Yemisi Izuora
Total funds in the current Contributory Pension Scheme (CPS) which replaced the Defined Benefit Scheme (DBS) now hovers above $27billion.
Revealing this, the Director General (D-G) of the National Pension Commission (PenCom) Chinelo Anohu-Amazu who addressed the opening of the second edition of the World Pension Summit “Africa Special” stated that the Nigerian Pension Reform narrative can be situated within the context of Africa’s economic resurgence after the lost quarter of a century.
“Indeed, from operating the old Defined Benefits System that had well over 2 Trillion Naira (circa USD 10 Billion) in deficit at the dusk of the last century, the new Contributory Pension Scheme (CPS) that was kick started in 2004 now has over 5 Trillion naira (circa USD 27 Billion) in just over 10 years of operation”.
She said that Africa has experienced a reasonably rapid growth of over 5 percent since the turn of the Century, pointing that this followed what could be described as a “lost quarter century” during which per capita income in the year 2000 was still below its level 25 years earlier.
“Along with the economic meltdown of the former Soviet Union and Eastern Europe in the transition to market economy, this perhaps ranks amongst the biggest economic disasters in history since the records of national accounts began.
Whilst contemporary discourse has focused on the lessons of success centering on the experiences of South-East Asia, relatively little attention has been paid to insights to be gleaned from the analysis of economic failures and successes in Africa” she said.
Anohu- Amazu said the Summit, would focus on why Africa had to go through such a prolonged period of economic decline during its lost quarter century and the lessons for policy formulation, especially for sustaining and accelerating Africa’s economic renaissance.
She said that Nigeria’s Pension Reform trajectory for example, highlighted the limitations of ad hoc and over generalized institutional explanations that confuse cause and effect as well as ends and means, adding” It is obvious that where States have failed or are at war there is little that economics has to offer as solutions”.
The D-G noted that the key feature of the CPS is the institutionalization of risk-based regulation as a means of engendering the long-term sustainability of the Pension Industry.
According to her, Sustainability on this score encapsulates the troika of social, environmental, and economic dimensions of development.
Regulatory strategies would thus encompass a painstaking consideration of risks as well as the rewards that lie behind endogenous opportunities.
The impact of poor corporate governance practices on shareholder value, exacerbated by the recent global financial crisis, for instance, has raised issues such as transparency, risk management and business ethics, amongst others, to the front burner of the regulatory agenda.
She further pointed out that issues of unemployment, diseases, poverty, climate change, and inequality are also pressing needs for Regulators to consider in mapping their regulatory landscape.
“This novel approach to regulatory oversight – Sustainable Regulation – is one that overtly acknowledges the importance to institutional regulators of environmental, social and governance (‘ESG”) factors and the long-term stability of financial markets, especially the Pension Industry.
It recognizes that creation of long-lasting return on pension assets is essentially dependent on transparent, predictable and well governed environmental and economic systems; systems that are underpinned by clearly defined prudential regulatory guidelines” she added.
Furthermore she said, “Unsurprisingly, pension fund managers all over the Globe are changing mandates to reflect considerations of sustainable investment and consequently the growth of ESG mandates in overall investment strategy is on the rise.
Nonetheless, many regulators still require further education on how they should quantify performance and assess the extent to which ESG mandates are delivered upon”.