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Micro-pension Scheme will Deepen Asset Accumulation in Nigeria–Stanbic IBTC Pension Managers

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Micro-pension Scheme will Deepen Asset Accumulation in Nigeria--Stanbic IBTC Pension Managers

By Dipo Olowookere

Managing Director of Stanbic IBTC Pension Managers Limited, Mr Eric Fajemisin, has backed measures taken by the National Pension Commission (PENCOM) to sustain growth of the Nigerian pension industry.

According to him, micro pension scheme, multi-fund investment structure and Pension account transfer window, to mention but a few, are among initiatives capable of putting the sector in stronger footing going forward.

Stanbic IBTC Pension Managers Limited is the biggest pension fund administrator (PFA) in the country.

From Sunday, July 1, 2018, the new multi-fund structure announced by the industry regulator would become operational.

Speaking at a media interactive session in Lagos on Monday, May 28, 2018, Mr Fajemisin said such reforms and innovations are necessary to maintain the strength and depth of Nigeria’s Contributory Pension Scheme (CPS).

Mr Fajemisin noted that the Retirement Savings Account (RSA) Multi-Fund Investment structure, which replaces the “one-size-fits-all” arrangement that puts all active contributors into one RSA Fund, would resolve the challenge of asset-liability risk management faced by the operators.

According to him, the micro-pension scheme will help in deepening asset accumulation in the country, and provide the crucial capital required for investment in critical sectors of the economy.

As an initiative designed to cover an estimated 70 percent of Nigeria’s working population in the informal sector, the scheme offers enormous benefits to the society and ensure improved standard of living for the elderly, guarantee the safety of funds and may provide access to other incentives, such as mortgage facilities and health insurance., regardless of challenges associated with its seamless implementation.

By aligning the age and risk profile of RSA holders to match the four funds, contributors would have a better chance to earn improved returns on their investments in proportion to their risk appetites.

The different categories of the multi-funds structure are Fund 1, Fund 2, Fund 3 and Fund 4. Fund I is targeted at people of 49 years and below who in the quest for higher returns are willing to take more risks. Fund 2 is aimed at people who are aged 49 years and below and still working but are satisfied with moderate returns and levels of risks. Fund 3 targets people 50 years and above but still working and have very low risk appetite. In Fund 4 are retirees who have the lowest risk profile of all categories.

Among its other benefits include improved standard of living for the elderly, safety of funds and access to other incentives, such as mortgage facilities and health insurance. In addition are flexible contribution remittances, the opportunity to make withdrawal prior to retirement and the enhancement of financial inclusion in the country.

On the proposed pension transfer window, which allows a RSA holder to switch PFA once a year, the Stanbic IBTC Pension helmsman said it would deepen the democratic space in the pension industry as well as encourage healthy competition, resulting in further transparency and accountability, which would in turn enhance efficiency, innovation and service delivery.

Mr Fajemisin also reviewed the 2014 Pension Reform Act and the impact on the CPS. On the enabling law, he said the introduction of more stringent penalties for erring operators and directors, especially as it relates to mismanagement of funds, has engendered greater corporate governance, making it almost impossible to misapply pension funds by anyone.

By increasing the contributions of the employer and employee to 10 and 8 percent respectively, Mr Fajemisin said the Act has ensured the availability of more benefits to contributors at retirement. In addition, the Act makes the non-remittance of employees’ contribution by the employer an offence which the regulator can prosecute in court.

Amongst its provisions, which expanded its coverage, private sector organizations with just three employees or more are required to register under the scheme; while the law also compels an employer to open a Temporary Retirement Savings Account (TRSA) on behalf of an employee that fails to open a Retirement Savings Account within three months of being employed.

The PFA’s Head of Business Development, Mrs Nike Bajomo, said the company is already reaching out to its over 1.6 million RSA holders nationwide to create awareness about commencement of the multi-fund structure with effect from July 1, 2018. She said the PFA will continue to engage various stakeholders on developments in the industry to ensure the provisions of the CPS are fully harnessed to the benefit of all. Such platforms as the employers’ forum, preretirement seminars, among other initiatives Stanbic IBTC Pensions organises yearly, are fashioned to ensure regular engagement and to drive awareness.

Backed by the experience and expertise of Stanbic IBTC Group, a member of the over 155-year-old Standard Bank Group Mrs Bajomo said the PFA will not relent in providing excellent services to its RSA holders and Nigerians. Stanbic IBTC Pension Managers Limited, she said, has over 1.6 million RSA holders nationwide, with assets under management in excess of N2 trillion. It pays approximately N1.3 billion to over 37,000 retirees monthly and over N279 billion has been paid to retirees since the PFA commenced operations in 2006, Bajomo added.

