Nigeria In One Minute

Economic downturn: Pension industry to the rescue

By Joseph Edgar. . .

My good friend Gbubemi Atiomo is usually very pensive. Not used to chicanery and hardly impressed. I have known him for a while and kind of respect his approach especially his love for FAPE. FAPE for the uninitiated is a mixed grill made up of yogurt and assorted fruits. For Gbubemi it is a brew for weight loss, for me, it is a brew to save money for its ingredients drive away hunger for most of the day.

You may ask me why all this talk about Gbubemi and how does it relate to what I am trying to say in this article, well the answer is no relevance. It is as scatter brained as the current economic policies being initiated by the government to tackle the immense collapse of our economy.

What has Gbubemi’s love for FAPE got to do with my desire to push very forcefully my thoughts on how to battle this economic apocalypse that is facing us and threatening to destroy the future of our children. My people nothing. That is how I see the present predisposition of the government to handcuff people and allow them grow white beards in jail when the economy is unraveling like a car that just lost its brakes.

We are happy to announce 55 looters of the economy, those who stole billions of dollars in the arms scandal when the very pressing need to halt the decline of the economy is staring us menacingly in the face. Suddenly we are staring at the face of a runaway locomotive train with no plans to either halt its impending devastation, or at worst jump out of its marauding way.

But wait, I have suddenly found Gbubemi’s use in this article. He has just recommended that I read Fasholas recent speech. The one he gave at the pensions summit. As I read through it, I see a probable solution to this problem of the value of the Naira, the loss in revenue due to the drop in oil prices and the crash of the stock market amongst other economic malaise.

Due to the pension reforms of the Obasanjo administration, we now have a robust pension pool of funds. I hear the total value of the contributory scheme is now in excess of N3 trillion and growing. The next question is why these funds can’t be immediately deployed to regenerative sectors of the economy. They could be used to reflate the economy by deploying it into revenue generating infrastructure that would now attract private sector participation.

Of what use is the collection of these funds and its investment in now morbid and archaic asset allocation. This asset allocation which I hear regulates their investments no longer bares any relevance to its stakeholders. That 20% be invested in a bleeding stock exchange is a morbid joke. Pension managers now avoid the stock exchange like the plague and only just place the funds in banks at ridiculous rates. So the contributors are suffering, the fund managers are suffering and the economy generally is choking for funds while these huge funds are being kept within an inefficient system that makes these hapless fund managers demi gods.

The government is planning to fund the deficit with more external borrowings which will in turn lead to more devaluation whether we like it or not and throw future generations into servitude. All the more painful because Obasanjo and my queen Ngozi Okonjo Iweala just took us out of. Why can’t we look at this Pension funds and take this gamble.

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We can deploy the funds very carefully into the real sector. To build roads that will be tolled to ensure veritable cash flow and returns for the pension funds. These roads will lead to the reduction on the costs of evacuation of raw materials and agricultural produces thereby creating jobs and reducing the import dependencies of our very big industries and saving forex.

These funds can be used to buy major stakes in strategic large industrial complex with strong return profile and internationally supervised corporate governance. The long term profile of the funds under their management can put them in a position to bite major stakes in firms like Dangote cement, MTN, Shoprite and the rest thereby giving them the much needed liquidity to do real business and indirectly also pumping up the stock exchange and creating liquidity there too.

The pension fund should stop their flirty games of just placing funds in banks run by their friends who will In turn take the funds into the interbank and circulate it without letting it seep to the real sector where the funds are much needed. See Innoson Motors who claimed to build the first Nigerian car is dying. I hear 50% of their staff are being laid off due to lack of support from all stakeholders. You can just imagine the stress they have to go through with their bankers who do not even have the long term liquidity needed for such intervention when we have pension funds sitting on 30 year money and doing nothing with it.

The Pension Fund managers are the new engine of growth and the Pencom who is their regulator should step up to the plate and take another look at their regulations as it affects the deployment of these funds. This is not the time to sit on the fence and speak English but to jump into the fray and release at least 40% of these monies to provide liquidity to enterprises with the capacity to employ Nigerians, build infrastructure and provide power while also looking for international partnerships in bringing in joint ventures.

Fashola said as much and I am echoing it, together with Gbubemi who is still drinking his FAPE and screaming that I am making sense.

The time is now and I really plead with the government to look at reforming that sector for they have the veritable platform to mobilize funds internally thereby reducing the need for external borrowings to a manageable level while also becoming a better partner than the banks as economic agents of growth. Please look at Brazil, Chile and maybe India as small examples.

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