Pension Reform: Former NIA Boss Canvasses Entry Restriction
By Nnamdi Duru
Ahead of implementation of the Pension Reform Act, 2004 which will usher in a new pension dispensation in Nigeria, an insurance practitioner has called on the National Pension Commission (NPC) to put effective control measures at the entry point to ensure that a manageable number of operators were allowed to run the system.
The immediate past Chairman of the Nigerian Insurers Association (NIA), Mr. Godwin Alegieuno who made this observation warned that five years down the line, there would be mushrooming of Pension Fund Administrations (PFAs) and related problems in the new pension system if stringent conditionalities were not imposed on intending operators in the sector.
Alegieuno who is the Managing Director of The Lion of Africa Insurance company Limited, Mr. Godwin Alegieuno made this observation in an interview with newsmen in Lagos recently. He traced problems militating against the development of the Nigerian economy to absence of effective control at the entry point of key sectors in the system.
He observed that even before the whistle is blown for the take-off of the new pension system, insurance companies are scrambling to set Pension Fund Administrators (PFAs) alongside people outside the insurance industry.
The former NIA Chairman who foresees a crash of the system due to mushrooming five years down the line if entry is not controlled, called for collaboration among operators wishing to set up pension fund administration outfits instead of each company going it all alone.
"This issue of PFA is now coming up, insurance companies are likely to start scrambling, everybody wants to set up his own PFA. Other people who are not insurance companies will like to set up their PFAs.
"But then, five years down the line, we will have the same problems we are having in banking and insurance industries now. There will be too many PFAs and they are going be so small individually that they cannot make any meaningful contribution to the business of pension. I personally believe that there should be collaboration", Alegieuno said.
He regretted the unnecessary proliferation in the system which has resulting in mushrooming of operators, blaming government and relevant regulatory bodies for not putting adequate measures to check entry into viable sectors of the economy with its negative effects on development.
"I personally do not believe in proliferation of organisations. The greatest problem why the Nigerian economy is not doing well is because any business that is established, because the government does not put stringent conditionalities for entry, everybody just go into it.
"Airline business now, everybody who can afford two airplanes will set up an airline, it is rubbish. Same thing in insurance, because of the capitalisation, before, it was N50 million or N20 million or whatever it was, everybody is into insurance. 108 insurance companies, it is madness. In India, they have only about five insurance companies and I learnt in South Africa, they have about four banks", he said.
Alegieuno, who argued that liberalisation of the economy is necessary stated his opposition to mushrooming in the system even as he urged regulatory authorities to explore other means of checking entry into key sectors in the economy.
"It is good to have proliferation but 108 insurance companies, 89 banks, it is rubbish. So if the only way to ensure that there is some measure of stability and control is to increase the capitalisation, so be it. But I know that is not the only avenue to get companies to comply", he argued.
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