Yemisi Izuora
The Director General of the National Pension Commission (PenCom), Mrs. Chinelo Anohu-Amazu has identified some of the operational and regulatory challenges facing the pension industry in the country.
According to her, these span across coverage of the Contributory Pension Scheme (CPS), dearth of investment products, inadequate technological capacity as well as inadequate knowledge and skills on the part of Pension Fund Administrators (PFAs) to conduct due diligence on developmental projects.
The Director General pointed out these challenges during the High Level Side event at the just-concluded 3rd International Conference on Financing for Development in Addis Ababa, Ethiopia.
Sharing her thoughts on “Leveraging Pension Funds for Financing Infrastructure Development in Africa” in one of the discussion panels she noted that PenCom supervises and regulates the pension industry through regulations and guidelines, while the operators including PFAs and Pension Fund Custodians (PFCs) manage, secure and administer pension fund assets.
Some of the major challenges facing the Nigerian pension industry at the current stage of its evolution, according to her, have to do the coverage of the CPS, adding that the Commission hopes to raise the number of Retirement Savings Account (RSA) holders from 6.5 million this year to 20 million in the next four year with the introduction of Micro-pension.
“Current position of 6.5 million contributors is low relative to estimated working population. There is plan to expand to at least 20 million by 2019 through micro pensions. It is pertinent also due to inadequate social safety nets. This is a Pan-African issue that should provoke ideas sharing,” she said.
The Director General also lamented the dearth of investment products, particularly those that meet the strict criteria resulting in low activity in spite of pension funds availability. She blamed this on inadequate local expertise to structure and manage infrastructure funds within acceptable risk profile, adding that opportunities for partnership abound across African nations where this expertise exists.
Mrs. Anohu-Amazu also complained about inadequate technological capacity to assure integrity of database of pension contributors, which she said is a prerequisite to some major initiatives such as transfer of RSAs between PFAs. Technological improvements also required to enhance customer service experience for contributors, she said, adding that PenCom is leading in this regard with ambitious IT projects for the industry’s future.
The Director General also stated that insufficient knowledge and skills of PFAs in conducting due diligence on specialised investments such as infrastructure and private equity is also a big challenge.
In this regard, she said the Commission encourages mutually beneficial relations between pension funds and the private sector through its consultative approach to industry governance and promotion of new investment outlets.
Also reflecting on “Situating Pension Funds within the African Union (AU) Policy on Domestic Resource Mobilisation”, the Director General observed that the AU policy on Domestic Resource Mobilisation (DRM) stemmed from the realisation that Africa should take responsibility and possesses the resources, if properly mobilised, for its own economic development.
The AU Agenda 2063 for infrastructural development, according to her, is broken down into 10-year development plans, having identified major regional integration infrastructure projects in highways, electricity, aviation, etc. She said pension is a major source of DRM in Africa adding “a critical assessment of the of the major sources of DRM in Africa revealed over $350 billion in pension funds and a projected rise to $7 trillion by 2050.”
Meanwhile, Heads of State and Government of the African Union (AU) in its 50th Anniversary Solemn Declaration, rededicated themselves to the continent’s accelerated development and technological progress and laid down the vision and eight ideals to serve as pillars for the continent in the foreseeable future.
They mandated the Chairperson of the African Union Commission (AUC) to collaborate with the UN Economic Commission for Africa (UNECA), African Development Bank (AfDB) and NEPAD Agency to develop Agenda 2063 through a people-driven and extensive consultation process.
The AU Agenda 2063 is both a vision and an action plan, a call for action to all segments of African society to work together to build a prosperous and united Africa based on shared values and a common destiny.
It is expected to translate this vision and ideals into concrete objectives, milestones, goals, targets and actions/measures and it is supposed to enable Africa remain focused and committed to the ideals envisaged in the context of a rapidly changing world. In operational terms, the Agenda 2063 would be a rolling plan of 25 years, 10 years, 5 years and short term action.