Against the backdrop of increasing dearth of long term funds for real sector access and utilisation, the operators have advocated for review of legislations guiding investments so as to facilitate real sector access to funds warehoused in Pensions and insurance subsectors.
They lamented that whereas pension and insurance funds are major sources of long term funds needed by key sector like the real sector which requires funds from long term sources, but strict laws on investment of funds from these sources do not give room for real sector operators to access these more beneficial funds.
Further, they said that investors in real sector going by these laws, can only access funds from money market source which is purely a short term funds that favors operators in buying and selling market.
The operators spoke at the 2020 national conference of the National Association of Insurance and Pension Correspondents (NAIPCO) held in Lagos.
They observed that the current legislations on investment in Nigeria do not favour investments in most sectors of the economy.
They reasoned and attributed the current high mortality rate of small and medium scale businesses to difficulties in sourcing long term funds.
The Director General, Lagos Chamber of Commerce and Industry(LCCI), Dr Muda Yusuf, speaking on the theme “Promoting Bankable Investments Portfolio For Insurance and Pension Sectors”, said bankable investment portfolio has become a general economic challenge facing Nigerian banking system.
He noted that insurance and pension funds are larger sources of long term fund but are not available for real sector investment whereas funds from financial system which is short term in nature are the only available fund for them.
He however noted that the tight regulation in investment of pension fund somehow saved the sector during crash in capital market investment.
He said key issues to put into consideration in investment of pension funds in the real sector include safety of the investment, returns on investment, liquidity of the investment especially for insurance funds because of payment of claims which may arise ant time.
He noted that the N11.35 trillion pension funds as at August this year means a lot in Nigeria investment market if there is right kind of investment environment and regulation.
He said there is need for government to put in place a unified exchange rate to encourage diaspora remittances.
Also speaking, the Chairman, Nigeria Social Insurance Trust Fund, (NSITF), Mr Austin Enajemo-Isere, said there is urgent need to consider alternative strategies to retool the economy for survival and growth even as he called for the review of the Pension Reform Act (PRA) to enable those in Real sector of the economy have access to insurance and Pension fund to finance their operations.
Enajemo-Isere, who was the chairman at the conference, identified the effect of the ravaging COVID-19 pandemic and wanton destruction of life and properties across the country caused by the ‘#EndSARS mayhem, among many others on the economy and noted that the impact of these crisis have resulted into the Nation GDP declining from a growth of 2.2 percent in 2019 to about -4 percent by year end.
He said as a result of this, the government, private sector institutions and individuals have continued to search for economic survival strategies to change the narratives and create new normal.
The NSITF boss, advocated for a deliberate policy by the authorities, in addition to what is currently obtainable, directly or through moral suasion to invest Insurance and Pension Fund in sectors such as Manufacturing, Agriculture and Aviation among others with an inbuilt safety net.
According to him, “In furtherance to the foregoing, the current restrictive nature of insurance and pension funds investment outlets calls for review of the legislations guiding investment of insurance and pension fund. The yelling and plea from the Organised Private sector of Nigeria (OPSN) to create more access to investible funds deserves attention.
“It is worthy to note and be reminded that insurance and pension funds are subject to regulatory guidelines as provided in section 25 of the Insurance Act 2003 as amended and Sect 86 of the PRA 2014, for the purpose of safety and Returns.
“However, a consideration for review of these legislations to enable some special and real sectors of the economy have access to insurance and pension fund to finance their operations, will be most beneficial to the growth and development of the Nation’s Macroeconomic activities. A deliberate policy by the authorities, in addition to what is currently obtainable, directly or through moral suasion to invest insurance and pension fund in sectors such as manufacturing, agriculture and aviation, etc with an inbuilt safety net, will be a welcome development.”
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