Stakeholders chat growth path for pension industry in Nigeria

Stakeholders in Nigeria’s Pension Industry have at the weekend during the 3rd annual Pension Fund Operators Association of Nigeria (PenOp) and National Assembly retreat in Lagos with the theme “17 Years of Pension Reforms: Gains, Challenges and Opportunities” evolved a growth path for the industry.

The gathering afforded PenOP a veritable platform to highlight the challenges and the achievements of the industry during the seventy years of its existence.

Stakeholders who attended the event which took place at the Lagos Marriott, from 9th – 11th July 2021, included the Chairman, Senate Committee on Establishment and Public Service, Senator (Dr.) Ibrahim Shekarau; distinguished members of the Senate Committee on Establishment and Public Service; the Chairman, House Committee on Pensions, Honourable Kabiru Al-Hassan Usman Rurum; Honourable members of the House Committee on Pensions.

Others were the Director-General of the National Pension Commission (PenCom), Hajia Aisha Dahir-Umar; Members of the Board of Trustees of the Pension Fund Operators of Nigeria here present; Management and staff of the National Pension Commission as well as President & Members of the Pension Fund Operators Association of Nigeria (PenOP)

The Former Director-General, National Pension Commission (PenCom) Muhammed Ahmad while delivering the theme paper “17 Years of Pension Reforms: Gains, Challenges and Opportunities,” implored pension operators to unlock the informal sector by reaching out to the workers to enhance the Pension industry growth.

He said pension operators should never expect the workers to come to them willingly without engaging them, pointing out that a micro pension plan was evolved to unlock the informal sector, adding that the set objective for the plan could only be achieved through proper and regular engagements with people in the sector.

He noted that the pension and insurance sectors are yet to gain more grounds in the financial inclusion strategy and implored pension operators to assist informal sector workers in planning their future by bringing them into the micro pension plan.

In his speech at the event, President, Pension Fund Operators Association of Nigeria, Wale Odutola, noted that the growth of any industry is premised on constant dialogue and communication among the key stakeholders, adding that over the years, PenCom and the operators have built a strong and robust stakeholder engagement framework which has significantly assisted in the growth and development of the Pension Industry.

He submitted that PenCom and PenOp have also developed a strong relationship with the National Assembly whom they recognize as key partners in the industry.

“In the last 17 years, Nigeria’s pension industry has certainly come a long way from when the pension reform act was initially passed in 2004.

“The industry has moved from a largely unfunded pension system to one that is fully funded, professionally managed, and mainly private sector driven. We can all agree that the Contributory Pension Scheme practised in Nigeria, has adopted international best practices, is technologically driven and has grown steadily over the period.

“There is also marked progress with respect to the level of professionalism within the industry. The pension industry has raised the bar for professionals locally.

“The investment, risk and compliance professionals within the industry can favourably compare to their counterparts anywhere in the world. Indeed, the industry has bred a new class of pension professionals across the board over the years,” he said.

He went further to highlight areas where the industry lags behind other countries, stressing that one area was the level of pension penetration.

According to him, Nigeria currently has a pension penetration rate of approximately 11 per cent of its labour force, adding that this pales in comparison to 19 per cent in South Africa, 20 per cent in Kenya and 77 per cent in the United Kingdom.

“Consequently, it goes without saying that the industry needs to deepen its level of penetration, especially in the informal sector,” he added.

Another area of improvement, he noted was the level of pension assets to GDP, adding that Nigeria’s level of pensions assets to Gross Domestic Product (GDP) is only a little over seven per cent while in developed markets, it’s typically above 100 per cent.

“So, whilst the level of our pension assets is relatively large in absolute terms when you look at it in relation to GDP, it is actually low. This further speaks to the fact that we need to increase the level of penetration of the pensions scheme in general,” he added.

Odutola maintained that whilst stakeholders applaud the fact that the industry has grown in a number of areas over the years, there are still areas that require improvement.

“This is not lost on us as operators or as an industry. We continue to work with the regulator and other stakeholders, including the National Assembly, on several areas in the near and long term. These include areas like market development, Service delivery, National impact, upskilling of pension professionals and maintaining a sound and ethical environment within the industry,” he posited.

On market development, he noted that the operators are engaging with market operators, the exchanges, the regulators, and international organisations to develop new and alternative products that pension funds can profitably invest in. “It is in ours and our contributors’ interest to continually find new products and markets that meet our objectives,” he added.

