Nigeria : Financial institution urges policymakers to prioritise growth of CPS
- 14 April 2022 / News / 203 / Fares RAHAHLIA
Absa, a pan-African bank, has advised policymakers to prioritise the growth of the contributory pension scheme (CPS) amongst others to ensure the sector maintains a healthy growth trajectory.
The banking group, which operates two licensed subsidiaries, Absa Capital Markets Nigeria Limited and Absa Securities Nigeria Limited, said it is important to improve the business of pension in the domestic market.
The Country Head of Equities and Fixed Income Sales, Simi Ojumu, said the pension industry has maintained an impressive growth since the enactment of the Pension Reform Act (PRA) of 2004, which made it mandatory for an employer with more than five employees to make consistent contributions to the workers’ pension fund.
She said: “The CPS, through the multiple operators and agencies, the pension fund administrators (PFAs), pension fund custodians (PFCs), closed pension fund administrators (CPFAs) and the regulator, the National Pension Commission (PenCom), has created an ecosystem of career path, employment, business and investment opportunities for several Nigerians.”
Citing recent reports, she explained that the robust policy intervention in the pension sector has led to a jump in Nigeria’s net asset value pension assets from a deficit position two decades ago to N13.6 trillion valuations in 2022, while scaling the sector’s overall contribution to the GDP from 0.9 per cent in 2004 to nine per cent in the current year.
She admitted that the CPS continues to face some challenges despite the recent growth.
According to him, low coverage, inadequate awareness of the scheme’s benefits and the inability to ensure strict compliance by the parties are some of the issues that are still plaguing the sector.
“The most important thing would be to ensure the sustainability of the contributory pension scheme. Ensuring participant compliance by the federal, state governments and the private sector, creating awareness of the benefits, and creating an investor-friendly environment are some of the ways that policymakers can ensure that the pension sector continues to thrive and improve its contributions to the country’s GDP,” Ojumu said.
She pointed out that the recent case of mergers and acquisitions (M&A) by pension fund administrators to recapitalise is a sign of growth in the industry, noting that new entities that are emerging from the merger and acquisition framework will have more resources at their disposal.
However, she cautioned that a smooth transition within the M&A framework is necessary to ensure that the recapitalisation efforts do not harm the contributors’ assets.
“Smooth transitions are also largely dependent on the investment bank that facilitates the reorganisation and, in this case, the mergers and acquisition. This is one of the core services of Absa Group in Nigeria. At Absa Nigeria, we have proven expertise to manage mergers and acquisitions to ensure a smooth transition of the new company.
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