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PENCOM Issues Public Notices on Compliance with the Pension Reform Act, 2014

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The National Pension Commission (PENCOM) recently issued two separate Public Notices (PNs) to employers and employees on certain compliance requirements with the Pension Reform Act (PRA), 2014. The PNs reiterate the provisions of Section 4(5) of the PRA, 2014 which require employers to maintain group life insurance policies in favour of their employees. They also reinforce the rights of employees to group life insurance policy and request employees to take necessary steps to demand compliance from their employers.

Details

The PN to employers emphasizes the requirement to submit copies of Insurance Certificates with the schedule of benefits to PENCOM. The PN also urges employers who are yet to submit copies of Insurance Certificates for the current year to do so by 31 March 2018, failing which PENCOM would consider such employers in default of Section 4(5) of the PRA, 2014. This requirement is in line with Section 5.5 of the Guidelines for the Life Insurance Policy for Employers (Guidelines) which was jointly issued by the National Insurance Commission and the National Pension Commission.

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The PN to employees seeks to remind them of their rights to employer-provided life insurance policies and the contributory pension scheme. Consequently, it advises employees to report their employers’ failure in respect of the following:

  1. Procurement of the minimum required life insurance policy in their favour;
  2. Submission of the evidence of compliance with life insurance policy to PENCOM and placement of the certificate in a conspicuous place within the organisation; and

3.    Remittance of the deducted Pension Contributions into their Retirement Savings Account.

Implications

The PNs should raise greater awareness on the requirement for employers to provide group life insurance policies for their employees as stated under Section 4(5) of the PRA, 2014 as well as the above-referenced Guidelines. However, it is doubtful that employees would be able to serve as checks on their employers, given that there are no provisions in the PRA, 2014 or in the Guidelines for the protection of a “whistle-blowing employee” in the event of a default by his/her employer.

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Although the PN to employers requires them to place Insurance Certificates in conspicuous places in their organisations, it will be difficult to enforce sanctions for failure to place such certificates as required by the PN. Given that the strict provisions of the PRA, 2014 only requires the employers to maintain group life insurance policies rather than paste Insurance Certificates, a simple demonstration of compliance by an employer should as well suffice.

PENCOM’s efforts in providing greater awareness on the responsibility of employers as well as the rights of employees in respect of group life insurance policies and pension contributions is highly commendable. However, it is equally important to introduce processes to monitor and ensure compliance with the guidelines and the PRA.

Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training. He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE). He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy. You can contact him via onome.ohwovoriole@nairametrics.com

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Markets

Nigeria’s naira gains against the dollar, as CBN closes in on currency speculators

This is naira’s first major gain against the dollar since late March.

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Naira’s true worth,Naira gains on the dollar for the first time since March, Naira forwards hit record high as it crashes to N420/dollar in the parallel market, Naira hits N500 to $1 at the forward market, Naira hits N509 to the dollar at forwards market, demand for the U.S dollar climbs up, Naira hits $387.35 to $1 at currency spot market , Naira sells at N456, Nigeria’s Foreign Reserves drop by over $3 billion in Q1 2020, Investors and Exporters (I&E) window, Naira gains against the dollar, CBN close in on currency speculators

The Nigerian currency (the naira) gained against the dollar on Monday by selling at N441 to a dollar at the parallel market.

Note that the N441 exchange rate is stronger than N450 to a $1 that was posted on Friday May 29, 2020.

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Meanwhile, this is naira’s first major gain against the dollar since late March. The development follows concerted efforts by the apex bank to disrupt the activities of currency speculators.

Just recently, the CBN Governor, Godwin Emefiele, issued a stern warning to currency speculators and hoarders. He also advised Nigerians to desist from patronizing black-market currency operators. According to him, the rates they are buying the dollar from the black market are unrealistic. Therefore, there is high probability they will lose their money if they continue to do so.

Recall that the CBN recently re-started the weekly dollar sales of $100 million for small businesses and individuals who are in genuine need of Foreign exchange. Reacting to this, the Team Lead at CardinalStone Research, Philip Anegbe, had told Nairametrics that the pressure on the naira is expected to ease soon.

