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Police Exit Threatens N6.4tn Pension Funds

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  • Police Exit Threatens N6.4tn Pension Funds

A bill to amend the Pension Reform Act 2014 that will lead to the exclusion of members of the Nigeria Police Force, the Nigerian Security and Civil Defence Corps, Nigeria Customs Service, Nigerian Prison Service, Nigeria Immigration Service and the Economic and Financial Crimes Commission from the Contributory Pension Scheme and other related matters has been of concern to stakeholders in the pension industry.

The bill, sponsored by Hon. Oluwole Oke, has passed the second reading and referred to the relevant committee of the House of Representatives for further action.

If passed into law, the Nigeria Police Force Pension Limited, which has accumulated total assets of N283.9bn, and paramilitary personnel, would withdraw their money from the N6.4tn pension funds under the CPS.

The exit move embarked upon by the paramilitary organisations was triggered by the way the military, Department of State Security and the National Intelligence Agency pulled out of the CPS and withdrew all their funds from the scheme some years back.

There are fears that this may embolden workers in the public sector and other sectors to renew their interest to pull out of the pension scheme.

Already, due to some implementation challenges, there has been a clamour among some Federal Government agencies for exemption from the CPS.

Their complaint is essentially the quantum of retirement benefits, which they believe should be enhanced.

While many investors have been eyeing the growing pension funds and lobbying the administrators of the assets on how to get access to the money, the operators have continued to explain that the funds are not idle, but have been invested in various assets.

According to the pension fund operators, N4.75tn of the N6.4tn funds has been invested in Federal Government securities.

They are of the view that exempting some government agencies will lead to divestment from the FGN securities before maturity.

This, they noted, would have a ripple effect on not only the finances of the government, but the entire financial system.

They also gave another negative impact as the erosion of the pool of long-term investible funds accumulated under the CPS, which would further undermine development initiatives in infrastructure, housing and real sectors of the economy, expected to be funded with the pension funds.

Experts noted that pension operators had actively participated in the establishment of the Nigeria Mortgage Refinancing Company with the investment of N83.36bn in its securities and other mortgage refinancing initiatives of the Federal Government.

According to data obtained from the National Pension Commission, the total number of registered contributors rose to 7.4 million as of March, which represents about 7.45 per cent of the total labour force and 3.95 of the country’s population.

The pension funds presently contribute six per cent of the Gross Domestic Product, with an average monthly contribution of N30bn.

As of March, over 184,979 workers had retired under the CPS and are currently receiving pensions with an average monthly pension payment of N6.7bn, while monthly pensions have averaged N1.7bn.

However, the Pension Fund Operators of Nigeria has argued that exempting the police and members of paramilitary organisations will put additional financial burden on the Federal Government.

According to them, while the CPS ensures that both workers and their employers contribute to the Retirement Savings Accounts during the workers’ active years, this financial responsibility will now be shouldered by the government, which may not be sustainable.

According to PenCom, the Federal Government is already overburdened with payment of pensions, as illustrated in the 2016 Appropriation Act, which made a provision of N200.17bn as the total pension and gratuities allocation, which is insufficient to fund the pension liabilities of the government.

The 2016 Pension Transitional Arrangement Directorate’s budget proposal indicated a total annual pension liability of N388.32bn, and out of that sum, N255.89bn constituted unfunded liability, which was inherited by PTAD, mostly due to an outstanding payment of 33 per cent pension arrears to pensioners under the Defined Benefits Scheme. This is much higher than PTAD’s proposal in view of the provision of about N74.53bn for the Military Pension Board; N7.64bn for the State Security Service; and N3.71bn for the National Intelligence Agency.

According to the pension operators, the DBS is not sustainable as exempting the military, DSS and the NIA has resulted in very high allocation of resources to fund their retirement benefits.

Experts have however said that if more financial liabilities are transferred to the Federal Government, and the funding is not forthcoming, retirees can be dragged back to the era when there were long queues of pensioners for verification and haphazard payment of pensions.

The Head, Research, and Strategy Management, PenCom, Dr. Aminu Farouk, said the bill for the exemption of the police and other paramilitary organisations provided no clear justification for the affordability and sustainability of the proposal.

According to him, the bill is only seeking to increase the liabilities of the already overstretched and overburdened Federal Government.

The Chairman, PenOp, Mr. Eguarekhide Longe, said it was clear that the bill was not well thought out, and showed limited understanding of the innate long-term benefits of pensions for retirees, adding that if passed, it would significantly defeat the purpose of pension reforms in Nigeria.

According to him, a complete pullout of the paramilitary organisations is not the answer to the problems in the CPS, given the current state of public finances in the country.

“Permitting this bill to gain root as the Armed Forces amendment bill did will spell doom for the public sector segment in the CPS in Nigeria and for the entire industry ultimately as other groups within the system will follow suit,” he said.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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BUA Cement Announces 24.6 Percent Increase in Profit to N43.4 Billion in H1 2021

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BUA Cement stock - Investors King

BUA Cement Plc, Nigeria’s second-largest cement manufacturing company, on Thursday reported a 22.7 percent increase in revenue in the six months ended June 30, 2021.

