NAVIGATING SUCCESSFULLY IN A CHALLENGING ECONOMIC ENVIRONMENT
Our Board of Trustees, The Governing Council distinguished Colleagues, Members of the press, Ladies and Gentlemen. It is with great pleasure that I welcome you to the 4th Annual General Meeting of the Members of The Pension Fund Operators Association Of Nigeria.
SOCIO-POLITICAL REVIEW OF 2015 AND ITS FORWARD IMPACT
Coming off what could be considered broadly as conclusive general elections, the attention of the Nigerian populace quickly turned to the much desired (and voted for) change in direction of governance that the newly elected Government of President Muhammadu Buhari (PMB) had promised to deliver.
In the one year (+) period in which the Government assumed the reins of power, there have been much gains in curbing the security threat posed by insurgents in the North East of the Country, and a lot of activity has been centred around improving the ‘moral index’ of the Nigerian society. However, the Government has faced significant challenges on the economic front.
Crude oil – Nigeria’s economic mainstay, traded largely at sub US$40pb until April/May 2016 when it exceeded momentarily, the US$50pb mark. This, however, hardly benefited Nigeria with the renewed activity of Niger Delta militants contributing to shut-ins of oil production which translated to spiked global oil prices.
The expectation of low crude oil prices informed the decision of the Government to presage the 2016 budget on a crude oil price of US$38pb with projected output of 2.2mbpd. With the shut-ins referred to above, Nigeria’s oil output has hovered around 1.4mbpd. The consequences of this to Government revenue targets in an already stretched financial situation, need not be unduly emphasized.
The approval of the 2016 Budget and the passage of the Appropriation bill into law became mired in unprecedented controversy, stalling the take-off of the plans of the Government contained in the N6.07trillion expansionary Budget focused largely on infrastructure development and social spending.
While the Central Bank of Nigeria’s administrative approach to exchange rate management subsisted for approximately 13 months in the life of the new administration; seeing the official exchange rate remain at N197:US$1 during this period, the unofficial exchange rate by which the larger part of the economy functions, depreciated by approximately 70% from N217:US$1 when the Government took over at the end of May 2015, to as high as N370:US$1 by mid-June 2016. This has informed the CBN’s newly introduced approach to managing the exchange rate of the Nation’s currency which will be market driven. This has brought palpable relief to many private sector operators.
The inflation rate crept up from 9.00% to 15.6%, which is the latest number released for May 2016 by National Bureau of Statistics (NBS). This comes as no surprise given the high incidence of the translation of imported inflation as well as the reflection of the spike in the price of the ‘live- wire’ premium motor spirit (pms), which the Government has also had to do a volte-face on as well.
Although the Government at the centre has made important strides at stemming leakages and tracking the inflow of government revenue with the implementation of the Treasury Single Account (TSA), the debilitating impact of the drastic reduction in government spending on businesses across all sectors of the economy is evidenced in the 0.36% contraction in the GDP recorded in Q1, 2016.
The Governments across the Country at the National and sub-national levels could be said to be only just coming to terms with the stark realities of the governance challenge as supply of critical social goods and services remain imbalanced but widely acknowledged and dimensioned.
Urgent action is called for on their part, especially the Federal Government which now has an approved budget of N6.07trillion to implement.
THE NIGERIAN PENSION INDUSTRY
Amidst the dire economic challenges, aggregate pension assets under the CPS grew by 15% from N4.61trillion as at end of December 2014 to N5.3trillion as at the end of December 2015.
Compliance with regard to remittances of pension contributions from the Public Sector on both the Federal and State levels have lagged notably. While remittances from the Federal Government through the National Pension Commission (Pencom) were last received for September 2015, some states have outstanding remittances dating back over two years.
Private sector remittances, though impacted by the adverse economic environment, have been more consistent.
In January 2016, the Industry leaders assembled to deliberate on desirable strategies to consolidate the gains the industry had made to date and to evolve new thoughts on how to grow the industry and make a greater impact on the society which essentially serves as its base. Key decisions and action steps were agreed upon setting an agenda for the next 8 years – up to 2024. The highlights of these agreements revolve around the following headers:
Expanded and inclusive coverage
Excellence In Service Delivery
Low Cost & Efficient Industry
Positive Real Return & Visible Impact
Improvement in industry skill sets
direction of the set vision.
teams have set to work on these themes and momentum is developing daily in the
PENSION FUNDS & DEVELOPMENTAL INVESTING
It is important for me to say a few words on the above subject, given its topical nature these days in our Country where a longing for transformation is palpable.
