The Financial System Strategy (FSS) 2020 was launched in 2007 and reviewed in 2012. This led to the introduction of Pension as a Sector to support, strengthen, develop and create a robust and vibrant Pension Industry in collaboration with the National Pension Commission as the main driver of the Industry. The Pension Sector is one of the Five Sectors of the FSS2020 Program with Mortgage, Financial Market, Insurance and the MSMEs contributing towards making Nigeria one of the 20th Largest Economy amongst emerging Markets.
Objective of the Pension Sector.
The three objectives of the Pension Sector are:
Collaborate with other regulators and key stakeholders to structure and develop products suitable for pension investments.
Enable PFAs to partner with international counter-parties to structure and invest in domestic infrastructure projects.
Proactively lobby and advocate for government support for projects to qualify for long term financing.
The FSS2020 Pension Transformational Programmes are Strategic Initiatives that will help the Sector actualize and achieve its strategic objectives. They are actionable activities that if achieved, will leapfrog the industry to enviable heights. They Include:
Align stakeholders to accelerate contribution to pension funds.
This Program provides additional and alternative ways to accelerate contributions to Pension funds through Incentives, building awareness, promote benefits of saving for the future, and changes in Rules & Regulations as well as enforcement.
The Benefits of this program is to Increase the size of investible pension funds, Attraction of International Investors and Increase wealth creation & welfare for pension contribution. The key deliverables will include design of Rules and codes adaptation suggestions for all key institutions, Enforcement, supervisory framework, Sensitization programmes for informal sector and setting up of a Comprehensive database.
Enable infrastructure investments
This program will develop and deliver a set of advocacy & capacity building initiatives to ensure long term financing of projects with PFA funds. This will be done by reviewing and assessing the full list of infrastructure projects which require long term financing, developing and building awareness for the investments criteria for long term financing using pension funds with relevant government organizations. The Benefits will include: Creation of Investment windows for PFA’s; deepening the capital market & provide exit strategy for pension investments; and Creating awareness & new products for long term financing. Some of the expected deliverables are Criteria for infrastructure projects suitable for Pension & Insurance financing, Capacity building for Senior Leadership team – Training, Seminars, Education & Support and Confirmed Criteria for investments.
Achievements Recorded so far.
Contributory Pension Scheme (CPS): There has been significant increase in the number of states and organizations keying into the scheme, thereby deepening the pension fund asset to over ₦7.5trillion and expanding the coverage of the Contributory Pension Scheme.
The Informal sector and provision of 3 employees as minimum to enroll in the CPS is being implemented.
Micro pension scheme: Sensitization and awareness are ongoing to enlighten the informal sector on the benefits and importance of the Micro pension scheme.
The amended regulation on the investment of Pension Fund Assets has been approved. It contains key modifications to foster the investment of pension funds in infrastructure as follows:
Mortgage bonds, guaranteed by the FG have been included as allowable securities for pension fund investments
Minimum requirement of 75% of PE and Infrastructure Fund investment in companies/projects to be cited within Nigeria has been reduced to 60%
Multi fund Structure
The Bill for the establishment of a Pension Institute is currently in the House of Representative and has passed through second reading.
New Products are being identified and developed capable of attracting Investment in the Pension Fund.
Inadequate sensitization campaigns to the public on the workings of CPS.
Low level of compliance from states, informal sectors and organized Private sectors.
Inadequate infrastructure bonds and infrastructure funds that meet the criteria for pension fund investment in the capital market
Bridging the capacity gap of PFA.
Below are the highlighted sector interventions, which if carried out, are believed to prompt a vibrant sector contributing positively to the growth of the economy.
Facilitate Capacity Building for the stakeholders.
Facilitate sensitization programs for informal sector and OPS.
Facilitate the use of pension funds for infrastructure development and real sector financing.
Organize Pension workshops and seminars for the industry to develop broad range technical expertise,
Increase capacity in the financial sector on product development in the capital market.
Review the extant laws to facilitate the issuance of products in the capital market.
Expedite the creation of a platform to facilitate the development of infrastructure investment products.
Identify international investors and trade missions to provide platform for collaborations to increase foreign investments in domestic products.
FSS2020 Pension Sector Forum
The FSS2020 is working closely with its stakeholders PENCOM, SEC, DMO, CBN, ICRC, NSIA, NAICOM and FMBN to hold quarterly sector forums to brainstorm on ways to improve the Pension industry in Nigeria and carry out the implementation of the FSS2020 Pension sector initiatives.
A strong pension market in Nigeria is dependent on prompt settlement of contributors/ retirees when required. PENCOM is aware of this challenge and must work hard to restore investors trust and confidence in the industry. With proper legal and regulatory framework in place and efficient enforcement machinery, it is envisaged that by year 2020 over 20 million persons would have keyed into the CPS and the asset would tremendously grow to over 12 Trillion.