Making Innovative Investments in Infrastructure

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As Nigeria once again blazes the trail by playing host, for the third consecutive time, to world delegates for the World Pension Summit in Abuja later this month, James Emejo examines the challenges that are likely to be the focus of this year’s deliberations

Founded in the Netherlands in 2010, the World Pension Summit – Africa Special (WPS-AS) is one of the premium global platforms for knowledge sharing in the pension industry.
Again, the country will be the centre of attraction between September 27 to 28, 2016, as key players in the global pension industry converge on the nation’s capital for the third consecutive year for the World Pension Summit.

Annually, it brings together well over 500 professionals, in addition to pension regulators and key stakeholders from more than 45 countries across the world, to participate and debate relevant innovations and best practices in the industry.

As the founder of the WPS, who is also a financial services marketing and positioning strategist, Harry Smorenberg, aptly captured it: “The WPS is the place to exchange key developments and solutions and learn from each other.”

In 2014, Nigeria became the first country outside Europe and indeed the first African nation to host the WPS, known as WPS- Africa Special. And it secured this hosting right for five consecutive years, thanks to the foresight and leadership provided by the National Pension Commission (PenCom).

The maiden edition in 2014, which former President Goodluck Jonathan declared open and the subsequent one in 2015, were considered huge success both for Nigeria’s image and industry growth and for the development of the pension industries in Africa. They rallied pension regulatory authorities from major African environments, leading players in the continent’s pension industries, key figures and leaders of thought from the global business communities, the who-is-who in the finance sectors as well as captains of industries to share their expertise and boost transnational cooperation on the African continent.

According to the National Pension Commission, PenCom, the Africa Pension Summit “provides top-level environment for exchange of business insights on essential ‘crossroads’ in pensions.”

“The themes of the summits were selected based on the need to lay a solid foundation for the establishment of enduring pension systems in Africa and chart ways for effectively channelling the pension funds to sustainable investments such as railways, power, agriculture and real estate. It was envisaged that this would serve as a catalyst to actively stimulate economic development across countries in the African continent”, it added.

The summit is held in high esteem by both local and international experts and stakeholders, who also see it as a testimony of Nigeria’s ability to transit from a bad example in pension management to the leading light in the industry in Africa.

Dr. Gerald Lyons, a renowned economist succinctly captured the perceptions of such stakeholders at the 2015 edition of Africa Special Summit. His words: “I think that the fact this summit is taking place here in Nigeria at this time is a sign of how the pension industry in Nigeria and PenCom, in particular, has achieved great success in the past decade. Also, it is an indication of how Nigeria is starting to play an important role on the global stage addressing some key issues such as pension.”

In the same vein, Senior Financial Sector Specialist, World Bank, Fiona Stewart, sees the WPS- Africa Special as “a great opportunity and it is important that we have more of these to get the regions talking to each other because learning from each other is absolutely key to economic development”.

“We can have international experience, but very much talking to each other in regions with member nations who understand the challenges is very important; I hope it will continue,” he added.

At a recent world press conference in Lagos, PenCom explained that “the 3rd Summit, which has as its theme, ‘Pension Innovations: The African Perspective’, was aimed at driving into greater prominence, the revolutionary strides and achievements of African Governments in the area of pensions and social benefits.”

“It is expected that this year’s summit would, again, bring together professionals and highly experienced resources from across the world in the areas of investment, actuarial science, insurance, coverage extension, and other pension-related fields,” it added.

It is not surprising, therefore, when information on the summit website show that stakeholders from around the world, especially key players from the various African pension industries, were already making final jostle for the remaining spaces, as the 2016 edition promises to be notches higher than the previous editions.

The rush is not just due to the antecedents of the Africa Special Summit, but also the rich array of sub-themes and plenaries lined up for the two-day event.

