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FG Unveils Pension Plan for 80 Million Informal Sector Workers

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pension funds - Investors King
  • FG Unveils Pension Plan for 80 Million Informal Sector Workers

President Muhammadu Buhari has unveiled a Micro Pension Plan for people operating in the informal sector of the economy, even as he promised to halt the rot in the nation’s pension system.

The President, while unveiling the pension plan on Thursday in Abuja, noted that those in the informal sector needed to be captured in the plan just like those in the formal sector.

The Micro Pension Plan targets the significant majority of Nigeria’s working population who, incidentally, operate in the informal sector.

With an estimated 80 million people working in the informal sector of the economy, the Micro Pension Plan would take care of participants from various informal sector workers including market women, members of the National Union of Road Transport Workers, and members of textile, garment and tailoring associations.

Others are tricycle operators and Okada Riders Associations, butchers associations, workers in the movie and performing arts industry, mechanics and other workers in the automotive industry and single professionals like lawyers, accountants and many others.

Buhari said his administration understood the importance of the pension industry, adding that this was why the Micro Pension Plan was conceived so that operators in the informal sector would have something to fall back on when they retire from active service.

He added that despite its lean resources, the Federal Government would continue to support the National Pension Commission in order to successfully implement the initiative.

As part of the government’s support to the initiative, he directed that the Financial System Strategy 2020 should support the plan through its financial inclusion programme.

Buhari said that in the last three years, his administration had provided grants, technical support and loans to small businesses, noting that through such interventions, the lifestyle of many people had changed for the better.

Having achieved so much with making the business environment-friendly for businesses, the President said it was imperative to have a social protection plan in form of pension for traders, farmers, and tailors, among others, operating in the informal sector of the economy.

Earlier, the acting Director-General, PenCom, Aisha Dahir-Umar, disclosed that up to N6.51tn of total pension assets had so far been invested in government securities.

She added that this represented 73 per cent of the total pension assets.

The DG explained that another N95.31bn was invested in infrastructure, while N7.19bn went into the subscription of the Federal Government’s Green Bond.

Explaining the Micro Pension Plan, she said that under the plan, 40 per cent of the amount contributed could be accessed for contingency purpose while the balance of 60 per cent would be set aside for retirement benefit.

She said while contributors could start drawing from their 40 per cent contribution after three months of making the initial deposit, the 60 per cent balance could only be accessed at the age of 50 during retirement.

She said through the implementation of the Micro Pension Plan, it was expected that the level of old age poverty would be reduced by 85 per cent.

The DG said, “This event is remarkable because it unveils a unique financial product, which democratises the savings culture in Nigeria in a systematic and efficient manner.

“The product also perfectly aligns with the current social empowerment programmes of the Federal Government, as it seeks to ensure, in the long-term, the sustainability of the benefits of the empowerment programmes for the participants, who may seize this opportunity to save for their old age.

“Our objective is to ensure efficiency and effectiveness in service delivery as well as transparency and accountability in the administration of the product by licensed pension operators.

“With the formal launch and subsequent successful implementation, the Micro Pension Plan is expected to significantly expand pension coverage to greater number of Nigerians and further generate additional long-term funds for economic development.

“The Commission would collaborate with relevant stakeholders to sensitise and enlighten the target participants and the public on the features and benefits of the plan.”

The Secretary to the Government of the Federation, Mr Boss Mustapha, expressed optimism that the initiative would expand pension fund coverage to the informal sector.

He said that the unveiling of the plan by the President would make a greater number of Nigerians to expand the pool of investible funds available to the economy.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Economy

Nigeria’s Growth Forecast Lowered to 3% for 2025, Higher than Most Emerging Markets

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The International Monetary Fund (IMF) has projected a 3% growth rate for Nigeria in 2025, slightly down from the 3.1% forecasted for 2024.

Despite this slight decline, Nigeria’s projected growth remains higher than that of many emerging markets as detailed in the IMF’s latest World Economic Outlook released on Tuesday.

In comparison, South Africa’s economy is expected to grow by 1.2% in 2025, up from 0.9% this year. Brazil’s growth is projected at 2.4% from 2.1% in 2024, and Mexico’s growth forecast stands at 1.6% for 2025, down from 2.2% in 2024.

However, India is anticipated to see a robust growth of 6.5% in 2025, although this is slightly lower than the 7% forecast for 2024.

The IMF’s projections come as Nigeria undertakes significant monetary reforms. The Central Bank of Nigeria has been working on clearing the foreign exchange backlog, and the federal government recently removed petrol subsidies.

These reforms aim to stabilize the economy, but the country continues to grapple with high inflation and increasing poverty levels, which pose challenges to sustained economic growth.

Sub-Saharan Africa as a whole is expected to see an improvement in growth, with projections of 4.1% in 2025, up from 3.7% in 2024. This regional outlook indicates a modest recovery as economies adjust to global economic conditions.

The IMF report underscores the need for cautious monetary policy. It recommends that central banks in emerging markets avoid easing their monetary stances too early to manage inflation risks and sustain economic growth.

In cases where inflation risks have materialized, central banks are advised to remain open to further tightening of monetary policy.

“Central banks should refrain from easing too early and should be prepared for further tightening if necessary,” the report stated. “Where inflation data encouragingly signal a durable return to price stability, monetary policy easing should proceed gradually to allow for necessary fiscal consolidation.”