Revenue rose from N101.261 billion recorded in the first half (H1) of 2020 to N124.278 billion in the first half of 2021.

The company disclosed in its unaudited financial statements release through the Nigerian Exchange Limited and seen by Investors King.

As expected, the cost of sales inched higher by 19.1 percent from N55.539 billion in H1 2020 to N66.158 billion in H1 2021. While gross profit expanded by 27.1 percent to N58.120 billion in H1, up from N45.723 billion.

The cement manufacturing company grew other income by 52.3 percent from N47.653 billion filed in H1 2020 to N72.6 billion in H1 2021.

Administrative expenses rose to N4.17 billion in the period under review, representing an increase of 57.9 percent when compared to N2.643 billion recorded in H1 2020.

Operating profit increased by 23.8 percent from N40.809 billion in the corresponding period of 2020 to N50.524 billion in the period under review.

Profit before income taxes rose by 26.9 percent to N49.700 billion in H1 2021 from N39.165 billion in H1 2020.

The company paid N6.3 billion in income tax in the first half of 2021.

Therefore, profit after tax stood at N43.396 billion in the first six months of 2021, an increase of 24.6 percent when compared to N34.819 billion achieved in the same period of 2020.

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Seplat Energy Appoints Dr. Emma FitzGerald as an Independent Non-Executive Director

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Seplat Energy Plc - Investors King

Seplat Energy Plc has appointed Dr. Emma FitzGerald as an Independent Non-Executive Director of the Company, the company disclosed on Thursday.

Dr. FitzGerald will replace Lord Mark Malloch-Brown who retired from the Board of the Company on 1st August 2021.

Dr. Emma FitzGerald Profile

Dr. FitzGerald is a seasoned executive in Energy & Water, with hands-on experience in transformation through her many years of working at Shell, ranging from building its lubricants business in China to running its Global Retail network.

From 2007-2010, she was accountable for Shell’s Downstream strategy and played a key role in reshaping Shell’s renewables strategy including the creation of Raizen, a game changing biofuels JV with Cosan. From 2013 to 2018 she ran gas distribution and water & waste networks for National Grid and Severn Trent where she successfully
positioned them as sustainability thought leaders in their Industries.

Most recently Dr. FitzGerald served as CEO of Puma Energy International, a global energy company owned by Trafigura and Sonangol, which is focused on high potential developing markets in Africa, Asia and Central America. In 2020 she set up Puma’s Future Energies division to play a critical role in helping customers and communities find the right energy solutions to support the energy transition. Over the last 10 years she has served on various Boards in executive and non-executive capacities and currently sits on the board of UPM Kymmene, an international paper & biomaterials business focused on innovating for a future beyond fossil fuels.

Commenting on the appointment, Dr. A. B. C. Orjiako, Chairman of SEPLAT Energy said: “The Board of SEPLAT Energy is indeed delighted to have Dr. Emma Fitzgerald on board as she brings vast knowledge in important areas such as the energy sector, renewables and sustainability. SEPLAT Energy has a great future ahead and looks forward to the enormous contribution she will make towards its continuing global success.”

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Company News

Robinhood IPO Priced at Lower End of Range, Firm Valued at $32B

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Robinhood-Investors King

Stock and crypto-trading app Robinhood has secured a $32 billion valuation via its initial public offering (IPO) and is set to debut on the Nasdaq exchange on Thursday.

According to a press release on Wednesday, Robinhood has priced its offering at $38 per Class A common stock share.

The pricing is at the lower end of the $38-$42 per share price range the company had targeted and had planned on selling 5.5 million shares targeting a $1.89 billion raise.

Net proceeds from the sale will go toward working capital, capital expenditures, funding tax obligations, hiring efforts, customer support services, among others.

Shares will be listed on the Nasdaq Global Select Market on Thursday, according to the release.

Earlier this month, Robinhood began unconventionally offering a portion of its IPO to users via its app — a view some consider to be a risky gamble.

Known for its zero-fee trading structure, the company has continued to endure hits to its image as well as legal and political ramifications stemming from the fallout of the GameStop saga and limitations to users trading crypto.

The company is trying to reshape that image and is reportedly working on a new feature that will help protect users from crypto price volatility while hiring a former Google alumn to improve its overall product design.

“Robinhood intends to use the net proceeds for working capital, capital expenditures, funding its anticipated tax obligations related to the settlement of RSUs, and general corporate purposes including increasing its hiring efforts to expand its employee base, expanding its customer support operations and satisfying its general capital needs,” the firm said in the announcement.

Robinhood filed the public offering prospectus on July 1, noting at the time that 17 percent of its total revenue in Q1 came from crypto trading transaction fees, which represented a big jump from the 4 percent in Q4 2020.

“While we currently support a portfolio of seven cryptocurrencies for trading, for the three months ended March 31, 2021, 34 percent of our cryptocurrency transaction-based revenue was attributable to transactions in Dogecoin, as compared to 4 percent for the three months ended December 31, 2020,” the firm said in the initial filing.

Still, the company’s CEO Vlad Tenev is staring down allegations from the Financial Industry Regulatory Authority over his failure to register Robinhood Financial relating to compliance issues.

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