Pension as catalyst for African infrastructural, economic development

NIGERIA and the continent of Africa are witnessing a new wave of growth in pension administration driven by stable political atmosphere, social security reforms, growing middle class and economic growth put at over five per cent of GDP.

  Attention has now been shifted to how countries take advantage of the pension growth to bring about positive social change in the life of their citizens through effective mobilisation of savings, wealth creation and deployment of the growing funds towards infrastructure development and economic growth.

  Stakeholders who gathered at the recently concluded World Pension Summit- Africa special held in Abuja underscored the challenges of managing this growth in Africa’s pension, adding that developing of appropriate framework would guarantee sustainability and national development.

  The forum identified the need for cross fertilization of ideas in terms of technology adaptation and policy framework, it was agreed that Nigeria’s Contributory Pension Scheme (CPS) driven by the National Pension Commission was a system to embrace.

  Acting director general, PenCom,  Chinelo Anohu-Amazu, said “We must be mindful of the fact that our hopes and aspirations as a Continent are primarily hinged on the evolution and development of retirement benefits into a veritable instrument of social change. Not in a theoretical or abstract sense, but in terms of an intrinsic transformation of our institutions, and our operations.

  “We need systems that are relevant to the fundamental needs of our Continent, and which are dynamic enough to initiate and also respond to developmental challenges facing the continent in an increasingly interdependent global economy.

  “Given the size of pension fund assets across Africa, there is a real opportunity for policy makers to collaborate with pension professionals so as to effectively leverage these assets for sustainable progress. “Reaching a consensus on how best to harness the Continent’s pension fund assets as catalysts for economic development would be critical for the Continent”.

  Another issue which became evident at the forum was the need to expand the ‘catch-net’, by expanding the regulatory frameworks to bring more people in the informal sector to the organised pension system. Though the revised pension law in Nigeria has made provision to include organisations having three or more employees, Aloysius Etok, Chairman,  Senate Committee on Public Service, said it was discovered though belatedly that the pension law left out employers and political appointees.

  He advised that the pension stakeholders should do everything possible to ensure that the law is returned to the National Assembly to be upgraded with a view to bringing both employers and government appointees under the contributory pension scheme.

  Vice President, Nigerian Labour Congress, Issa Aremu, charged pension stakeholders to deploy pension asset to financing home ownership schemes for workers.  He said this is one of the ways to deploy pension funds for the benefits of contributors directly.

  Houses are expensive when mortgage institutions and other intermediaries build for sale to workers. So in Kenya, workers are allowed to borrow from their retirement savings to build houses.

  As the proportion of retirement income provided by private pensions continues to grow, the regulatory framework designed to protect those funds becomes ever more crucial. The theme of this summit – ‘Shaping the Future’ thus underscores the imperative of institutionalising a risk-based approach which allows the regulatory agencies to channel their resources towards issues that pose greatest threat to the stability of the industry.

  Also important is the need to utilise information and communications technology towards ensuring that operators have adequate platform to reach pensioners wherever they may reside in retirement.

  Drawing from Kenyan’s experience, the best way to bring workers in the informal sector under contributory pension scheme is to make use of the mobile telephony.  They could be reached with the messages from the regulator and operators using mobile phones and their contributions could also be collected drawing from the credits loaded on their phones in collaboration with mobile telephone operators.