The IMF also highlighted the importance of avoiding fiscal slippages, noting that fiscal policies may need to be significantly tighter than previously anticipated in some countries to ensure economic stability.

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Economy

Nigeria’s Inflation Rises to 34.19% in June Amid Rising Costs

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Food Inflation - Investors King

Nigeria’s headline inflation rate surged to 34.19% in June 2024, a significant increase from the 33.95% recorded in May.

This rise highlights the continuing pressures on the nation’s economy as the cost of living continues to climb.

On a year-on-year basis, the June 2024 inflation rate was 11.40 percentage points higher than the 22.79% recorded in June 2023.

This substantial increase shows the persistent challenges faced by consumers and businesses alike in coping with escalating prices.

The month-on-month inflation rate for June 2024 was 2.31%, slightly up from 2.14% in May 2024. This indicates that the pace at which prices are rising continues to accelerate, compounding the economic strain on households and enterprises.

A closer examination of the divisional contributions to the inflation index reveals that food and non-alcoholic beverages were the primary drivers, contributing 17.71% to the year-on-year increase.

Housing, water, electricity, gas, and other fuels followed, adding 5.72% to the inflationary pressures.

Other significant contributors included clothing and footwear (2.62%), transport (2.23%), and furnishings, household equipment, and maintenance (1.72%).

Sectors such as education, health, and miscellaneous goods and services also played notable roles, contributing 1.35%, 1.03%, and 0.57% respectively.

The rural and urban inflation rates also exhibited marked increases. Urban inflation reached 36.55% in June 2024, a rise of 12.23 percentage points from the 24.33% recorded in June 2023.

On a month-on-month basis, urban inflation was 2.46% in June, slightly higher than the 2.35% in May 2024. The twelve-month average for urban inflation stood at 32.08%, up 9.70 percentage points from June 2023’s 22.38%.

Rural inflation was similarly impacted, with a year-on-year rate of 32.09% in June 2024, an increase of 10.71 percentage points from June 2023’s 21.37%.

The month-on-month rural inflation rate rose to 2.17% in June, up from 1.94% in May 2024. The twelve-month average for rural inflation reached 28.15%, compared to 20.76% in June 2023.

The rising inflation rates pose significant challenges for the Central Bank of Nigeria (CBN) as it grapples with balancing monetary policy to rein in inflation while supporting economic growth.

The ongoing pressures from high food prices and energy costs necessitate urgent policy interventions to stabilize the economy and protect the purchasing power of Nigerians.

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Economy

Inflation to Climb Again in June, but at a Reduced Pace, Predicts Meristem

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Nigeria's Inflation Rate - Investors King

As Nigeria awaits the release of the National Bureau of Statistics’ report on June 2024 inflation, economic analysts project that while inflation will continue its upward trajectory, the pace of increase will moderate.

This comes after inflation rose to a 28-year high of 33.95% in May, up from 33.69% in April.

Meristem, a leading financial services company, has forecasted that June’s headline inflation will rise to 34.01%, a slight increase from May’s figure.

The firm attributes this persistent inflationary pressure to ongoing structural challenges in agriculture, high transportation costs, and the continuous depreciation of the naira.

Experts have highlighted several factors contributing to the inflationary trend. Insecurity in food-producing regions and high transportation costs have disrupted supply chains, while the depreciation of the naira has increased importation costs.

In May, food inflation grew at a slower pace, reaching 40.66%, but challenges in the agricultural sector, such as the infestation of tomato leaves, have led to higher prices for staples like tomatoes and yams.

Meristem predicts that food inflation will persist in June, driven by these lingering challenges. Increased demand during the Eid-el-Kabir celebration and rising importation costs are also expected to keep food prices elevated.

Core inflation, which excludes volatile items like food and energy, was at 27.04% in May. Meristem projects it to rise to 27.30% in June.

The firm notes that higher transportation costs and the depreciation of the naira will continue to push core inflation up.

However, they also anticipate a month-on-month moderation in the core index due to a relatively stable naira exchange rate during June, compared to a more significant depreciation in May.

Cowry Assets Management Limited has projected an even higher headline inflation figure of 34.25% for June, citing similar concerns.

The firm notes that over the past year, food prices in Nigeria have soared due to supply chain disruptions, currency depreciation, and climate change impacts on agriculture.

This has made basic staples increasingly unaffordable for many Nigerians, stretching household budgets.

As inflation continues to rise, analysts believe the Central Bank of Nigeria (CBN) will likely hike the benchmark lending rate again.

The CBN’s Monetary Policy Committee (MPC) has raised the Monetary Policy Rate (MPR) by 650 basis points this year, bringing it to 26.25% as of May 2024.

At a recent BusinessDay CEO Forum, CBN Governor Dr. Olayemi Cardoso emphasized the MPC’s commitment to tackling inflation, stating that while the country needs growth, controlling inflation is paramount.

“The MPC is not oblivious to the fact that the country does need growth. If these hikes hadn’t been done at the time, the naira would have almost tipped over, so it helped to stabilize the naira. Interest rates are not set by the CBN governor but by the MPC committee composed of independent-minded people. These are people not given to emotion but to data. The MPC clarified that the major issue is taming inflation, and they would do what is necessary to tame it,” Cardoso said.

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