Stanbic IBTC Pension Managers Limited is a subsidiary of Stanbic IBTC Holdings, a member of Standard Bank Group, a full service financial services group with a clear focus on three main business pillars – Corporate and Investment Banking, Personal and Business Banking and Wealth Management. Standard Bank Group is the largest African financial institution by assets. It is rooted in Africa with strategic representation in 20 countries on the African continent. Standard Bank has been in operation for over 155 years and is focused on building first-class, on-the-ground financial services institutions in chosen countries in Africa; and connecting selected emerging markets to Africa by applying sector expertise, particularly in natural resources, power and infrastructure.

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan. Mr Olowookere can be reached via dipo.olowookere@businesspost.ng

Economy

House of Reps Tells CBN to Suspend New Cash Withdrawal Limits

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House of Reps Tells CBN to Suspend New Cash Withdrawal Limits

By Modupe Gbadeyanka

The Governor of the Central Bank of Nigeria (CBN), Mr Godwin Emefiele, has been told to immediately suspend the new limits placed on the withdrawal of cash from over-the-counter (OTC), Automated Teller Machines (ATMs) and Point of Sales (POS).

On Tuesday, the central bank said from January 9, 2023, any cash withdrawal above N100,000 for individuals would attract a 5 per cent processing fee and a 10 per cent processing fee for withdrawals of more than N500,000 for corporate organisations.

This policy is already generating mixed reactions, with POS operators saying it would push them into the unemployment market because of the loss of jobs and the Nigeria Employers’ Consultative Association (NECA) saying stakeholders were not “extensively consulted” by the CBN before its announcement.

At the plenary on Thursday, a lawmaker, Mr Aliyu Magaji, who moved a motion of urgent public importance, warned that the new policy could spell doom for the economy as several people would lose their jobs, while traders, artisans and rural dwellers would suffer because of the cash limits.

His colleagues agreed with him and criticised the apex bank for the policy.

Though the Minority Leader, Mr Ndudi Elumelu, pointed out that the new cash withdrawal limits would check crimes as funds would now be tracked through the banking system, he emphasised that the timing was wrong.

The other legislators echoed this opinion and added that it would have serious consequences and adverse effects on businesses and Nigerians who have no access to the banking system.

As a result, they asked Mr Emefiele to roll back the policy, summoning him to appear before them on Thursday, December 15, 2022, to explain the policy and why it should not be rejected.

Incidentally, the day he is to appear next week is the same day the CBN plans to officially introduce the newly redesigned N200, N500, and N1,000 banknotes into circulation.

The Naira was redesigned by the apex bank to control the volume of cash in the financial system after it was discovered that more than 80 per cent of cash in circulation was not in the banks’ vaults.

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Economy

New Cash Withdrawal Policy Was Without Extensive Consultation—NECA

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Nigeria Employers’ Consultative Association NECA

By Modupe Gbadeyanka

The Nigeria Employers’ Consultative Association (NECA) has accused the Central Bank of Nigeria (CBN) of not consulting with stakeholders extensively before coming up with the new cash withdrawal policy expected to take effect from January 9, 2023.

In the new directive, the CBN said the maximum cash that can be withdrawn from banks is N100,000 per week for individuals and N500,000 for corporate organisations. Also, customers would not be able to withdraw more than N100,000 from the Point of Sale (PoS) machines and Automated Teller Machines (ATMs) and N20,000 per day. It further said the highest Naira note to be loaded in ATMs is N200.

However, withdrawals above the cash limits via over-the-counter, according to the directive of the apex bank, would attract 5 per cent for individuals and 10 per cent for companies.

Commenting on the new development, the Director-General of NECA, Mr Wale-Smatt Oyerinde, emphasised that the livelihood of many individuals and enterprise sustainability would be impacted.

“As usual with the CBN, the bank announced a new naira withdrawal policy without extensive consultation with organized businesses and those that will be directly impacted by the policy.

“This new policy is diversionary and a mere distraction from the critical issues that are affecting the nation,” Mr Oyerinde stated.

Speaking further, he said, “While it is desirable to get all bankable individuals and businesses into the banking system and promote the cashless policy of the CBN, the timing without adequate preparation and sensitization of the critical mass that drives the economy (the SMEs and MSMEs) could prove counter-productive and further drive many below the poverty line.

“This is another classical example of the inconsistencies and misalignments between the fiscal and monetary policies of the government.

