Pension Funds Register 41,352 New Contributors In One Year

The Procurement Act requirements which demand that firms must get PENCOM compliance certificates to be able to bid for government contracts are having positive effects on the pension industry, following an upsurge in the number of compliant firms and contributors.
Between 2015 and 2016, the contributory pension scheme registered 41,352 new contributors, leading to N36.56 billion in additional remittance. The total amount remitted into the scheme rose from N35.978 billion in 2015 to N72.543 billion in 2016 just as new employees enrolled with the scheme increased to 185,527 from 144,175 during the period.
Of the newly registered contributors, 75 per cent of them or 31,053 employees, were registered by the small and medium scale enterprises in the country. The large corporations, which by classification, employ a minimum of 200 workers, accounted for 25 per cent or 10,299 new members into the scheme.
Regarding why more firms, especially SMEs are complying with the scheme, North-East regional head, ARM Pensions, Esmaéel Salisu, attributed this development to the conditions attached to getting government contracts.
“One of the conditions for getting government contracts is that a firm has to be compliant with the pension law. The compliance certificate boosts your bid, which will put a contractor in good stead when applications for government contracts are evaluated”, Salisu said.
Furthermore, senior analysts with some of the leading pension funds administrators (PFAs) in the country, who did not want their names in print, wanted government to address the issue of contract staff because that is a basis some Nigerian workers are not registered with the scheme.
“Most of the firms that comply with the scheme now are government contractors. But every firm cannot apply for government contracts. So, if the government can address the problem of casual labour, more contributors will be registered with the scheme”, one of the analysts said.
“ The Procurement Act requirements have encouraged more firms to comply with the pension scheme. The Federal Government should come up with more incentives, eventually more firms will come on board”, said another analyst.
In analysing the lists of compliant firms, BusinessDay Research and Intelligence Unit (BRIU) further grouped the data into SMEs and large enterprises with a view to knowing how each category of firm has performed within the period. Additionally, the SMEs were further divided into micro, small and medium enterprises. Relying on the SME classifications by the National Bureau of Statistics (NBS), a micro firm employs between one and nine employees. A small firm employs between 10 and 49 employees, whereas a medium enterprise has in its employ a minimum of 50 and maximum of 199 workers. We also used the number of employees registered with the scheme and amounts remitted by each category of firms as parameters.
BRIU findings show that micro enterprises outperformed all other categories of firms across the two parameters during the reference period. The number of employees registered by micro firms rose a record 131.3 per cent from 14,396 in 2015 to 33,303 by December 2016. Likewise, the amounts remitted posted 125 per cent growth from N796.76 million to N1.796 billion during the same period.
Small enterprises registered 5,119 new employees, representing an increase of 61.6 per cent and that brought the number of workers enrolled for the scheme by this category of firms to 13,424 in 2016 as against 8,305 in 2015. The amount remitted rose by 105 per cent to N3.258 billion from N1.587 billion during the period.
Medium enterprises posted 38.6 per cent and 73 per cent growth across the two parameters. The number of employees enrolled with the scheme rose to 25,221 in 2016 up from 18,194 in 2015. Similarly, amount remitted increased to N7.507 billion up from N4.330 billion during the reference period.
The large corporations in the country recorded 10 per cent increase in the number of new employees enrolled with the scheme while amount remitted on their behalf increased by 105 percent. From 103,280 members in 2015, the number of registered employees by large corporations went up to 113,579 by 2016. The amounts remitted also rose to N59.980 billion up from N29.264 billion in 2015.
Our analysis also focused on the allocation of pension funds to different asset classes, especially between April 2016 and same period this year. Overall, the fund assets posted 21 per cent growth increasing from N5.359 trillion to N6.493 trillion during the reference period. Allocation to foreign market securities, infrastructure fund, cash and other assets as well as the Treasury bills went up by 669.57 per cent, 243.37 per cent, 192.11 per cent and 120.29 per cent respectively. In addition, allocation of pension funds to corporate debt securities increased by 67.05 per cent; foreign ordinary shares, 34.67 per cent while FGN bonds increased by 15 per cent. Single digit increase in funds allocation was recorded in supra national bonds, private equity funds, real estate properties and domestic ordinary shares.
On the contrary, investment in state government securities declined by 18.36 per cent; banks, 30.23 per cent while investment in open/close-end funds declined by 39.28 per cent.

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