• Thursday, March 28, 2024
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‘For effective compliance, moral suasion should have been over in pension industry’  

PAGE 3 INTERVIEW (1)

Paddy Ezeala is a communication and development specialist who has worked for reputable international relief and development agencies. He was West Africa Regional Communication and Campaigns Coordinator for Oxfam and also Africa Communications Officer of World Wide Fund for Nature (WWF). He has also contributed immensely to Pension Funds Administration in Nigeria, having worked at First Guarantee Pension Limited (FGPL) and also Premium Pension Limited (PPL) head of Corporate Communications and later The Regional Manager, South East.

A chattered management consultant and Fellow of the Institute of Management Consultants, In this interview with Modestus Anaesoronye bares his mind on the workings of the Contributory Pension Scheme (CPS) in Nigeria.

You recently left the Pension industry after close to a decade, how do you feel being part of this industry and the level of transformation that has taken place within the past 15 years?

I’m in a good position to comment on this having been a pioneer staff, so to speak. I joined First Guarantee Pension Limited in 2006. I witnessed all the teething challenges in the industry and can now say that the transformation and growth in the industry has been tremendous. From the quality of personnel to the application of cutting-edge technology in the rendition of service, it has been steady growth ever since. I am one of those who believe that the Contributory Pension Scheme (CPS) remains one of the best policies, if not the best, that has come from the Federal Government since the return to democratic governance since 1999. I am very proud to have been part of it.

When you look back, what is your biggest regret that you wished hadn’t happened or could have been done in a better way in the pension industry?

My life doesn’t have space for regrets. However, looking at the industry as a whole, three things that are intertwined evidently could have been better. The first is that the level of public awareness of the modus operandi, requirements and potential of the industry is still below par. This is not just at the level of the uneducated. Even the lettered and powerful are still struggling to come to terms with what the industry is all about. The second is the level of compliance. The Federal Government through the regulatory agency has yet to wield the big stick. The time for moral suasion should have been over. Pension is in the interest of the individual worker as well as the Government and society. It is as important as tax payment and should receive equal attention. There is no doubt that many corporate bodies in Nigeria are out of the loop of the Contributory Pension Scheme. Nigeria’s working population is about 100 million. Even when we know that more than 40 percent of this population is either unemployed or under employed, market penetration in the pension industry is still hovering around 10 percent. I don’t know whether this can be said to be impressive. This dovetails into the third issue which is funds under management. Pension Assets under Management in Nigeria should be higher than what it is right now.

What is the implication of this?

Great economies are usually those with huge financial backbone. The CPS has the potential to provide the necessary financial cushion in our drive to build a solid and diversified economy beginning with addressing our infrastructural deficiencies. From a deficit of more than two trillion naira in the old Defined Benefit Scheme before 2004, the CPS currently has more than 9 trillion naira in Assets under Management (AuM) even when a greater percentage of this is illiquid as about 70 percent of the pension funds are in FGN Bonds, Treasury Bills, State Government Securities and other asset classes. In other words, less than 10 percent of Nigerian workers in the formal and informal sectors of the economy that enrolled in the CPS have been able to contribute such huge sum. This explains the great potential and immense possibilities of the industry unpacks. But is this sum really reflective of the size of our economy? The answer, I’m afraid, is in the negative. In South Africa, the pension assets is about R4 trillion which is about $300 billion while Nigeria’s is about $25 billion. With that figure, South Africa has the 8th biggest pension pot in the world. There is no doubt, pension wise, that South Africa punches far above its weight. But the truth remains that huge pension funds guarantees the good life for workers during retirement, mainstreams the industry in the socio-economic dynamics of a country and cushions the economy.

There is every reason for the various tiers of Government to take the CPS seriously. It is a contradiction that we are pursuing a GDP of $600 billion while have total pension Assets under Management of $25 billion after 15 years of contribution. We all have to put hands together for a more aggressive drive and compliance enforcement.

Today one of the major challenges facing the industry is non remittance by many private sector employers; what do you think that can be done?

This is in line with what we have been discussing. Compliance is not just about enrolment or registration (opening a Retirement Savings Account and having a PIN Number). It is more about remittances. The private sector in Nigeria largely has not demonstrated much enthusiasm with regard to the Contributory Pension Scheme. Some of the private sector employers of labour who have attempted to comply did so because it is a prerequisite to render service to or execute contract for Government. More of such stringent rules are required even in the area of monitoring remittances. The hammer must begin to fall on those who have refused to comply.

You should also know that it is not only the private sector that is guilty of non-remittances. Recently, the director-general of the National Pension Commission,  Aisha Dahir- Umar accused State Governments of withholding up to N3.40 billion already deducted from state employees. This is unfair because it, among other setbacks denies the contributing employees the investment income that should have accrued to them. There must be severe sanctions for non-compliance of any form.

How has the Nigerian labour benefited from this scheme, looking at where we are coming from?

The condition of retirees across board under the former Defined Benefit Scheme was quite pathetic. It was obvious that such a scheme was unsustainable. The more the responsibilities of government expanded, the more it became difficult to offset pension liabilities. It even seemed as if pension was the last thing government thought of in the event of liquidity squeeze. Corruption, analogue documentation and excessive bureaucracy worsened matters. The aged were dying off, even in queues during verification. The various tiers of government practically proved incapable of handling the situation.But nowadays, the situation has changed to a great extent. There is a fiduciary relationship between the PFAs and clients. You know who to report to and hold accountable if you are not satisfied with service rendered. Unfortunately, the Government has not been forthcoming with regard to prompt payment of accrued rights. This causes undue delay in payment of entitlements and the blame unfortunately is heaped at the doorsteps of the operators of the CPS. Pension should not be treated as favour being done to workers. It is their entitlement.

Recent reports on registered contributors show that more men are enrolled than women, what is the implication of this on their social welfare?

This is not in any way indicative of gender bias in the pension industry. It only goes to show that there are more men in the formal sector than women. When I was working at Oxfam, research showed that 80 percent of all the food consumed in West Africa is produced by small-holder farmers and that 80 percent of these small-holder farmers are women. So, naturally if the pension industry enlists rural farmers and petty traders, there would be more women in the loop. Oxfam recently ranked Nigeria very low in gender equity. Something should be done about it. Economic and social exclusion of any kind impacts negatively on social welfare.

What is your expectation on the micro pension scheme, and what do you think operators and the regulator should do to improve uptake and contributor interest?

 The micro pension scheme is expected to address to a great extent the gaps we have identified in the industry with regard to market penetration. 12 million accounts are targeted in the scheme. In my own personal view, however, a long runway is needed before take-off of the scheme. There should be for a national campaign and sensitisation on the immense benefits of the scheme. Even a longer runway would be needed to maximise the potential of the scheme after commencement considering the current economic headwinds. This however does not take anything away from the good intentions, great potential and, in fact, imperative of the scheme.

Where is Paddy Ezeala going after now?

Presently, you will get to know. Meanwhile I stepped sideways to my former employers, the Nigerian conservation Foundation (NCF) where I currently act as South East Outreach and Communication Adviser. It is the primary organisation, alongside its international associate, the World Wide Fund for Nature (WWF) that propelled me. I have the mandate within this short period to deepen the impact of the organisation in the South East and South-South. You know I am a stakeholder in the organisation and also a life fellow.  But something great would be happening very soon.