Stakeholders urge PenOp to engage PenCom on upgrade extension

• As 50% of 22 PFAs meet target

Stakeholders in the pension sector have called on 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 with barely six months to the deadline to enable the Pension Fund Administrators (PFAs) to upgrade their minimum capital from the current N1billion to N5 billion, since only 50 per cent of the 22 PFAs have met the mark.

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 indicated 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.

Meanwhile, the remaining operators seem to be working slowly underground but the Director General PenOp, Mr Oguche Aguda, at a Recapitalisation summit workshop organized recently by PenOp said that currently, about 50 per cent of the existing pension fund operators were ready to go in the new capital regime, while the remaining 50 per cent have been working hard to ensure they meet the deadline.

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

Kunle-Bello said that operators would seek to raise funds directly or indirectly, stressing that for those that would have to raise funds directly, there would be additional pressure to sweat capital.

She added that indirectly, operators would aim at higher profit retention and lower dividend payout.

According to her, despite the recapitalisation challenges, the pension sector would continue to maintain the current growth rate of 18 per cent per annum.

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

In her words: “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.”

On his part, Mr Funso Akerele, Chief Executive Officer, Stanbic IBTC Capital, advised 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.

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

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

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