Pension funds useful to economic growth in Nigeria - CNBC Africa

Pension funds useful to economic growth in Nigeria

Western Africa

by Elayne Wangalwa 0

Having a pension fund alongside a salary is a means of not keeping all one's eggs in one basket. PHOTO: Getty Images

According to Demola Sogunle, CEO Stanbic Ibtc Pension Managers, it is imperative to critically examine investment opportunities in the pension industry in order to grow infrastructure, which is a key driver of sustainable growth in Nigeria.

“We want to see to what extent the pension fund [Nigeria’s Contributory Pension Scheme] will play in a more significant role in terms of infrastructure. We want to see to what extent we can manage the risk embedded in investing pension funds in alternative asset classes,” Sogunle said.

(READ MORE: State government tapping into ongoing reforms in Nigeria's pension industry)

Nigeria’s Contributory Pension Scheme was established through the nation’s Pension Reform Act of 2004 to help Nigerians save and plan for retirement.

Under the scheme, employers would deduct 7.5 per cent of an individual’s monthly salary and place the same percentage into the individual’s retirement savings account. According to Sogunle, effective regulation is therefore necessary for building a sound pension system.

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“It is very important for us to take stock of what we have done for 10 years and to also look at what the next level or steps that we need to take for the next decade [should be]. This is an important aspect of the economy and an important aspect for Nigerian workers as well,” Sogunle said.

(WATCH VIDEO: Growing importance of pension funds in Africa)

A week ago, Nigeria’s president Goodluck Jonathan signed a new bill dubbed the Pension Reform Bill 2014 into law to govern and regulate the administration of the uniform pension scheme in the West African state.

“With the new bill signed by the president, we have more flexibility and it is a matter of time when we will see some innovative products coming into the market. We will start to see investment of pensions going into alternative assets classes,” Songule explained.

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