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The persistent depreciation in the value of the Naira has eroded the value of Nigeria’s pension funds assets by as much as 100% between 2012 and 2019. In the meantime, inflation continues to be a major problem.

The pioneer Director-General of the National Pension Commission (PenCom), Muhammad Ahmad, called the attention of stakeholders to this problem when he spoke recently on the topic “The Pension Industry – The Way Forward” during a retreat that was organised for National Assembly members on pension.

A serious problem: The Nation Newspaper reported that Ahmad stressed the need to ensure that contributors and retirees do not end up suffering unduly due to the depreciation of the Naira over the years.

The former DG also pointed out the fact that a dollar exchanged for an average of N170 in 2012, whereas today it exchanges for N360. What this means, therefore, is that within this period, pension contributors and retirees have collectively had the value of their monies eroded by 100%.

PFAs make N1.69 trillion ROI , Pension Contributions in Nigeria rose by N169.9 billion in 3-month , PenCom calls for thorough scrutiny of dead RSA holders’ benefits, PenCom discontinues Employee Death Benefit Account  , PFAs boost investment in infrastructure by N17.77 billion in one year , Pension: Low RSA balances - a subtly growing concern, PENCOM boss queried for spending unapproved funds, N5 billion on 360 staff in 8-month 
The current DG of PenCom

The Way forward: The former PenCom boss went further to argue that in order to preserve the value of the N9.5 trillion pension fund asset, there is an urgent need for PenCom to allow more investment of pension funds in foreign assets. According to him, the provisions made by the Pension Reform Act (PRA) of 2014, Section 87 (1) which allowed for this have remained fairly non-operational.

Ahmed also urged PenCom and other industry stakeholders to engage the Central Bank of Nigeria in order to develop a workable framework to access foreign exchange for pension funds investments for the benefit of RSA holders in the immediate future. He added that the power to increase the limit of pension funds’ assets allowed to invest in foreign investments should be moved from the presidency to the board of the pension commission.

[READ MORE: PenCom boss queried for spending N5 billion on 380 staff in 8 months]

Going forward, however, I will strongly suggest that the need for Presidential assent be removed and replaced with the power of the Board of the Commission to issue investment regulation for foreign investments as is done in a number of North and South American countries. 

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“There is the need to encourage the development of enabling a framework for pension funds to facilitate national development. In this case, Public-Private Partnership (PPP) rules need to be strengthened at both the national and state levels while Africa infrastructure collaboration initiative projects like roads, rails, telecommunication, power, among others should be promoted.

“There is also need to promote credit enhancement market in the short term – currently InfraCredit is virtually the only private institution providing such guarantees (incentives) in Nigeria. However, enabling environment such as policies on project preparation to enable quality project issuance need to be established so as to walk ourselves out of provision of guarantees in the future.” 

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1 COMMENT

  1. It will be a complete disaster to allow them to invest pension in foreign lands.

    They are trying to become completely immune from the the institutionalized grand rent-seeking pyramid scheme they have perpetuate in Nigeria.

    One of the things that shields civil servants from the bad decisions they make in office is Pensions, Nigerian civil servants are living in a bubble, by moving their pension to another country for investment, it further protects them from the hash reality they create in our country.

    They can recover some of the money lost from paying civil servants that have been dismissed from office/service.

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