrator, FUG Pensions Limited is excited about its achievement and contribution to the successful implementation of the Contributory Pension Scheme (CPS). Usman Sulaiman, managing director/CEO of the company in this interview with journalist shared his thought on managing a PFA in Nigeria, challenges of the business and future of the company. Modestus Anaesoronye was there. Excerpt:

10 years of uninterrupted operations, how do you feel about it and what have been the challenges?

It has been quite challenging but 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 of 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 corporates 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 made a determination that we would survive and we would succeed. I am delighted to say that the result is what you are seeing today.

In numeric terms, could you furnish us with growth achievements within the period under review?

Within that period, we had to move from a 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 is the volume of assets under your management, number of RSA holders as well as retiree accounts and the company’s net worth including its capital base?

The number of the Retirement Savings Accounts, RSA, holders is about 115,000 comprising both the active and the retirees’ accounts. We have a paid up share capital of N1.5Billion. This is 50 percent above the required statutory minimum.

Just done the first 10 years, what are your growth plans for another 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 achievecompetitive 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 have 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 in spite all odds and when we meet in the market you see FUG being the choice of the 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 top most echelon of this market. By the end of next 10 years we wouldn’t want to see ourselves anywhere below the top five PFAs in this industry.

All pension fund administrators are selling a mono-product to customers, what would you say is your cutting edge?

The license itself specifically states that we are to only do pension fund administration business. Yes, it is a mono- product business and it is the same product we are all selling but the differentiation is in terms of one; the delivery, two; the customer services and three the returns on investment. And these three are actually our core areas of competence. We are also guided by our core values of Trust; Integrity; Prudence and Partnership which differentiate us with others. In addition we try to look at the market, segment it, and see where we have comparative advantages, move into those areas and put across the most excellent service available in the industry.

In fact we are not only trying to ensure that we meet the regulatory requirements in terms of service, but indeed to assess ourselves with and match the best globally. That was why we voluntarily went for ISO certification and maintaining it to ensure that service delivery is a core element in our focus. We are certified and can stand shoulder to shoulder with the global best as far as quality management system is concerned. So service excellence and outstanding returns on investment are what differentiate us in this competition.

Do you consider merger consummation or an acquisition of smallerPFA to expand your operations and provide better services to customers?

Now the industry is tending towards that direction by virtue of the fact that clients are becoming more perceptive and therefore more demanding.  The competition is becoming tougher. Ultimately it is only those who understand the market and have strategies of providing the best possible service and returns that will survive. This effectively means, therefore, that in due course you will see different forms of business combinations being consummated.  For us as FUG Pensions, we’ll continue our determination to survive as an entity.

However, because of our growth objectives that I have mentioned earlier, we are not looking at growing vertically or organically only, but also horizontally by acquisitions.  We therefore are not precluding what you have said of looking at the opportunities of acquiring competitors into our business.  Acquisition can take all sorts of form but the basic goal is the growth of the business and survival as an entity with a very clear identity, the identity of FUG Pensions.

Looking at the pension industry in 2017, what are your expectations?

2017 is a crucial year for various reasons; the economic situation has been very difficult over 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 the rate of job losses has gone up in the same manner. 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 window 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 20million over the next three years and the key is the micro pension and the integration of informal sector.

Investment of pension funds in infrastructure has been a contentious issue to date, what are the headwinds holding back the implementation?

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 and meeting 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 of the 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 infrastructure projects   that will qualify for pension funds. These are in the areas of transport, 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 the National Pension Commission, PenCom, requirements such that they will be able to access these funds.

And for us once an infrastructure project meet the regulatory requirements as well locally and internationally accepted 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.