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Pension Funds and Economic Development

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Chairman of the Pension Fund Operators Association of Nigeria, Mr. Misbahu Yola, recently said the pension assets under the Contributory Pension Scheme should be invested in projects targeted at economic development. He said this after a meeting on developments in the pension industry with operators in Lagos.

According to him, “the ideal thing is to use the pool of funds for economic development but it has to be done in a safe manner where people’s assets are protected and we have no objection to that,” he said.

As at the end of 2014 financial period, the pension assets managed by the Pension Fund Administrators and Pension Fund Custodians had risen to N4.6tn. He said that presently, more than half of the funds had been invested in Federal Government of Nigeria’s bonds which were developmental bonds. All the investment, he added were the right investment instruments with appropriate checks and balances to guide and regulate them.

According to him, there have to be certain safety criteria before the funds could be invested because the money does not belong to the general public but belongs to only the contributors.

He assured that despite the lull in the economic and challenges visible, the pension assets had remained safe and well protected because the operators have not lost any money.

Presently, he said the operators were working on a frame work to bring the informal sector into the scheme because there is an obvious gap between workers working in Nigeria and those that the operators had registered under the CPS.

We only need a framework that will enhance identity, and be able to educate the artisans so that they would understand pension as opposed to savings, which would enable them to appreciate the essence of saving for retirement.

Yola also said there was also process of introducing the minimum pension guarantee which aims to guarantee minimum pension for retirees.

He however said it requires funding because the law has said that it will be funded by the government, PenCom and operators but that, the specific ratio of funding had not yet been worked on for the operators.

Going forward, the pension fund should be invested in areas that will bring about great and positive multiplier effects to the generality of Nigerians. This will do well in infrastructure which will lead people to do more and generate more which will bring about the needed shift for the growth and development of Nigeria.

Such will be that will reduce inequality, unemployment, poverty and external dependence of the nation. A situation where Nigeria is an import-depdendent country cannot do the people any good. This is because any vagaries in the global environment will have an impact on the country.

The drop in the international price of oil has brought the economy of the country to all time low as the nation’s currency, the naira has lost more than 30 per cent of its value. Not long ago, naira was exchanging for the US Dollars at N160 but now in the free market, it is exchanging for N210 and in some areas even more. It is however strongly believed that if the Nigerian economy is not import-dependent, the present pressure on the naira will be reduced and it would not have lost more than 30 per cent of its value.

Since pension fund is not ordinary saving, the government can tap into it, especially because of its long-term nature to invest in critical infrastructure that will elad to the growth and development of the Nigerian economy long-term.

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