Is Nigeria's pensions industry ready for investments in derivatives?

The pensions industry is undergoing significant developments globally, with pension fund administrators in Kenya gaining approval to invest in exchange-traded derivatives as the country's first ETF contract is set to be listed on the Nairobi Bourse. The question arises: Is Nigeria's pension industry ready to explore investments in derivatives? Niyi Falade, CEO of Crusader Sterling Pensions, sheds light on the potential for Nigeria's pensions industry to deepen its investment landscape. Falade emphasizes the importance of readiness and the need for infrastructure and regulatory frameworks to support derivative investments. While recognizing the benefits of derivatives for portfolio management, Falade acknowledges that Nigeria may not be fully prepared to engage in such investments currently. He stresses the importance of effective risk management and regulation to ensure that derivatives are used responsibly for overall portfolio improvement. The discussion highlights the need for comprehensive readiness in the industry before delving into derivative investments. Falade also acknowledges the positive developments in Kenya and the potential for growth in Nigeria's pension sector through innovative investment opportunities. The conversation delves into the micro-pension scheme aimed at capturing the informal sector and encouraging long-term savings among self-employed individuals. Falade notes the challenges of convincing traders and small business owners to set aside funds for retirement amidst economic uncertainties. Nonetheless, he underscores the importance of demonstrating value, flexibility, and transparency to promote savings in the informal sector. The micro-pension scheme presents a game-changer in expanding pension coverage and releasing capital for investment. Falade also addresses the need for awareness campaigns and engagement with community leaders to promote pension participation among informal sector workers. Winston Orsichuku, Managing Director of First Ally Asset Management, lauds Nigeria's pension system for its impressive performance and commitment to service delivery. He highlights the success of the contributory pension scheme in ensuring retirees receive their benefits without delays or complaints. Orsichuku emphasizes the importance of trust in the pension system and the potential for the micro-pension scheme to provide a safety net for vulnerable populations. The discussion also touches on regulatory developments, such as the Vice President's approval of an act protecting pension rights for judges and the introduction of a transfer window for RSA account holders to switch PFAs. Both speakers commend the industry's focus on customer service and competition, emphasizing the need for seamless processes and customer-centric solutions. The conversation underscores the ongoing efforts to enhance Nigeria's pension industry through regulatory reforms, innovative schemes, and improved service delivery. As the industry navigates new opportunities and challenges, stakeholders remain optimistic about the potential for growth and development in Nigeria's pensions landscape.