Nigeria’s pension regulator: ‘Ghosts don’t have biometrics’

Ghostbuster is not a requirement generally included in the job description of a financial regulator.

But slaying ghosts has been an important part of the role of Chinelo Anohu-Amazu, director-general of Nigeria’s pension regulator, the National Pension Commission (PenCom).

Indeed, payments to “ghost” (non-existent) pensioners have been just one of the ways corrupt officials in the country have long been defrauding the Nigerian state of cash.

But such practices are being eliminated with the introduction of biometric authentication, part of a comprehensive plan overseen by the regulator to verify Nigeria’s population of retirees.

“Ghosts don’t have biometrics,” says Ms Anohu-Amazu, who has worked for PenCom since it was established under the 2004 Pension Reform Act.

The act created a national contributory pension scheme to replace a poorly managed defined-benefit system that had accumulated a N2.3tn ($11.5bn) deficit.

Before the 2004 reforms were passed, very few private sector employees were enrolled in pension schemes. Savings in private sector schemes were also often stolen or abused by trustees and fund managers, while officials in the public sector pensions arena were frequently able to withhold payments to retirees.

Ms Anohu-Amazu, who is a lawyer by training and holds degrees from the University of Nigeria and the London School of Economics, says that the 2004 reforms were seen as “highly controversial” but the changes have been a turning point for the Nigerian pension system.

“The 2004 act has created an entirely different landscape,” says the 42-year-old.

Fiona Stewart, a senior financial sector specialist at the World Bank in Washington, agrees Nigeria has done a good job of improving the situation for pensioners at a national level. “Experience elsewhere suggests it can be difficult to achieve scale and to control costs through local initiatives,” she says.

Ensuring the security of the pensions saved was one of the main goals of the reforms.

Contributions are held by one of four designated custodians and are ringfenced from the 20 administrators that pay pensions to retirees.

“Great care is taken to ensure that the pension savings are invested in secure vehicles.

“There has not been one single case of fraud within the [post-2004] pension system,” says Ms Anohu-Amazu with some pride, adding that her resolve to pursue change and improve the situation in Nigeria has been bolstered by the opposition she has faced to the reforms.

“I was told I was too young and was asked why a lady should be involved with such matters,” she says, reiterating that the regulator has a zero-tolerance attitude to wrongdoing.

She is very critical of those who see no value in her no-nonsense approach. “I don’t speak their language and I never will,” says Ms Anohu-Amazu, whose parents encouraged her to question authority from a young age.

As a result of the reforms, 6.8m Nigerians now have retirement savings accounts, while more than N5.2tn has been accumulated in the pension system.

Employers with three or more staff members are required to enrol their employees in the pension system and to provide matching contributions. The 2004 act required employers and employees to each pay 7.5 per cent of a salary into a pension.

Ms Anohu-Amazu says: “Nigerians now see pension packages as an important consideration within their career choices.”

However, these arrangements do not cover the many Nigerians who are self-employed or work in “informal” employment, as Ms Anohu-Amazu calls it.

Her ambition is to see millions more saving for retirement under a micro-pensions initiative that will be launched next year. “The hairdressers, tailors and market traders have saved nothing,” says the director-general.

The National Pension CommissionPenCom is working with trade unions to encourage pension saving and to seek ways to address the needs of non-unionised sectors. “The message about the importance of pension savings is beginning to resonate,” Ms Anohu-Amazu says.

Gerard Lyons, former chief economist at Standard Chartered, the bank, said at a pension summit in Abuja in October: “I am very impressed with the reforms in Nigeria. The government and PenCom have focused on building the right foundations for the pension system and all of the ingredients are in place for further expansion.”

Under a second pension reform act passed in 2014, pension assets can also be invested in Nigeria’s roads, rail and power supply infrastructure, which are badly in need of updating. Additionally, permission to diversify into real estate property has been granted as part of the 2014 legislation.

At the moment less than 1 per cent of Nigeria’s pension assets are invested in infrastructure, while just 5 per cent is held in property. The vast majority of assets are invested in federal and state government bonds and money market instruments.

“There will be a huge opportunity for pension funds to play a more active role in economic development, helping to source the $15bn needed annually to bring infrastructure up to scratch,” says Ms Anohu-Amazu.

The federal government is planning to launch a $25bn infrastructure fund, and regional authorities are also working on projects in the hope of attracting interest from both multilateral agencies and private sector investors.

Growth in Nigeria’s gross domestic product is expected to slow to around 4 per cent this year, mainly because of the fall in global oil prices. But Ms Anohu-Amazu remains upbeat about the country’s prospects.

“I see Nigeria changing very rapidly. People are raising their game and there is a wave of entrepreneurship, in finance, music and acting,” she says.

“Who would ever have thought that there would be demand for cappuccino in Lagos?”

CV

Born 1973

Total pay Not disclosed

Education
1996 LLB, University of Nigeria, Enugu Campus
1997 BL, Nigerian Law School
2000 LLM, London School of Economics

Career
2002-04 Consultant for private sector initiatives, as well as non-governmental organisations and public institutions, including the Bureau of Public Enterprises, Nigeria
2004-08 Pioneer commission secretary and legal adviser, National Pension Commission (PenCom), Nigeria
2008-12 Legal commissioner, PenCom
2012-14 Acting director-general, PenCom
2014 to present Director-general, PenCom

National Pension Commission (PenCom)

Established 2004

Assets under supervision N5.2tn ($26bn)

Employees More than 300

Headquarters Abuja, with six regional offices across Nigeria