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“I believe some of the recent pressures on FX is driven by speculators’ panic responses to weakness in dollar earnings, the decline in FX inflow through the I and E window, and suspension of dollar sales to BDCs.

“The imminent resumption of BDC activities is therefore likely to slightly ease naira pressures in the parallel markets, but we believe the underlying medium-term fundamental concerns facing the naira still remain,” he said.

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Business News

REMINDER: FGN Ijara Sukuk Bond auction closes on 2nd June 2020

Proceeds from the Ijara Sukuk Bond auction will be used solely for the construction and rehabilitation of key roads across the six geopolitical zones of the country.

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The Debt Management Office (DMO), on behalf of the Federal Government, has reminded the general public that the offer for subscription to the N150 billion FGN Ijara Sukuk Bond will close on Tuesday June 2nd, 2020.

The offer for subscription was announced some days ago by the DMO, as Nairametrics reported. Below are the details of the offering.

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The Auction: N150, 000,000,000 – Rental Rate of 11.20% per annum IJORA SUKUK FGN JUNE 2027 (7-Yr Opening)

Arranger: FBNQuest Mechant Bank Limited and Lotus Financial Services Limited.

Opening Date: May 21, 2020

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Closing Date: June 2, 2020

Settlement Date: June 9, 2020

Summary of the Offer

Instrument Type: Ijarah (Lease) Sukuk

Issuer: FGN Roads Sukuk Company 1 Plc. on behalf of the Federal Government of Nigeria.

Units of Sale: N1,000 per unit subject to a minimum Subscription of N10,000 and in multiples of N1,000 thereafter.

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Rental Payment: Payable Half Yearly.

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Redemption: Bullet repayment on the date of maturity

Use of Proceeds: Proceeds will be used solely for the construction and rehabilitation of key roads across the six geopolitical zones of the country.

(READ MORE: FG impounds aircraft for illegal flight operations)

About Sukuk bonds  

Sukuk is derived from the word Sakk, which can be translated to mean legal instrument, deed, and cheque. Sakk can also mean to strike a deal on a paper document.

The origin of Sukuk dates to 7th century AD, where the first Sukuk transaction took place in Damascus, Syria in the Great Mosque of Damascus (Umayyad Mosque).

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Since Islam prohibits usury – collecting interest from your loans – interest-based bonds are banned in Muslim nations.

Difference between Sukuk and regular bonds

Sukuk indicates ownership of an asset. The assets that back Sukuk are compliant with Shariah. In other words, such assets adhere to the Islamic prohibitions on gambling, alcohol, tobacco, narcotics, and adult entertainment products and services.

Sukuk notes pay a fixed percentage return as a profit-sharing percentage of the underlying assets’ revenues.

Regular bonds, on the other hand, pay a fixed rate of return as interest (coupon) semi-annually or annually. 

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Business News

Just In: PPPRA reduces petrol price to N121.50 per litre

“After a review of prevailing market fundamentals in the month of May and considering marketers realistic operating costs as much as practicable, we wish to advise of a new PMS guiding pump price…”

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NNPC, Reduce funding oil subsidy - IMF to Nigeria , Oil marketers, PENGASSAN call for subsidy removal 

The Petroleum Products Pricing Regulatory Agency (PPPRA) has announced a new retail price band for oil marketers.

In a circular dated May 31st, as seen by Nairametrics, the downstream regulator said oil marketers are now expected to sell petrol within the price range of N121.50 and N123.50. Part of the circular said:

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“Please recall the recently approved pricing regime which became effective March 19, 2020, and the provision for the establishment of a monthly price band within which petroleum marketers are expected to sell PMS at the retail stations.

“After a review of prevailing market fundamentals in the month of May and considering marketers realistic operating costs as much as practicable, we wish to advise of a new PMS guiding pump price with the corresponding ex-depot price for the month of June 2020, as follows; price band N121.50 – N123.50 per liter.”

Details later…

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