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Mr Dave Uduanu is the President, Pension Fund Operators Association (Penop). In this interview, he speaks on the recently concluded recapitalisation exercise in the Nigeria Pension industry among many other issues. Excerpts:
PENCOM has released the list of recapitalised PFAs, what is your comment?
PenCom has completed the first phase of the exercise, they have said that it will be two phases, and the first phase was to publish the number of PFAs in principle that met the new minimum capital requirement and that number is 18. Now, what they are also saying is that they are going to do verification of other PFAs.
It is a throwback to the banking recapitalisation days when NDIC used to do verification of capital to ensure the authenticity. It is just really measure against money laundering, nothing significant. So we don’t expect that number to change. I will say that as at today, we have 18 PFAs, and we don’t expect that number to reduce because we believe that a lot of the PFAs are owned by corporate institutions. The test is not whether money came in, it is just to ensure that there is no issue of money laundering.
It was seamless and there is nothing to worry about. Some PFAs were bought over by others and there were two PFAs that were adjudged not to have met the minimum capital base and were not bought over by anybody; and after 28 days, if nothing happens, their licence will be revoked. The law stipulates that every PFA must be given 28 days of notice from PenCom to revoke the licence.
We believe that by the end of August, that 18 will become a conclusive list; that will draw a curtain on consolidation exercise.
Does the outcome represent the true expectation of your members in terms of the numbers that will be able to drive the sector?
The number before now was 27, now we have 18. Consolidation happens in phases; while a number of people were expecting 10 PFAs, some people were expecting 15 PFAs. Remember, the pension industry is a bit different from banking. I don’t think we were expecting anything significantly lower. You need a certain number of pension fund administrators to go round the country, doing registration, canvassing for new members because this is pension, it is not banking. Secondly, the consolidation will take it natural course.
The industry is certified already, there will be merger and acquisition over the next two years, but they will not be induced by regulation, they will be induced by competition. People will decide that rather than being alone, let me come together with two other PFAs so that we can be stronger and bigger. Remember also that in the pension industry, one should cross a certain number of assets under management before one can run a fair decent business which depends on the ambition of the owners of the company. The outcome is not strictly different from what we have expected.
IGI Pension is a member of PENOP, but faulted the outcome of the recapitalisation. What is PENOP doing to assist its member?
You know, association is an association of willing members of the industry. While everybody supposed to be a member of PENOP, PENOP is not a regulator, it is not really our business, it is not within our area of jurisdiction.
PenCom is the regulator, the issue about whether someone has met capital requirement or not is what only PenCom can deal with and not PENOP. We are not at liberty, and we are not allowed or required to start intervening. What we know is that if PenCom says we are 18, then we are 18. Members of the industry are those that have been cleared that have clean licences from the PenCom.
The industry is in excess of N18 billion capital base, what does this hold for the larger economy?
The industry capital, shareholder funds is more than N18 billion. N18 billion is the minimum, because N1 billion is the minimum for PFAs. Some PFAS have N2 billion, some have N3 billion, some N1.5 billion.
But the capital of the PFAS is really not what determines the impact of the pension funds on the larger economy; it is the size of the pension funds, which is about N2.6 trillion. It is this N2.6 trillion that is invested in various instruments, whether it is the money market, the bonds, the capital market, infrastructure and others that will impact the larger cycle. PFAs need capital to run their business, to run an office, to employ staff, and they need capital to go about their marketing and pricing. The number of PFAs does not really matter, but the size of the pension assets; as the pension assets grow, the PFAS become stronger, because they have more assets they are looking after technically.
The reason why some PFAs are hanging there, even though they are not big is because they are expecting the industry to grow; and as the industry grows, that business will grow.
It is a long term investment.If you have one billion, you can invest in PFAS, even though, it is not profitable today. It is a long term business that will grow.Share