Former minister,Aganga advocates investment of pension funds in inflation-linked instruments

Cynthia Ezekwe

Olusegun Aganga, former minister for industry, trade and investment, has urged Nigerian pension fund managers to allocate a portion of their assets to investments in offshore markets and inflation-linked instruments, noting that this will protect the gains of the country’s pension reforms and provide financial security for retirees. 

Aganga, who has extensive experience in public policy and finance, stated that the devaluation of the naira and rising inflation could pose significant risks to the pension system. He noted that the erosion of earnings caused by these economic conditions could lead to a decline in the real value of the funds, which could have devastating consequences for retirees.

At a training session for board members and directors of pension fund operators in Nigeria, organised by the Pension Fund Operators Association of Nigeria (PenOp) and the Financial Institutions Training Centre (FITC), in collaboration with the National Pension Commission (PenCom), Aganga urged the directors to collaborate with the federal and state governments to ensure the expansion and success of the contributory pension scheme. Specifically, he called on the directors to work with the state governments to ensure that they join the scheme and make timely remittances of employer and employee contributions to the pension fund administrators. 

The former minister strongly opposed the practice of deducting pension contributions from employees without remitting them, warning that it is a threat to the financial security of Nigerian workers. He stated that the government cannot afford the burden of pension liabilities under the old defined benefit scheme, as the pension bill keeps increasing in line with the expanding civil service workforce. Instead, he proposed that the pension operators, regulators, and government should work together to find ways to meet the diverse needs of various groups under the framework of the contributory pension scheme.

Aganga emphasised the role of the directors in shaping the policies, strategies, and processes of their organizations, and stressed the need for them to promote the “4 Ps of corporate governance”: people, purpose, processes, and performance. He called for creativity and innovation in developing structures and strategies that can generate returns for pension fund contributors, and ultimately help the industry to grow and thrive. He also highlighted the importance of trust, transparency, and accountability in the industry, and urged the directors to uphold the highest ethical standards in their roles.