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Borrowing from pension funds

Besides reactions to the impact of coronavirus and #EndSARS carnage in recent times, one other issue that has raised dust again is the news that governors are tinkering with the idea of borrowing N2 trillion from the Contributory Pension Scheme assets.


For the governors, whose stalk in trade is to search for money everywhere even when they have nothing substantial to show for the borrowings and allocations they have amassed overtime, the call to borrow from the pension funds further highlights the depth of their ignorance and lack of capacity to investigate issues properly before taking decisions.


It also becomes distasteful to imagine that governors, most of who have failed to remit the contributions of their workers, are the ones agitating to borrow from the funds. Moreover, the governors are only being clever by half as they actually have access to the funds through bonds.


But for the fact that their predecessors had gone that route in the past, which they are currently servicing, it has become a no go area for them.


This is not the first time that government officials would suggest dipping fingers into the funds, which is being guarded by the Pension Reform Act 2014 as a way of forestalling retirees from going through the pathetic experience of the past. As a matter of fact, the new pension scheme was introduced following the total failure of the old order under the Defined Benefit Scheme.

Nigerians are still familiar with scenarios where aged pensioners collapsed while queuing to receive their pensions that were in most cases not more than N2,000. The leakage in the old pension system provided an opportunity for pension board officials and relevant ministries to defraud the system, enriching themselves, family members and cronies while those who deserved the funds were left to wallow in poverty and in most cases died without ever receiving their due.


Today, we know for sure the drama being played out by the former Pension Reform Task Team boss, Abdulrasheed Maina, who is being tried for embezzling N2 billion. Basically, it was the failure of the system that a study was carried out by former President Olusegun Obasanjo to get a pension arrangement that would guarantee a future for Nigerian retirees.


Thus, the revised PRA 2014 came onboard and has remained immutable since 2005. The growth and success of the scheme, which assets currently stand at over N11 trillion, have remained stable without an iota of scandal.


This has been made possible because of strict adherence to the Act that set it up, which specifically states that larger part of the funds managed by Pension Fund Administrators (PFAs) be invested in capital market with a Retirement Savings Account (RSA) opened for workers that contribute.


Even in the face of this unassailable arrangement, government officials have continued to agitate that part of the funds be put into infrastructure development.


One could recollect that besides the recent agitation to borrow N2 trillion, a former Central Bank of Nigeria (CBN) Governor, Lamido Sanusi, had in the past proposed that part of the funds be ploughed into electricity sector.

Even though the proposal did not sail through, a similar one, however, resurfaced years later when the current Minister of Works and Housing, Babatunde Fashola, also came up with the idea of injecting part of the growing pension fund in infrastructure development.


The pension fund, though large, is not warehoused in an account that can easily be tampered with; and from the law creating the scheme, it would be a tall order for even the Federal Government to borrow from the funds. Moreover, it also smacks of ignorance when government officials easily make reference to countries like South Africa and some others as deploying large part of their pension assets into infrastructure.


For the record, the pension industry in those countries being referenced had existed for over 50 years to enable them conserve enough funds for infrastructure and other areas of investment. In Nigeria, the scheme is still in its formative period as even the transfer window unit was recently unveiled while the micro-pension plan is yet to take off fully.


The way it works is such that it involves contributions by employers and employees. It is, therefore, unthinkable that government would even take such a fundamental decision solely, without due consultation with representatives of employers and employees – who are key stakeholders and recognised by law.


Moreover, the government should bear in mind that another pension scheme failure would ultimately spell disaster for another generation of Nigerians, who are capable of disrupting the socio-political sphere of the country and putting the economy on the edge.


The scheme is being guided by the law that set it up and, which currently does not have any room for borrowing.


That is the pattern we are following. It is not as if there is no room for investment in infrastructure, but it appears risky the way those agitating it are going about it. The asset is fully funded, privately managed by Pension Fund Administrators, who are all licensed in line with the provisions of the Act by the National Pension Commission (PenCom).

It is based on private individuals Retirement Saving Accounts (RSA). The principal objective of the scheme is to ensure that everyone who worked in the public services of the federal, states and local governments and the private sector who had contributed receives his/her retirement benefits as and when due.


As a matter of fact, we advise that those demanding that the pension assets be tampered with in whatever form to drop the idea as the scheme does not even allow that. The pension fund is about investment for the contributors and not borrowing.

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