A few hours here, I commended the Central Bank of Nigeria (CBN) for a really brilliant policy shift: “liberating” international money transfer organizations, thereby making it possible for Nigerian diasporas to supply more dollars into the Nigerian economy, and by doing that, reduce the pressure on the Naira. I expect the black and official forex rates of Naira to attain a manageable parity by the end of Q1 2021 after the current backlogs of dollars requests have been sorted out.
Our total remittance as a nation is always at parity with the total executed national budget. In other words, even though we may have a budget of $30 billion, the execution is never 100%, and by the time you look at the percentage of execution, the number is always around the amount remitted into the economy from Nigerians living abroad. That remittance froze because the deal was not there: if you had sent $1,000 via Western Union last week, they would pay your family N384,000!
Hopefully, in two weeks, after they have adjusted to the new policy, Western Union will ask your bank to pay you $1,000 in cash or put the money in your dorm account. With that, more forex enters into Nigeria and more Nigerians in diasporas will have incentives to wire more.
More so, I commented on Tangerine Life, a digital insurance company, which invested in a startup, CredPal, for choosing the startup over just investing in their regular choice (real estate) after treasury bills went out of form in Nigeria. And in that piece, I wrote: “We will be waiting for the pension funds to join the party. If that happens, a new generation of well-backed startups in Nigeria will emerge”.
Unfortunately, that will not happen; someone shared a link which I missed when it ran. Yes, the Nigerian government borrowed N6.16 trillion from then N8.499 trillion pension funds: “The pension commission said 72.5 per cent of the fund had been borrowed by the Federal Government and invested in the FGN securities totalling N6.16tn during the period under review.” [This was done in 2019]
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The total pension assets under the Contributory Pension Scheme rose to N8.49tn as of the end of November 2018 financial period, latest figures obtained from the National Pension Commission on Tuesday revealed.
The pension commission said 72.5 per cent of the fund had been borrowed by the Federal Government and invested in the FGN securities totalling N6.16tn during the period under review.
The Pension Fund Administrators also invested 6.87 per cent or N584.321bn of the fund in domestic ordinary shares, while 0.71 or N60.529bn of the fund was invested in foreign ordinary shares.
According to the Pension Reform Act, the PFAs manage the funds which are in the custody of the Pension Fund Custodians.
That is unfortunate; the government’s borrowing of pension funds and investing in government’s securities will remain suboptimal. It is just offensive for Nigeria to keep cheating its citizens. There is a need for us to recalibrate as a nation. Putting 10% of these pension funds in our emerging sectors powered by these young companies will transform Nigeria faster than using the funds in the way we are using them today.
I call on the government to see pension funds as strategic assets for building and funding the future of Nigeria. Like in Canada and other economies, these funds invest in emerging sectors, helping innovators and entrepreneurs have access to capital to accelerate economic transformation. It is time Nigeria joins that party. While we continue to see big buildings in our banks, the fact is this: most of them do not worth much when benchmarked with the values these emergent startups are creating.
Yes, Paystack was worth more than Wema Bank, FCMB Holdings and Unity Bank combined on the day it was acquired. But Paystack would not have been possible without outside capital from America. Nigeria’s pension funds could seed and scale other entities like Paystack which may not have access to American funds. We have an obligation as a nation to recalibrate on how we plan to run the future redesign. Yes, Nigeria must recalibrate; Mr. President, this is your time.
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We play sports betting, lotto, draft, ludo, and all manner of gambling and betting, but when it comes to betting on things that can lift a nation, we magically become jittery and pessimistic, and then offer amalgam of excuses on why we should not go that route.
Put money on start-up? People will begin to ask how sure are you their money won’t vanish, or whether you have the capability to deliver on the lofty ideas. On the surface, you might be tempted to believe that they are really expressing legitimate concerns, but look deeper, it borders on value system and mindset. When it comes to investing in dirty deals or secret dealings, all due diligence and scrutiny goes out of the window. In other words, our values work in reverse direction: we believe false or fake things, but doubt and scorn at legitimate endeavours.
The government just swapped treasury bills with pension funds borrowing, the same people, same pattern, just different names!
The people think like their government, and the government is the reflection of the people; anyone accusing the government independently has no clue on how rotten and shallow the minds of its citizens are. The government doesn’t trust start-ups, just like its people.
Look in the mirror…
You’re absolutely right Francis. We are so myopic in our thought process and sentiments and all kind of ill-thoughts come in when it comes to investing in those things or areas that can move the country forward and hasten out economy development.
Just like you said, the people think like their government, and the government is the reflection of the people.
Not until we change our thought process and evaluate things on rational ways, then I’m sorry, we ain’t going anywhere.
Vision-President Ndubuisi, we really do not need someone to effect the productivity of farm industry or affecting people’s bank account, Naija needs someone like Gandhi.
Insightful
Hmmm. I thought pension funds are not supposed to be put into risky assets. Startups are high risk investments because of their failure rate. It might be too risky for a PFA to put the money in startups. Governments should rather create an enabling environment for private sector to invest in infrastructure. A lot of infrastructure projects in Nigeria like railway, roads, gas pipelines are bankable projects that private sector can invest in and recorver their money if there is a nice PPP arrangement in place.