PenOp Urged to Engage PenCom on Extension as 50% of PFAs Meet Target

Barely six months to the deadline given to Pension Fund Administrators (PFAs) to upgrade their minimum capital from the current N1billion to N5 billion, only 50 per cent of the 22 PFAs have met the mark.

Alarmed by this development, stakeholders have advised the umbrella body of pension fund operators in the country, the Pension Operators Association (PenOp) to engage the National Pension Commission (PenCom) for the possibility of extension of the deadline to enable more operators put their houses in order.

PenCom had early this year, obtained approval from its board to increase the minimum capital requirement of PFAs from N1 billion to N5 billion with 12-month transition period.

PenCom numbers showed that as at 31December, 2020, the largest four operators have met the requirement while in June 2021, two months after the new capital regime was announced, four more firms hit the N5billion mark.

Since then, the remaining operators seem to be working slowly underground but the Director General PenOp, Mr Oguche Aguda, at a Recapitalisation summit workshop organised by PenOp at the weekend said as at present, about 50 per cent of the existing pension fund operators were ready to go in the new capital regime.

He however said the remaining 50 per cent have been working hard to ensure they meet the deadline.

In her presentation on Post Recapitalisation Strategy at the workshop, Wonuola Kunle-Bello, Head, Funds and Investment Manager Ratings Augsto &Co, noted that the new capital regime was most likely going to impact operators in many ways among which were operators would scout for additional capital injection.

She said operators would seek to raise funds directly or indirectly.

According to her, for those that would have to raise funds directly, there would be additional pressure to sweat capital.

She said indirectly, operators would gun for higher profit retention and lower dividend payout.

She however projected that despite the recapitalisation challenges, the pension sector would continue to maintain the current growth rate of 18 per cent per annum.

She projected that after the sector had overcome the general challenges posed by the COVID-19 pandemic, the pension assets, which at present stands at N13 trillion would hit N20 trillion mark by the year 2023 at a projected annual growth rate of 18 per cent.

“Given the increase in the minimum share capital requirement for pension companies to N5 billion from the N1 billion, we expect to see business combinations and strategic partnerships in the near term.

“We expect that industry operators would explore investments in the foreign markets to provide real returns to contributors, given the dearth of investible assets and the rising inflation rate in Nigeria. Focus will be on quality of enrollees’ not just number, “Bello stated.

Mr Funso Akerele, CEO Stanbic IBTC Capital, noted that before the PFAs think about going into the available options left for them to meet the new capital, they should first set their objectives right in terms of usage of the money.

He said their simplest solution is to get their shareholders inject capital through right issues, private placement or private capital rising.

He said another option is for the firms to combine strength through business combinations.

He also said the operators should seek for strategic conversation with their financial advisers on how best to meet the deadline without crashing on the way.