From Uche Usim, Abuja
The need to urgently evolve innovative ways of improving pension schemes and administration as well as other social security programmes to match Africa’s rapidly-growing population estimated to hit 2.8 billion by 2060, was the thrust of the third World Pension Summit (WPS) hosted by the National Pension Commission of Nigeria (PenCom) between September 27 and 28 in Abuja.
The high profile event themed “Pension Innovation, the African Perspective”, attracted President Muhammadu Buhari, former President, Olusegun Obasanjo, other African leaders, Kaduna State Governor, Nasir el-Rufai, pension fund administrators, finance experts, diplomats and other stakeholders.
Participants, while describing pension matters as a vital vehicle for nation building, said contributors and beneficiaries should not have any hassles in accessing it when needed. They also urged pension fund administrators to improve their services and churn out products to benefit pensioners.
Attendees however, observed that majority of those captured under Contributory Pension Schemes (CPSs) in Africa, especially Nigeria, were mainly from the government and private sectors, while those in the rapidly-growing informal sector (self employed), who represent the future of African economy were yet to be captured.
They unanimously called for aggressive moves to bring the informal sector onboard, even as they noted that governments of most African nations have been compelled by their peculiar circumstances to either make priority changes to their pension schemes or a paradigm shift from the direct benefit to the Contributory Pension Scheme.
Pension experts alerted of threats to pension assets from cyber attacks and poor investment strategies that may rob the pensioners of their benefits upon retirement from active service.
They called for pragmatic steps to sound pension plan and other social security programmes to cater for the aged as they exit the productive circle.
Resource persons who spoke at various plenary sessions were passionate about Nigeria getting the pension scheme right, even as they advised against bad investments with the nation’s pension asset estimated at N6 trillion.
While commending PenCom for its audacious steps in reforming the Contributory Pension Scheme (CPS) by introducing the biometric verification platforms to weed out ghost pensioners, they also urged other countries in Africa to toe Nigeria’s path.
President Muhammadu Buhari, who was represented at the event by the Head of the Civil Service, Winifred Ekanem Oyo-Ita, revealed that PenCom had been mandated to extend its enforcement drag net to cover those in the informal sector under the micro pension scheme using the enabling laws.
He described the CPS established in 2004, as a huge success, pointing out that in 12 years, the scheme has stabilised the pension system.
“Before the reform, Nigeria had pension liabilities running into trillions of naira. It has generated over N5.83 trillion worth of pension assets as at June 30, 2016, which are invested in various sectors of the economy.
“Within the confines of limited resources, we’re still addressing pension liabilities. Africa has given considerable attention in the recent past to pension related issues due to the myriads of challenges encountered in the administration of pension as well as the economic downturn on the continent.
“Developing countries in Africa opted for the latter model, and are also gravitating towards the contributory pension scheme. In 2004, we established the CPS due to its obvious advantages, including the sustainability as a system, robust framework that eliminates incentives for corruption and its ability to generate investible long-term funds”, she said.
In his views, former Nigerian President, Olusegun Obasanjo however called for caution and restraint in the ploughing the asset into business deals.
“It is important that someone can access his/her money when needed. Pension is vital. It won’t be good when someone who has laboured and sweated for years from when he was young till he’s aged to contribute to the pension, only to discover it can’t be accessed on retirement. This is a terrible thing. Even if everything goes awry, a person’s funds should remain intact. This is paramount. It’s something we must preserved no matter what we do. So our sustainability must be with security and innovation with caution.
“One of the founders of WPS talked about trust and I agree with him. We must never reduce or abuse trust”, he admonished.
He also described the Contributory Pension Scheme (CPS) as a huge success, revealing about seven million employees both from the government and private sectors been brought onboard since its inception in 2004.
“We must find a way of using pension to better our lots. Singapore used pension for housing. There’s no Singaporean worker that does not own a house. We can have that in Nigeria. We can plough the pension asset into other infrastructure. Roads too very vital. We must think outside the box but all we do must be done cautiously”, he said.
Governor Nasir el-Rufai of Kaduna urged his counterparts to immediately deploy biometric verification techniques to detect and flush out ghost workers and pensioners as most states are burdened by huge pension liabilities.
“Nigeria is forecast to be the third most populous country in the world by 2050 with a population of about 450 million people. That is not a bad thing if that population is educated. The challenge is for the state governments that are directly responsible for the provision of social services to provide them”, he said.
The host of the conference and Director General of the National Pension Commission of Nigeria (PenComm), Mrs Chinelo Anohu-Amazu in her remarks said there was an urgent need to address the issue of ageing population in Africa by developing robust pension and social security systems to cater for old age income.
“The United Nations estimated that by 2025, the population in Lagos and Kinshasha would reach 18.9 million and 14.5 million, respectively. To put this in context, it would be the equivalent of combining the current populations of London, Berlin and Madrid, which stand at 15.42 million based on 2015 population figures.
“Bridging Africa’s infrastructure deficit will require sustained spending of about US$93 billion per annum, which translates to about 15% of Africa’s GDP. This huge challenge, I believe, can be surmounted by a coordinated, multifaceted approach to development and the integration of domestic funding sources such as pension funds, and foreign institutional investors.
“The posers, however are: how do we build deep and efficient capital markets and financing models that would enable institutional investors such as pension funds to invest in Infrastructure? How can pension fund managers in Africa mainstream Environmental Social and Governance (ESG) principles in their investment decisions with a view to promoting sustainable impact investments? How do pension fund managers and regulators leverage technology to stimulate the impact of pensions on socio-economic systems? What specific action steps can be taken today to begin the process of developing these practices? We need to get the answers as we deliberate in this forum”, she said.
Also speaking at the forum, the founder of WPS, Eric Eggink hailed PenComm for hosting the conference for three consecutive years since it was created in 2014.
He urged participants to evolve innovative ways of managing pension assets, even as he urged nations to guard against cyber attacks.
“Pension is about money and we need to warn against fraudsters and cyber attacks. Africa has an amazing growth and with so much potential. There is room for growth”, he said.