For instance, the insurance sector and products, such as Group Life Insurance and Life Annuity are quite central to the effective implementation of benefits pay-out schemes by pension managers. Unfortunately, even in the 21st Century, the African insurance markets are way behind those of the markets in the developed world. Thus, “Emerging Insurer Role” will be dedicated to the challenges of the Insurance sectors in their roles towards delivering long-term retirement outcomes.

Also slated for major attention is the challenge of huge infrastructural deficits in Africa. Experts have projected requirement for infrastructure development in Nigeria alone in the next 10 years to be about $100 billion for power, roads, railway, bridges, and seaports. Addressing housing deficits alone will require $228 million. Pension funds, being long-term, patient capital, are ideally suited to address some of these infrastructure challenges.

Thus, the diversity of the panelists on ‘The Dynamics of Pension Investments’ would no doubt bring expert perspectives on various asset classes, particularly infrastructure, real estate, and other specialised areas.

Again, only very few African countries have achieved reasonable progress in extending pension coverage to the informal sector and the self-employed. Access to financial services is a massive challenge across Africa. This is mainly as a result of low awareness of the existence of these services by those who are being served. Again, there is lack of clear appreciation of customer preferences on financial products and services.

Currently, PenCom is at the verge of rolling out the Micro Pension Scheme (MPS) to accommodate this informal sector. And Nigeria will be the first PenCom industry in Africa to venture into Micro Pension. The plenary on ‘Financial Inclusion’, promises to proffer ways to efficiently and effectively design financial literacy programmes and share experiences on Micro Pension design and policy implementation.

No doubt, PenCom will find ideas from other global climes experienced in Micro Pension useful, just as Africa PenCom industries especially, stand to also benefit from PenCom’s trailblazing experience in this regard.
Technology now rules virtually every aspects of life today, including pension administration.

WPS-Africa Special is therefore set to discuss the use of technology in pension administration for the third consecutive time. The topic “Pension Distribution: The Impact of Technology”, aims to showcase new methods and advancements in technology that could be effectively deployed to provide efficient services to pension plan members, particularly in awareness creation and communication.

Other vital areas, such as actuarial valuations, are not also left out to ensure a holistic capacity-building and experience and knowledge sharing. The summit will, for the first time, feature discussions on the topic ‘Actuarial Issues and their Impact on Pension Benefits’.

The plenary will discuss issues such as actuarial assessment tools, policy and governance. This will improve the appreciation of actuarial valuations in assessing demographies and designing pension schemes.

Kaduna State Governor, Malam Nasir El-Rufai, is one of the architects of pension reform in the country and among the governors that have never missed out on any of the past editions of the WPS.

According to him, “it is important to encourage Pension Commissions all across Africa to up their ante to do more and to regulate more innovatively and ensure that the pension funds grow and are invested in the appropriate areas for development of their respective countries.”

As authorities in the global pension industries look forward to yet another rewarding engagement in Abuja, especially at a time of serious economic challenges, Nigeria has another opportunity to show that it has something other than oil and gas to offer to the world.

In its 12-year history, PenCom has painstakingly built a strong, transparent, and dependable pension system in Nigeria characterised by a dynamic and very efficient regulatory structure. From N2 trillion deficit inherited in 2004, PenCom has grown the nation’s pension assets to N5.7 trillion investible assets as at June this year.

However, stakeholders believe that the innovations and successes in the Nigerian pension industry spearheaded by PenCom have been significantly helped by the fact that the Pension Reform Act mandates the PenCom to report directly to the President. And President Muhammadu Buhari has shown uncommon political will for the pension regulator to succeed.

Essentially, this year’s programme could pave the way for a home-grown solutions to pension investment to reflect the peculiarities of the environment.

Several times, the lack of investible instrument had been blamed for the rather unwillingness by funds managers to invest the over N5.8 trillion assets in the country, and often times, highlighting the need for government guarantee as incentives.
Among other things, the gathering is expected to further seek innovative ways to deploy resources for development amid the current challenging conditions occasioned largely by the fiscal crisis caused by the falling prices of oil.