SPEECH DELIVERED BY THE PRESIDENT OF THE NIGERIAN COUNCIL OF REGISTERED INSURANCE BROKERS, MR. ROTIMI EDU, mni, FCIB AT THE FEBRUARY 2022 EDITION OF NCRIB MEMBERS’ EVENING HELD ON TUESDAY, FEBRUARY 22, 2022 IN LAGOS.
By Favour Nnabugwu
The National Pension Commission (PenCom) has condemned move by the Nigerian Police Force (NPF) to exit the Contributory Pension Scheme (CPS).
The Director General of PenCom, Aisha Dahir-Umar, on Tuesday in a statement in Abuja during a public hearing on two pension-related Bills by the House Committee on Pensionll.
Dahir-Umar explained that the exemption of the NPF from the CPS would result in the dismantling of the institutions, systems and processes that Government had put in place in the last few years towards the implementation of the pension reform programme.
“Exemption of the personnel of the NPF would imply additional financial burden on the Federal Government by way of unsustainable pension obligations. For instance, as at September 2021, there were 304,963 Police personnel based on IPPIS data. An actuarial valuation revealed that the retirement benefits (pension and gratuity) liability of these personnel under the defunct Defined Benefits Scheme would amount to about N1.84 trillion.”
The PenCom boss was of the view that liability under the CPS for the same NPF personnel is made up of N213.4 billion as accrued pension rights and monthly employer pension contributions of about N2.2 billion.
PenCom FG stated that to address the concerns of Police Personnel on pension, the employer can review upwards its current contribution rate of 10%.
In addition, the PRA 2014 further provides that notwithstanding the pension contributions made by employer and employee into the employee’s RSA, the employer may agree on the payment of additional benefits to the employee upon retirement.
“Accordingly, the Federal Government may wish to provide additional benefits in the form of gratuity to personnel of the NPF upon their retirement.”
On 75 percent lumpsum payment, she said the amendment, if approved, would be contrary to the provision of Section173 of the 1999 Constitution of the Federal Republic of Nigeria (as amended), which guarantees the right to pensions for all public officers as the payment of “at least 75 percent of the balance of the RSA” as lump sum at retirement.
She added that this will significantly deplete the pension savings such that the contributions will not be sufficient to provide meaningful pensions during retirement.
“That converts the pensions into a provident fund and leaves such a retiree with no periodic pensions, which is contrary to the requirement of Section 173 of the 1999 Constitution.”
She was of the view that the proposal is based on a misunderstanding of the concept of pension payment under the CPS.
She also disclosed that the CPS has provisions that can address the challenges being faced by personnel of the Nigeria Police and other Federal Government Agencies on the administration of their retirement benefits.
“The solution to the pension challenges of the personnel of the Nigeria Police does not reside in their exemption from Contributory Pension Scheme and reversion to the Defined Benefits Scheme, which is clearly unsustainable,” Dahir-Umar, said.
She noted that absence of other social security benefits in Nigeria is partly responsible for the clamour by the retirees for exemption or to access substantial amounts as lump sum from their RSA balance.
Speaking further, the Chief Executive Officer of the Pension Fund Operators Association of Nigeria (PENOP), Oguche Agudah, said the exemption of the Nigeria Police Force from the CPS would take Nigeria back to the dark ages before the pension reforms.
“This was a time when retirees had to depend on a defined benefit system; where the federal government paid monthly pensions to retirees directly from its coffers,” he said.
Agudah said at the time of the reform, it was estimated that the Federal Government had a pension liability of over NGN 2 trillion.
“Past experiences have proven that this system puts a lot of burden on the federal government, making it unsustainable. The sustainability of moving the police back to the pay – as – you – go Defined benefit scheme under their proposal is near impossible, given the Federal government’s struggling finances at the moment.,” he said.
He recommended that from the rank of Assistant Inspector General of Police (AIG) upwards, their pensions should be treated under the category of political appointees who retire with full benefits as stated in the PRA 2014 as their appointments are political in nature.
On the Bill to allow contributors take at least 75 percent of their RSA balance at retirement, the PENOP’s CEO said the people that have issues with the lump sum that they collect at the moment are those who have not been able to accumulate enough funds in their RSAs prior to retirement.
He said what the 75 percent essentially is looking to achieve is a gratuity type payment to retirees, adding that the PRA in its current form does not preclude the payment of gratuities by employers as many Department and Agencies of the Government already pay gratuity to their staff on retirement.
“What we suggest is that employers should be encouraged to pay gratuities at retirement and/or increase their level of monthly contributions in order to boost the balances and subsequent pension payout of their staff,” he said.