He submitted that on service delivery, operators realized that the industry needs to reduce its cost to acquire and serve its current and future contributors, adding that operators need to increase the level of technology adoption and collaboration within the industry on shared services and the likes

“In addition, we are working towards ensuring that the pension industry has a greater positive effect on National development by increasing our funding for infrastructure and transformational companies, sectors and projects in a sustainable manner that does not jeopardize our fiduciary responsibility to the pension contributors who are the ultimate beneficiaries of the funds,” he said.

He said operators also need to continue the process of improving professionalism within the industry by focusing on learning and development and adoption of international best practices in their operations

He posited that operators must work to protect the integrity of the industry, by ensuring a level playing field for all operators and a process to address grievances and other issues through a self-regulatory framework.

In his Goodwill message, Chairman, Senate Committee on Establishments and Public Service, Senator Ibrahim Shekarau, said the retreat is considered as very crucial for the Senate Committee on Establishments and Public Service because it serves as an avenue for practitioners and legislators to meet and rub minds on fundamental issues affecting the industry.

He said the ultimate goal is to ensure that pensioners are treated respectfully as well as promote a harmonious working relationship between the National Assembly and Pension Fund Operators and expressed his belief that the event will achieve its objectives.

“The PenOps-NASS Annual Retreat has proven to be a veritable room for knowledge sharing, interactions and deep reflections on the industry. We also explore all possible opportunities to constantly transform the processes and procedures entailed in pension administration in Nigeria. As a Committee, we look forward to an honest and productive exchange of views and ideas between the Association and legislators as well as other stakeholders in the industry. We must all work collectively to foster a mutually beneficial working relationship that will impact positively the lives of our senior citizens, knowing that we would someday fall into that category. We must jointly find effective solutions to some of the challenges confronting the Nigerian pension industry,” Hon. Shekarau opined.

Also speaking, the Chairman, House of Representatives Committee on Pensions, Right Honourable Kabiru Alhassan Rurum, corroborated its counterpart from the Senate on the objective of the Retreat which he said is to ensure that pensioners are given the right attention and strengthen the National Assembly and Pension Funds Operators relationship.

“The objective of this retreat is to further ensure that pensioners are given the right attention in the society and strengthen the relationship between the National Assembly and Pension Funds Operators in Nigeria in the interest of our senior citizens. Consequently, I believe that this event will identify, discuss and proffer workable solutions faced in the industry.

“The timing of this retreat is also apt as it is coming when the legislature is focusing on the amendment of the 2014 Pension Reform Act. The amendment aims to address some of the teething challenges currently faced by operators, as well as beneficiaries. We are aware of many challenges facing our senior citizens and we are determined as a Committee to find a lasting solution to them.

“It is expected that this retreat will highlight issues and challenges confronting the Pension industry and recommend workable and enduring solutions for same. The House of Representatives is ever ready to collaborate with the Association on any matter which may require its legislative intervention to achieve this in the interest of the Nigerian people, whom we serve,” Rt Hon Kabiru Alhassan added.

Earlier in his opening remark, the Chief Executive Officer of PenOP, Oguche Agudah informed the gathering of the progress so far made by the industry during the seven years of its existence.

According to him, “Seventeen years into the pension reform, we can all be very proud of the gains and progress that the industry has made over the period. With more than nine million Retirement Savings Accounts (RSA) across the private and public sector, many of our fellows Nigerians have confidence that they can have peace of mind in their retirement years.

“The annual growth of the pension assets is also impressive, growing at a Compound annual growth rate of 32% as at 2019, which is faster than the GDP growth rate. Furthermore, the pension industry has grown to become the largest institutional investor locally, driving the growth of the bond market and contributing to overall capital market development.

“We could go on and on about the gains and progress the industry has made which are incontrovertible. This would have been impossible without the support of the National Assembly and every other stakeholder present here. However, today’s event is not just about patting ourselves on the back and giving ourselves high fives for a job well done, which we have all done! It’s also about an opportunity to reflect on what we could have done better, chart the course for the next phase of growth and work together towards ensuring greater links between the pension industry and the larger economy.”

While calling on partners and stakeholders to work together “to come up with outcomes that will benefit the teeming number of Nigerians who look to all of us in this room to continue to uphold the integrity of the current pension system,” he posited that “Through our deliberations, we also expect to fashion out an even better system that will underpin the hopes and aspirations of the nation at large.”