Recapitalisation Deadline: PFAs Consummate Mergers, Acquisition Deals as Stakeholders Differ on Adequacy of New Capital Regime


Ebere Nwoji
Three months to the expiration of April 20 deadline given to Pension Fund Administrators (PFAs) to beef up their operating capital from the current level of N1billion to N5 billion, THISDAY investigation has revealed that PFAs are consummating merger, acquisition deals.

It was learnt that some firms have been taken over by stronger operators in form of acquisitions while talks on mergers between some operators have reached advanced stage. Competent industry sources informed THISDAY that fresh discussions on possible mergers by firms who were hitherto indifference are commencing.
This is just as stakeholders have differed in their views on the adequacy of the capital increase in the sector given the sacrosanct nature of the Contributory Pension funds.

The stakeholders, it was learnt, have therefore demanded for clear explanations by the regulator on how the exercise would contribute to the security of the contributed pension funds.

The National Pension Commission had in May last year, directed PFAs to raise their shareholders’ fund, from N1 billion to N5 billion giving them 12-month transition period.
The development was the second time the regulator is raising the capital base of PFAs since the inception of the Contributory Pension Scheme in 2004.

In 2011, PenCom had raised the operating capital of PFAs from N150 million to N1 billion.
In the present regime, the commission is demanding for a N5 billion minimum capital.
On acquisition, already, PenCom had granted a “no objection” approval to Guaranty Trust Holding Company to acquire 100 per cent shareholding of Investment One Pension Managers Limited.

It has also granted a “no objection” approval to FCMB Pensions Limited for the next phase of acquiring 60 per cent shareholding of AIICO Pension Managers Limited while AXA Mansard Pensions has also been bought over by the Verod Capital Alliance and has been renamed Tangerine Pensions Limited.

THISDAY Also gathered that four new merger talks are on going in the industry while others who are yet to meet the new capital regime are weighing different survival options.

But the Chief Executive Officer of Pension Fund Operators Association, the umbrella body of Pension Fund Administrators, Mr Oguche Aguda, said about 11 PFAs have made the list of the new capital regime.

When THISDAY Sampled the views of the pension sector stake holders on the development, the Director, Centre for Pension Rights Advocacy and Consultant, National Institute for policy and Strategic Studies, Kuru Jos, Ivor Takor, said both the new capital requirement and the merger and acquisition talks going on in the industry now is a very good development.

He said the development would strengthen the industry and get rid of unserious operators.
The development, he added, would afford the industry the economy of scale benefit.
He advised those going for merger to perfect their deals well to ensure smoothness in their operations.
Former South East Regional Manager, Premium Pension Managers, Mr Paddy Ezeala said the importance of huge capital for the pension industry can not be overemphasised as it will ensure that all existing PFAs were on sound footing.

He however said the new capital regime requirement by the regulator would create the negative impression that the industry was shaky whereas going by the nature and laws guiding management of pension fund under the Contributory Pension Scheme, nothing can endanger the contributed funds because of the nature of security surrounding the fund.

He said it was good to build an all inclusive industry comprising the small, medium and big scale operators but with the new capital level, the regulator was about building a large scale operating industry.
He said with level of the new capital, it was obvious the regulator wanted only the huge operators with huge capital to exist.

He said in doing this, it needed to explain to the layman how the huge capital would contribute to the security of each company’s asset under management.

He said in spelling out the new capital regime which according to him is bound to send some PFAs and their workforce out of business, “the regulator should have known that if the fear was on the possibility of any PFA going down, it should not have arisen since going down of any PFA has nothing to do with the pension asset because the assets were not with the PFAs but with the Pension Fund Custodians who in turn have invested the funds.”

Currently, there are 22 licensed pension Fund Administrators operating in Nigeria.
The are AIICO Pension Managers Limited, APT Pension Fund Managers Limited, ARM Pension Managers Limited, CrusaderSterling Pensions Limited, FCMB Pensions Limited

Fidelity Pension Managers, First Guarantee Pension Limited, IEI-Anchor Pension Managers Limited, Investment One Pension Managers Limited, Leadway Pensure PFA Limited, Nigerian University Pension Management Company (NUPEMCO), NLPC Pension Fund Administrators Limited, NPF Pensions Limited, OAK Pensions Limited
Pensions Alliance Limited, Premium Pension Limited, Radix Pension Managers Limited, Sigma Pensions Limited, Stanbic IBTC Pension Managers Limited, Tangerine Pensions Limited, Trustfund Pensions Limited and Veritas Glanvills Pensions Limited

Investments of the pension funds generated by these PFAs is determined by the following four PFC as stipulated by the laws guiding pension fund investments; First Pension Custodian Nigeria Limited, UBA Pension Custodian Limited, Zenith Pension Custodian Limited, and Access Pension Custodian Limited.
They play the role of undertaking the responsibility for keeping safe custody of pension assets on trust on behalf of contributors.

The main functions of PFCs are to receive pension contributions on behalf of PFAs; settle transactions and undertake activities relating to the administration of pension fund investments on behalf of PFAs and to notify the PFA within 24 hours of the receipt of pension contributions from employers.