Abubakar K. Mommoh
16 November 2008
(Page 2 of 2)
Nonetheless, we must understand that this down turn will also create greater awareness about how the stock market really works. Nigerians are going to demand more research about factors that drive the price of stocks before they buy in future. People are going to exercise more caution and they are going to approach the process of buying shares more systematically. This will help in the development of the market and of course, there will be other instruments that will come out to assist investors to minimise the down ward risk in the investment they will make in the equity market.
Becuase if somebody comes to you and says come and buy the shares of my company, may be it will be easier for him to sell the shares to you only if he gives you an instrument that gives an undertaking that even if the market is going down you can have the right to sell your shares at a predetermined price, some kind of sale option. For instance, if they offer shares of a particular bank that is N40 per share to day and with another instrument that says even if the price goes down below N35 by this instrument you can offer those shares for sale at N40 which means it will limit the amount of loss that you make. New instruments will come out that will provide special guarantees for diminishing share value before investors can be convinced to venture into.
It is more than two years since the new pension scheme commenced, is it justified?
Definitely, the pension system has been justified because now many Nigerians across the country get their quarterly statements from Pension Fund Administrators and they see how much they have in their Retirement Savings Accounts (RSA).When you open your Retirement Savings Account it is a private arrangement between you and your PFA and that account is personal to you the same way you have your saving account in the bank. The only difference is that this account is a plan towards your retirement and you only access it when you retire. But you are free to move it from one PFA to another. It is not the same when you used to line up at your employer's office chasing your benefit long after you have retired. Now, you deal exclusively with a professional third party on a contractual arrangement.
For us at Legacy Pension Managers, we have already over N369 million as lump sum payment with workers that have registered with us. We have at least about 160 retirees to whom we have paid this money. We are also paying them well over N40million a month as programmed withdrawals.
The only thing is as with all new endeavours, they come to us with their own challenges. One of these is how do you continue to maintain contact with all the workers you have registered across the country. As you know, communication is still a problem. Sometimes when workers are redeployed from one location to another, they do not notify their PFA, so it makes it much difficult for contact.
But as Nigeria becomes more advanced in communication through internet, telecommunication and other channels of communication, the pension system will become more reliable and people will see the benefits of the scheme.
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