“It is absurd to blatantly set traps of processing fees for individuals and businesses who desire to withdraw their hard-earned money from the bank for legitimate and genuine business transactions.

“It is also important to note that the banking infrastructure and mobile/digital facility to drive the cashless policy are not sufficiently developed. This is not only draconian but also inhuman.

“We urge the CBN and, indeed, the federal government to replicate the energy and promptness used in implementing this policy to address the issues of dwindling value of the Naira, rising inflation, oil theft, ballooning foreign debt, and get millions out of poverty realm.”

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Economy

SEC Plans to Boost Value of Shariah-Compliant Products to N5trn by 2025

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non-interest capital market Shariah-compliant products

By Aduragbemi Omiyale

The Securities and Exchange Commission (SEC) has said it plans to expand the size of the Shariah-compliant products in the non-interest capital market in Nigeria to at least N5 trillion by 2025.

The Director-General of SEC, Mr Lamido Yuguda, said the revised edition of the Capital Market Master Plan (2021 – 2025), which was launched recently, has mapped out ways to achieve this goal.

Speaking at the opening of a three-day capacity-building workshop for local Shariah talent for non-interest capital market held at the SEC head office in Abuja on Wednesday, Mr Yuguda said this could be achieved through the listing of at least 50 Shariah-compliant products.

The DG, who was represented by the SEC’s Executive Commissioner Operations, Mr Dayo Obisan, said that the Non-Interest Capital Market (NICM) also plans to ensure 100 retail Shariah-compliant products and attract about 1 million direct investors in the ecosystem.

Mr Yuguda noted that with these new responsibilities, promoting capacity-building programmes, such as the workshop, on Shariah-compliant processes and products (Regulators and Operators) has become necessary for the NCIM.

He said the commission, in recognising the potential of the non-interest capital market for economic growth, dedicated a component in its 10-year policy to the speedy development of the market in the financial system.

Specifically, Mr Yuguda said the plan provides clear strategic objectives for the development of the market, one of which is the “encouragement of the development of stakeholders for the market” and today’s workshop is evidence of the realization of this particular objective.

The stride and significant achievements recorded by the policy, he said, are evidenced by the last ranking of Nigerian Islamic Finance in 13th place on the global Islamic Finance Development Indicator 2021, with the assets under management valued at N2.30 billion, which is higher than countries like Bangladesh and Turkey.

“As you may be aware, the major difference between conventional finance and non-interest finance is the application of Shariah principles. This simply means that a non-interest financial market cannot exist without experts in Islamic commercial jurisprudence (FiqhulMu’amalat Al-Maliyya).

“Therefore, this Workshop will help in fast-tracking the development of experts for the Market. We believe that it would be a magic lamp for developing our local Sharia talent, not only for the Nigerian capital market but for the Nigerian financial system in general.

“The level of activities in the non-interest capital market that we are currently experiencing in Nigeria affirms the overwhelming acceptance of NICM products by the country’s populace. This shows a strong appetite for other alternative forms of investments.

“Recently, the market witnessed the entrance of institutions offering non-interest capital market services/products and the oversubscription of the FGN and corporate Sukuk, further buttresses the need for this workshop to encourage the development of Shariah experts for the market.”

The DG said the workshop is aimed at exposing participants who have the potential to provide Shariah advisory services for the Islamic finance industry, particularly the non-interest capital market’s operations as it relates to Shariah principles and rulings. It is also planned to be in two levels, Level 1 and 2.

He stated that Level 1, is focused on the basic areas of financial market structure and operations of the capital market, Shariah principles and contracts relating to non-interest capital markets, as well as Shariah issues relating to the operations and businesses of the market, among others while level-2 which will address the operation of the Sukuk and equity markets.

The SEC boss said NICM has so much potential in the country by attracting an untapped investor base who appears indifferent to conventional instruments to participate in the capital market as well as the existing investors to diversify to ethical and socially responsible investments.

“We believe that developing Shariah talent through a Workshop like this is another opportunity of creating awareness for the non-interest capital market products and services, which in turn will facilitate the financial inclusion drive in the Nigerian Financial System.

“I am happy to note that the commission recently exposed registration rules to set a minimum standard for corporate or individuals seeking to provide Shariah advisory services for non-interest capital market activities. This is to encourage further and attract the attention of qualified persons and entities to engage in the Shariah advisory function for the non-interest capital market.”

Mr Yuguda expressed the confidence that the participants will benefit from the vast knowledge and experience of the facilitators, which will bring about a much-needed impact on the participants and the market in general.

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