By Favour Nnabugwu
Nigeria is expected to grow slightly above Angola and South Africa in the Gross Domestic Growth as Africa will register mild growth in 2022 after being the slowest growing regín in 2021 with +3.5 percent.
According to Allianz Economic Outlook Report, said that the growth in Angola (2.2%) and South Africa (2.0%). This is even more as vaccination rates will remain very low at 32 percent on the overall continent but only 4 percent in Sub-Saharan Africa.
GDP growth expectations in countries are as follows: Senegal (6.1%), Kenya (5.6%), Ivory Coast (5.5%), Ghana (5.4%), Egypt (4.6%), Mozambique (4.6%), Namibia (3.7%), Morocco (3.3%), Tunisia (3.2%), Gabon (3.2%) and Algeria (2.4%),
In 2022, oil exporters such as Angola and Algeria will continue to benefit from the commodity up cycle tailwind
On the other hand, amid rapidly rising inflation to double digits in most countries, monetary policy rates are expected to increase in Kenya, Nigeria, Ghana, South Africa and Egypt. In an environment of continued sanitary uncertainty, this monetary tightening is expected to put a brake on growth.
In addition to rising energy prices, food inflation has soared to hardly bearable levels in Angola, Ethiopia, Nigeria and Ghana.
The food security situation is likely to deteriorate in 2022 in southern and eastern Ethiopia, Kenya and Somalia as a result of adverse climate events. The deteriorating security situation in Ethiopia entails significant risk of spillovers to the region, including migration flows to the Kenyan border. Tunisia, Ghana, Mozambique, Kenya and South
Africa are hot spots regarding debt sustainability. Tunisia, Morocco, Egypt and Burkina Faso will see current account deficits only improve slightly in 2022 after deteriorating in 2021.
Global growth should remain robust but uneven, with rising divergence between advanced and emerging market economies
Our 2022 GDP forecast remains broadly unchanged, with the Eurozone and the US expected to grow by +4.1% and +3.9%, respectively, while growth in China slows to +5.2% due to ongoing disruptions in the real estate sector and the government’s focus on financial stability.
China’s lowest contribution to global GDP growth since 2015 is likely to have negative spillover effects on emerging markets whose recovery will be shallower compared to past crises.
Global trade is expanding once again above the long-term average but will be disrupted by labor and supply chain bottlenecks, amplified by omicron. We expect global trade in volume to grow by +5.4% in 2022 and +4.0% in 2023.
By Favour Nnabugwu
Global insurance carrier Allianz has expanded its aggregate reinsurance protection for 2022 and also raised its catastrophe budget for the year, after the company experienced a particularly high burden from nat cat losses in 2021.
Allianz’s recently published full year 2021 financial results show that the insurer recorded net natural catastrophe losses, after reinsurance, of €1.637 billion, up significantly on the €880 million seen in 2020.
Last year was another above-average year of catastrophe losses for the industry, and Allianz was mainly impacted by flood and storm events across Europe in the summer months.
All in all, nat cats made up 3.1% of Allianz’s 93.8% combined ratio for 2021, which is up from 1.7% in 2020 and above the ten-year full year average of 1.9%. Weather-related losses, so excluding nat cat, were 1.2% of the combined ratio for 2021, compared with 1.3% for 2020.
In response to the higher nat cat bill, Allianz has renewed its aggregate reinsurance cover at a larger size for 2022, and also increased its catastrophe budget for the months ahead in order to reduce volatility.
Speaking during an analyst call last week, the company’s Chief Financial Officer (CFO), Giulio Terzariol, explained: “When we look at nat cat, internally, we look at nat cat and weather-related losses. So, overall, in the past, for the sum of nat cat and weather-related losses, we had a budget of about 3% of premium and we moved this budget up already, in the last two years, to about 3.2% of premium. Now, for 2022, the way I look at that is 3.5 percentage points.”
He went on to note that when compared with three-four years ago, Allianz’s catastrophe allowance, including weather-related, is now 50 basis points higher.
To further minimise the volatility of its property and casualty (P&C) book, the company has also increased the size of its aggregate excess-of-loss reinsurance protection at the recent renewals. This layer has grown in size by €200 million, year-on-year, to €500 million.
“So, I will say that if we see more nat cats that are included in this 3.5 budget, I would say, when we start getting to 4.5 percentage point of load, that’s the point where the aggregate should come into play,” said Terzariol.
“So, think about that combined budget of nat cat and weather-related of 3.5%, which is 50 basis points higher compared to what we had a couple of years ago and then I will say, at 4.5%, we should be capped in terms of nat cats load, because the aggregate will come into play,” he added.