In Nigeria’s unstable socio-economic environment, there is always a high possibility of well-intentioned programmes sailing into turbulent waters. In substantiation, fears are escalating that the Contributory Pension Scheme assets might come under threat from the government and the private sector, both of which are interested in relaxing its rules and regulations. Both parties have been mounting pressure on the regulator – the National Pension Commission – to get a piece of the pie in their bid to build infrastructure and raise investible funds respectively. PenCom should boldly resist their prodding; it should not change the rules in the middle of the game to satisfy them.
Unlike the Nigerian economy, the pension assets have continued to stand out. The Federal Government took a giant step in 2004, which radically replaced the rotten and dehumanising system in the public service – the Defined Benefits Scheme – with the CPS. From that little seed, it had 8.41 million contributors, comprising federal, state and private employees, by December 2018, with a target to attain 20 million enrolees this year. That is fair enough.
By August this year, the assets had risen to N9.4 trillion, said Aisha Dahir-Umar, the PenCom acting Director-General. This is not a mean feat in a country with the 2019 budget of N8.9 trillion. Aware of the aggregation, the Federal Government has been desperately trying to squeeze something out of the funds, ostensibly to rebuild the country’s broken infrastructure. To be fair, PenCom has resisted these overtures, after all, its rules/regulations state that the Pension Fund Administrators can invest in infrastructure bonds with a minimum value of N5 billion as long as the proposals meet the set criteria.
Apparently, the government wants more than this and the rules relaxed, going by the strident alarm by Dahir-Umar at a recent summit of directors. “What is news, however, is the recent upsurge of clamour for (the) deployment of pension funds to support several new initiatives in both public and private sectors,” she lamented. “Oftentimes, such clamour is inappropriately pursued by its proponents.” In an environment notorious for the impunity of government, this is ominous.
This has been the mindset in government: deploy the assets into public projects. While pension assets are truly valuable in funding projects elsewhere, the rules are there to protect the fund and pensioners. From inception, the Pension Reform Act 2004 – and the succeeding amendment in 2014 – has also made sufficient provisions on how to invest the assets. These provisions are aimed at safely generating adequate returns on contributions. This has run smoothly for the past 15 years, a credit to the initiators, the succeeding boards and managers of the assets.
Consequently, the era of pensioners collapsing and dying in verification queues is gone. Except for those still marooned in the DBS, pensioners, as young as 50 years, can now access 25 per cent of their contributions to meet their needs if they have been out of job for six months or more, which is the global ideal.
Apart from that, the economy is receiving a boon. “These pension assets are overwhelmingly invested in the national economy, with positive impact on all major sectors and a significant contribution to the GDP,” says the acting DG. Therefore, it is not that the funds are idle, as some might erroneously think. The PRA has set limits of where to invest the funds, including bonds, treasury bills, the stock market and banking in line with global best practices.
PenCom should devote itself to these rules primarily because public infrastructure in Nigeria is a delicate undertaking where returns are very unpredictable because of institutional weaknesses. Moreover, government policies are erratic. Take the issue of tolls: some highways were tolled until 2003 when the Federal Government abolished tolling in favour of a tax on petrol. But the policy has been in abeyance since then. It is now double jeopardy for the government, which had already demolished the toll gates and is not collecting the levy. In the event that a chunk of the pension assets was deployed to building the aforementioned infrastructure projects, the lifetime investment of the contributors would have gone up in smoke.
Again, corruption cannot be ruled out. This was partly why the Olusegun Obasanjo administration revoked tolling. Corruption, not prompt pension pay-outs, has been the defining feature of the DBS. On Tuesday, a Federal High Court granted an interim forfeiture of 23 properties traced to Abdurasheed Maina, a former chairman of the Pension Reform Task Team, who is to be tried for allegedly stealing N2.1 billion pension funds. In 2013, the High Court of the Federal Capital Territory convicted one Yakubu Yusuf of stealing N24 billion pension funds – all evidence of the rotten past scheme, which the new system should not experience in any other form.
Nevertheless, pension assets are valuable drivers of growth in other stable, transparent and developed economies. Caution is critical in Britain, though there is more liberalism in Australia and Canada. While the 89 local government pension schemes in Britain allocated 0.7 per cent of their total £263 billion to infrastructure as of 2018, Canada’s Ontario Municipal Employees’ Retirement System allocated 14 per cent and Australia’s HESTA (a health and community services superannuation of 840,000 members and $51 billion in assets) did 9.2 per cent, the United Kingdom Pension Funds noted.
Eyamba Henshaw, a one-time PenCom’s Commissioner, says, the main goals of pension investment are to ensure adequate, affordable and sustainable benefits to contributors; secure safety and security of funds; ensure adequate liquidity to pay all pension benefits of contributors as and when due; achieve an optimal trade-off of risk and return through strategic asset allocation. These are the minimum responsibilities governments owe workers. The Federal Government should, therefore, ensure that pension funds earn decent returns for workers by promoting good pension fund performance. For the CPS funds not to go the way of its predecessor, vigilance is critical, an assertion reiterated by Dahir-Umar. All contributors, labour unions and other interested parties should build mechanisms to monitor their assets. PenCom should redouble its drive to make the programme more inclusive, such as the Micro Pension Plan it recently introduced. The Federal Government should deploy the law to get all the state and local governments to join the scheme.
