World Pension Summit: Rallying Platform for an Economy in Recession?

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By Usman El-Amin

For a an economy in recess, the World Pension Summit ‘Africa Special’ (WPS-AS), which kicks off in Abuja in a matter of days, is not only a veritable platform to strengthen African pensions industries, but an opportunity to strengthen the faith of investors in our economy and build partnerships to stimulate it. Themed “Pension Innovations: The African Perspective”, the WPS- AF is an opportunity that must be grabbed with both hands.

The annual specialized summit, was hosted by Nigeria and indeed Africa for the first time in July 2014 on the fringes of the 10th anniversary of Pension Reforms in Nigeria, thanks to the innovative and proactive leadership of the National Pension Commission.

Meanwhile, this year’s Africa Special Summit also heralds the 7th World Pension Summit on managing rising risks, which holds in the Netherlands in November this year. A statement by the WPS Chairman, Harry Smorenberg, says “Key risks are on the rise; along with new economic realities and a rapid investment climate, Pension Funds and insurers have to rethink their strategies to secure adequacy, sustainability and integrity for their participants”. He could not have put it better.

For Nigeria, the official pronouncement by the National Bureau of Statistics (NBS) that Nigeria’s economy has gone into recession, for the first time in over 25 years, is bad news and risk. Experts warn that the country could slide into full depression if urgent steps are not taken to address this situation. President Muhammadu Buhari has lifted the spirit of the nation in his Eid-el Kabir message by assuring that his administration was to re-launch the nation on the path to economic recovery.

Therefore, the Africa Pension Summit could not have come at a better time. The 2016 Pension Summit, like the 2014 and 2015 editions, will bring together more 500 professionals, government functionaries, and policy makers, pension fund administrators, and investors, among others, from more than 45 countries across continents. It is cheering that foreign professionals and investors are coming into Nigeria on this platform at a time those on ground are said to be leaving the country. It, therefore, presents an opportunity for the government to inspire the confidence of Nigerians and foreign investors in our economy so as to attract more partnerships and investments towards infrastructural development.

The WPS-AS provides a great platform for exchange of ideas, especially for Nigeria, on how to further secure pension assets, tighten compliance, and move the country forward through the investment of pension funds in infrastructure and other critical sectors of the economy as we.

Following the recession, government needs to urgently spend more on infrastructure to bridge the infrastructural gap, forestall a full-blown depression, and push for economic recovery. PENCOM has said it plans to invest 40 percent (about 2.32 trillion) of the pension funds in infrastructure and sustainable investments such as railways, power, agriculture and real estate,by 2019 as part of its five-year strategy to enhance inclusive growth and generate better value for contributors. This will help stimulate the nation’s economic development, job creation, and economic sustenance.

PENCOM’s stringent regulation has ensured a robust growth of the pension funds from about 2 trillion deficits over the years to about N5.8 trillion as at July, 2016 such that both local and foreign PFA’s are scrambling to either invest in or buy over the Pension Fund Administrators (PFA’s). Thus, in spite of the recession, pension funds are growing in geometric progression and foreign investor’s interests in our pension system is expanding.

Non-remittance of pension funds is another problem that needs to be addressed to ensure that more pension funds are injected into the economy. Employers who deduct pension funds, but do no remit are not only engaging in financial crime and stealing, but are also doing harm to our economy by withholding funds that are meant to be deployed to stimulate economic growth; hence the current partnership between the EFCC and the PENCOM to clampdown on non-remitters of pension funds is a good initiative. And with the strong political will shown by President Muhammadu Buhari to war against corruption, PENCOM and the EFCC has no reason to fail in this renewed effort to ensure compliance with Pension Laws and that defaulters are brought to book. This way, we can ensure that more funds will be available for infrastructural development and economic investments.

Experts agree that strict adherence to the rule of law will help engineer investment inflow into the country. Pension funds management and investment is one of the best-regulated sectors of our economy. What the principled and tough stance of the PENCOM leadership has done through effective regulation is to restrain corruption in the pension industry. This has greatly inspired investors’ confidence and ensured that pension funds meant for investments and the payment of pensioners retirement benefits are not frittered away. Other government bodies must embrace the PENCOM regulatory model in order to help our nation chart a new trajectory to economic growth and development.

The Minister of Finance, Mrs. Kemi Adeosun, recently admitted that Nigeria is in her worst possible time and that government cannot deceive itself that all is well. She acknowledged that one of the ways the country could get out of recession is diversification of the economy and investment in capital projects. According to her, “What’s happening in the Niger Delta has dragged down the GDP of the entire country. We are too dependent on oil, whereas 87 percent of our GDP is non-oil. So let us drive other areas”.

I agree with the Minister on the need to drive other areas of the economy and PENCOM’S “Africa Special” Summit provides a unique opportunity to leverage Nigeria’s fast growing pension funds for real sector development. Presently, out of the 10 countries with the world’s best pension systems, there is no African country on the list. While the 7th Pension Summit is holding in Europe, we are just having the 3rd in Africa. It tells a lot about our underdevelopment. But today, Nigeria is leading the change in Africa through PENCOM.

Since the hosting right for the Africa Special Summit is for a limited time and other Africa countries are already gunning for it, Nigeria must take advantage of it, while it lasts, to strengthen long-term institutional partnerships with leading pension countries like Denmark, Netherlands, Australia, Sweden, Switzerland, Finland, among others, in order to reposition our pension sector and economy for the better.

If we want to build a great pension sector that will chart a new trajectory in our quest for growth and development, we must sustain our engagement with the countries that have the world’s best pension system year after year. We should tap into their ideas, energy, and resources. We should view the Summit, which comes on the heels of the official declaration of recession in the country, as an opportunity to re-launch the economy.

The Buhari-led administration should use the platform to woo investors and reassure Nigerians and the international community that his government is on top of the situation. The monetary funds investment structure, which is said to be before the President for approval, if not already approved, should be given urgent attention to create opportunity for the use of the pension funds for investment development.

Pension stakeholders acknowledge the positive changes and progress the Summit has brought to the pension industry. I would say that PENCOM long prepared itself to key into the change agenda of the Buhari administration. The ‘Africa Special’ Summit, like the WPS in Europe, has become an institutionalized springboard for change. It is up to Nigeria to make the most of it.

El-Amin writes from Kaduna State