In this interview with NIKE POPOOLA, the Managing Director, NLPC Pension Fund Administrators Limited, Mr. Wale Kolawole, speaks on the benefits of the Contributory Pension Scheme to workers
How will the introduction of guidelines on mortgage loan boost workers’ morale and contribution to the economy?
The issue of housing deficit is being recognised and estimated at about 17 million units. This simply means that quite a number of Nigerians are yearning for housing. If you now have a programme that tends to actualise this desire of an average Nigeria, it is a laudable scheme. If you are working and you have hope that before you retire, you can have a house that you can call your own, it gives a sense of joy. This is what is being done in most advanced countries. You don’t expect an average worker to go and look for so many millions of naira to buy a house with immediate payment because it is not easy to save. There is this challenge that what they are earning is not enough for their basic consumption, not to talk of savings. When you have an arrangement that can give you that leeway to give you that capital contribution and, on monthly basis, you pay over time, it will encourage workers to be more dedicated and have peace of mind. A lot of things lead to sicknesses, high blood pressure, like when you feel you have been working and have nothing tangible to show for your effort. So, it is going to be a morale-busting issue.
When you have more and more people that are applying their resources towards that particular sector, more houses will be built and more people will be engaged. You are contributing towards the Gross Domestic Product of the country; so, the multiplier effect is not just the person you have given that opportunity to. Whereas the same funds could have still been invested somewhere else that would not produce this kind of effect. So, it is good for the workers; it is good for our industry, and it is also good for the country.
What should be the attitude of the average Nigerian to the pension scheme?
An average employee should see this scheme as a programme that is for them. Not that government is trying to force them to do what they don’t want to do. In abroad and in established communities, you see old people beaming with smiles because they know that at the end of the month, they don’t need to rely on friends, relations and children to survive. Until we start to plan for the future of Nigerian workers and implement it the way it should be implemented, we will continue to have problems. But I am happy because the current system is working, and that is why people will be willing to retire, not that they will want to revise their age when retirement is knocking. When you have something to fall back upon, you will be encouraged to say you are going. And it is also good for your health to retire at the right time. An average Nigerian should see it as his or her own programme.
How will the Contributory Pension Scheme benefit the informal sector?
The informal sector constitutes almost 90 per cent of our working population because the formal sector is just about 10 per cent statistically. The primary purpose is whether you are formal or informal, you will grow old one day. And whatever thing you are doing now, you will not be able to do those things again. Even when you have the mind to do it, the body will tell you, ‘I cannot do it’. So the effort should just not be geared towards the formal setting, but think of the majority that are not just formal sector because they will also grow old. There will come a time when your system, everything will start to obey the law of diminishing returns. When that time comes, what will that person rely upon? That is the primary essence. Of course, when you have an arrangement in place that, after your working life, your mind is stable, the way you approach your assignment may be a bit different.
How will the informal workers be motivated to voluntarily take the CPS when it is not mandatory for them?
You need to find an encouraging way for them to buy into the arrangement. So that is why it is taking some time to bring them into the scheme. There are some incentives that need to be put in place to encourage them to buy into it because since it is not compulsory and the poverty level is so high, you need to do some things to encourage them to go into it. The level of flexibility will also need to be very high in such a way that there will be the possibility of them having access to the fund anytime they need it up to a level, unlike the formal sector because their own set of business is not stable. At times, they can have access to some money; at times, they may not. The telecommunication progress we have made in the country will make it a bit better, in the sense that they can make the contribution themselves through their phones. We see what is happening in some other jurisdictions, where people can make the contribution themselves through their phones since there are no established employers anywhere. They need an environment that will address their own peculiarities in such a way that they feel like being part of that institution. So, those are the things that the National Pension Commission is trying to put together. We need it in this country because when we have the bulk not being taken care of in the society, they need to be taken care of.
How can employers be discouraged from defaulting in pension remittance?
Employers need to be encouraged regardless of the challenges quite a number of them are having. I am aware some of them will tell you they are having facilities with banks, and that the banks are threatening to stop their facilities. They tell you all sorts of excuses for default. The employer should see pension remittance as a first charge as they are paying salary. They should see it as part of the total payout that you need to make. If that is done, it is in the interest of the organisation and they will be able to attract or retain their best hands because there is competition everywhere in any industry. Even out there too, when people know that staff matters are well taken care of, they can attract more people even from outside and, in the long run, the company will benefit. There will always be limiting factors in any enterprise; so, they need to be encouraged that it is in the long-term interest of the organisation that they do this. But I also want to say that since it is backed by law, they also need to be aware of the fact that there is no excuse when the law is broken. If you are there, you have to obey the law of the land. PenCom has been doing great too in this area by having recovery agents who go from one organisation to the other to ensure that they comply, and it has been helping the system. Regardless of the situation we find ourselves in the country, employers need to be encouraged that they should see it as a first charge and be law-abiding citizens. They need to pay what they are supposed to pay because this has to do with the future of their staff and the more they comply, the better for the organisation in the long run.
How has the NLPC PFA increased the value of its contributors’ money?
When you say value, it has to do primarily with what they have put under our care. We have handled the investment process in a way that regardless of what is happening in the economy, our account holders have got competitive returns on their contributions better than if they were the ones to handle it by themselves. Up to 2014 published account, our three-year rolling average is about 12 per cent. We were particular about the fact that whatever be the return that we were earning on the funds we are managing, it should be higher than the inflation level so that the funds will not be depreciating. It is then you are really adding value to the funds under your care. We have been able to achieve that excellently well over the period. That is the primary essence.
What are you doing to enlighten the account holders on the CPS?
As account holders, we believe in enlightenment so that before they retire, they can be aware of what is happening. When it is time for them to leave, we let them know what they are expected to do. That is why we do interactive fora for organisations. We gather our own RSA holders and update them and we have a feed-back process in case there is any issue. We have done it in some locations all over the country to open up their mind on what is happening so there will be less agitation. They are well-informed; they know what is expected, and they are happy with the process. We attach a lot of importance to that too.
What is the prospect of the CPS amidst the economic climate this year?
One thing that the RSA holder should be happy about is the fact that we have a regulatory framework that has made it possible not to concentrate investment in one asset class. So whatever the challenges, it won’t have terrible impact on their funds because by regulation, we are supposed to spread out. If anything is happening in any asset class, the other asset classes will still absolve. And that is why you are not hearing negative investment with PFA business. Because of the way we are structured in 2016, I can say stakeholders should rest assured that whatever may be the hiccup in investment climate, their funds will be intact with some level of growth. We are challenged as industry operators to ensure that we carry them along because without them, we cannot be in existence. Even the regulators, and owners of business, if we are able to do the business well, it will rub off on everyone and there will be stability and hope for the near future.
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