Experts Call for Increased Capital Base for Pension Fund Administrators Amid Economic Challenges
Amid rising inflation and the depreciating value of the Naira, financial experts have called for a review of the minimum capital requirement for Pension Fund Administrators (PFAs) in Nigeria. The current minimum capital of ₦5 billion, established in 2021, is deemed insufficient to meet operational needs and improve service delivery in light of the country’s economic challenges. Experts argue that recapitalization could spur industry consolidation, enhance competition, and bolster operators’ ability to adopt modern technologies, expand networks, and offer better returns to contributors.
Since the inception of the Contributory Pension Scheme in 2004, recapitalization has been a recurring effort by regulators to strengthen the sector. Past increases in minimum capital requirements from ₦150 million in 2011 to ₦1 billion, and subsequently ₦5 billion in 2021 have aimed to improve operational efficiency. However, with inflation now at 28.37% and the exchange rate exceeding ₦1,700 to the dollar, concerns have resurfaced about the adequacy of the current capital base. Experts highlight that increased operational costs, intensified competition, and customer demands for higher returns make fresh recapitalization a pressing necessity.
Some industry players, however, caution against rushing into another recapitalization exercise, given the short interval since the last review. While they acknowledge economic pressures, they stress the need for strategic timing to avoid overburdening stakeholders. With 18 licensed PFAs and significant market fragmentation, analysts suggest focusing on enhancing operational efficiencies and addressing market dominance by a few large players to create a more robust and equitable pension system.
