FG Mulls Mandatory Savings Scheme For Nigerians
The Federal Government mulling over the report of the Working Group on National Savings Scheme that has proposed a mandatory savings scheme for all Nigerians between 18 to 50 years of age, as the Federal Government seeks ways of mobilizing funds to boost the national economy.
The Working Group which presented its report to the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed in Abuja yesterday advised the government against making it mandatory for corporate bodies to save.
Dr. Ore Sofekun, CEO Foothold Advisors, who presented the report on behalf of the Committee Chairman, Mr. Fola Adeola, said implementing a mandatory national savings scheme was feasible but noted that it has to be driven by incentives, primarily tax.
“The scheme”, according to the group “will be open-ended and considering its medium-term to long-term objective, participants will have the opportunity to decide how their contributions will be invested and will be able to make periodic re-allocations.
“To allow for product diversification and provide savers flexibility and choice, multiple investor risk/return profiles have been designed with corresponding savings products. These products will allow service providers to offer an array of diversified product options tailored to match customer needs. New Government issued savings instruments that have features to protect savers from rising inflation have been recommended and a number of special products have also been proposed with the needs of Nigerians in mind”.
The group also recommended the scheme should be supervised by the Securities and Exchange Commission, starting off as a department in the commission.
“With the Investment and Securities Act (ISA) of 2007 currently being reviewed, a new section should be introduced in the proposed Investments and Securities Bill (ISB) to provide for the establishment of the National Savings Scheme as a mandatory scheme and other related matters. The new provisions in the ISB should be articulated to give the NSS its own advisory board. The governance structure of the Scheme should be robust and transparent with stringent measures in place to ring-fence the assets of the Scheme”, it added.
The Committee suggested a N1.26 billion fund for the take-off of the scheme.
Receiving the report, Mrs. Ahmed thanked members of the committee, which was set-up in May 2020, for their work, saying the government would review the report and come up with a position.
She observed that “mobilization of domestic savings for capital formation and investment remains a critical success factor for harnessing the true growth potential of the Nigerian economy. The just launched Medium-Term National Development Plan 2021-2025 recognizes the role of a deep financial market in supporting the high and sustainable growth the plan aims to attain.
“I hope the proposals made in this report will guide the Government in taking actionable steps to actualize the objectives outlined”, she added.
Earlier, the Director General, Securities and Exchange Commission (SEC), Mr. Lamido Yuguda explained that the need to establish a National Savings Strategy was outlined in the 10 Years Capital Market Master Plan “as one of the key strategies to enhance capital formation by mobilizing domestic funds for investment to drive rapid economic growth.
“It envisaged the deliberate provision of risk capital as venture capital and private equity that are naira based and more committed to the long-term prosperity of Nigeria as well as create a buffer to the instability created by foreign investors. The CAMMIC commissioned a white paper on a National Savings Strategy and recommended to the Minister of Finance, Budget and National Planning the formation of a Working Group to explore the feasibility of the report findings”, he added.