It is my belief that as a people we have to learn to EFFECTIVELY dream big dreams. The transformation has got to start from our mindset. To do this, clear thinking, sincerity of purpose, selflessness, honesty and productive use of time and resources need to be emblazoned on the minds of all the ‘influencers’ in society. We need to rekindle our sense of self-esteem, pride in what is ours – (our Nation) and a keen desire to become globally competitive. All of these constitute the inner preparation process.
Then comes the engagement with the external stimuli; the transition to execution. It is well understood that we currently are in a situation of financial stringency. However, we are not altogether deficient. Our oil still sells, we still enjoy a comparatively higher state of peace than many parts of the world. Our Land is still fruitful. Judicious deployment of resources and an understanding of the concept and value of sequencing is what may be most required to see us rise as a people again.
This preamble relates to the call to invest a greater portion of the pension funds in infrastructure in the simple way that they both; National Renaissance and Infrastructure investing require clear, calm, incisive and strategic thinking to achieve any notable success in their pursuit; hence the need to succeed in the ‘inner’ preparation process first.
With N5.3trillion, grown over an 11-year period, careless deployment could wipe these gains out in an instant. On the contrary, if looked at as a constituent part of National Economic Strategy, the focus will switch to how we can support the industry to grow beyond N20trillion describing broader coverage so that a National savings pool, effectively utilized, will always be available to kick-start properly conceived, internally consistent, National development initiatives.
This is the conversation I believe the pension industry needs to be afforded with government and governance at all levels in our dear Nation. We need to elevate the quality of the discourse.
CODE OF CONDUCT OF PENSION OPERATORS
One of the major areas of focus the PenOp Exco, which I am most privileged to serve on, set itself to in October 2015, is a Code of Conduct among operators.
A draft of is to be presented for review and feedback at this meeting. I am very passionate about this document. Passionate because I believe that we have to maintain a high standard of professionalism in our conduct as individuals and within organisations to etch ever stronger the Oasis of Sanity this industry has come to be in the Nigerian Financial Services landscape.
Unprofessional and unfair competitive practices should really have no place in the pension industry. As leaders, it is important that we take a firm stance on this.
It is also very important that we foster unity amongst ourselves as operators. That we imbibe the discipline of speaking with one voice. Healthy, honest and open debate is important. But once positions are agreed, it is my opinion that they should be binding. This applies likewise to payment of dues by all operators. An effective association can only work for good and progress for all operators. No criticism should be considered too scathing to absorb or give if it leads to overall ‘process improvement’.
THE COMMITTEES & THE EFFECTIVE FUNCTIONING OF THE SECRETARIAT
The Committees of PenOp are essentially the limbs of the association. It is important that members of individual Committees contribute actively to delivering on the tasks of Committees on which they serve. Where the CEO has schedule pressures, he/she should cultivate the practice of nominating an alternate to attend to Committee matters.
In this same vein, the Exco having received the approval of the General Meeting, has commenced the process of improving the internal control processes of the PenOp Secretariat and recruiting a Head of Research that will expand its technical capabilities. All this is being executed with a clear sight to adhere to budget prescriptions.
APPOINTMENT OF TRUSTEES
Nominations have been circulated for deliberation at this meeting. It is important that the Association selects the right Trustees in order to be able to broadly engage in areas of significance to operators and the industry in general.
I would like to thank my colleagues on the Exco for their consistent commitment and selfless contributions to tackling salient industry issues. To all members for being responsive with paying their dues and providing support and honest feedback when called to. A depth of gratitude is owed our Regulator – Pencom – for keeping a steady hand in piloting the development of the pension industry. I thank all the 7million (+) contributors for providing us the opportunity to be of service to them and our Nation. I would also like to thank the Legal and Accounting professionals who support us as Company Secretary and External Auditors. To the Governments – National and sub-national, we pray for God’s guidance for you as you lead us all in the quest for the place that we know is ours globally. We stand in partnership with you to bring our long-yearned for dreams to reality.
I wish everyone a safe journey back to their various destinations.
EGUAREKHIDE J. LONGE PRESIDENT
24TH JUNE 2016