N20trn Pension Fund: Uproar Over Fg’s Plan to Tamper With Workers’ Savings

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Although the Federal Government has affirmed that it would not do anything contrary to the Pension Reform Act 2024, on sources of funds to finance its infrastructural projects, stakeholders continue to express outrage over the report that government was considering deploying the over N19.66 trillion pensions savings for infrastructure. PAUL OGBUOKIRI reports

Plan to harness local funds to finance infrastructure

The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, said after a two-day Federal Executive Council meeting at the Presidential Villa on Tuesday, that the government would unveil a plan to harness local funds, including the pension fund, to finance infrastructural development. He disclosed that government plans to use the funds from local sources, including the over N19.66 trillion of the country’s pension fund to finance infrastructural projects across the federation.

According to the minister, the government’s move to invest pension and life insurance funds, along with other domestic funds, “in housing, power, rail, roads, water transport, even technology” is also to improve Nigeria’s economic growth, create jobs, and reduce poverty. Edun said: “These are key drivers of economic growth. They increase productivity. When you invest in them, you get increased productivity, economic growth, and job creation, which reduces poverty.

“And that is the strategy. So, it’s twopronged, and we’re not pivoting towards this all-important growth, and you say, where the resources come from? Nigeria is resilient. Nigerians are resilient.” Edun stressed that, “even before we start looking to foreign investors, we start looking to foreign funding available in Nigeria, longterm funds to fund infrastructure projects, and it’s within the pension.”

He mentioned that per the life insurance and investment fund industry, “generally, there are offers of N20 trillion available, or much of it is in short-term funding that doesn’t need to be quite sure money is long-term,” noting that “people save over their lifetime for their pension.”

The minister, therefore, revealed that, “in conversation, in consultation, collaboration, and cooperation with the private sector, we are now able to announce, with the full knowledge and support of all parties, that there will be an initiative to fund growth through investment in infrastructure, including housing provision of mortgages, long-term mortgages, and 25- year mortgages at relatively low interest rates.”

He added: “Initially, of course, the government will stand by and provide some support, particularly in this era of high interest rates but eventually, as interest rates come down, there should be less room for the government through providing, for example, guarantees and so forth. “So, we can look forward to these huge funds being leveraged with the expertise, the ability, the capacity of the private sector, partnering with the government to drive economic growth.”

He said house construction will be funded on the supply side while mortgages will be provided on the demand side, so that those constructing houses have an outlet and Nigerians, who are saving so much through pension funds have the bonus of access to affordable mortgages.

Stakeholders denounce plan

The comments by the Minister sparked off immediate reactions, mostly apprehension and outrage from Nigerians, who railed against the move, with the former Vice President of Nigeria and Presidential candidate of the Peoples’ Democratic Party,(PDP) in the 2023 elections in Nigeria, Alhaji Atiku Abubakar, describing it as a fraud. His words; “There is, according to the Minister, a move by the Federal Government to rev up economic growth by unlocking N20 trillion from the nation’s pension funds and other funds to finance critical infrastructure projects across the country.

The Minister has indicated that although, “the initiative is expected to attract foreign investment interest over time”, domestic savings are his ‘immediate focus’ for now. “He provided no useful details, such as the percentage of the funds to be mopped up from the Pension Funds, for example. Even at that, this move must be halted immediately! It is a misguided initiative that could lead to disastrous consequences on the lives of Nigeria’s hardworking men and women, who toiled and saved and who now survive on their pensions, having retired from service.

“It is another attempt to perpetrate illegality by the Federal Government. The government must be cautioned to act strictly within the provisions of the Pension Reform Act of 2014 (PRA 2014), along with the revised Regulation on Investment of Pension Assets issued by the National Pension Commission (PenCom). In particular, the Federal Government must not act contrary to the provisions of the extant Regulation on investment limits to wit: Pension Funds can invest no more than 5 per cent of total pension funds’ assets in infrastructure investments. I note that as of December 2023, total pension funds assets were approximately N18 trillion, of which 75 per cent of these are investments in FGN Securities.

“There is no free Pension Funds that is more than 5 per cent of the total value of the nation’s pension fund for Mr. Edun to fiddle with.’ Atiku concluded by urging the minister to introduce the necessary reforms to restore investor confidence in the Nigerian economy and to leverage private resources, skills, and technology.

FG won’t do anything illegal with pension fund -Edun

Reacting to the intense criticism, the minister disclosed that the government has no plan to do anything illegal with the pension funds. Edun, in a video message posted on the ministry’s social media handle, stated that the Federal Government has no intention of improperly accessing workers’ pension savings.

“It has come to my notice that there are stories making the round that the Federal Government plans to illegally access the hardearned savings and pension contributions of workers. Nothing could be farther from the truth. The pension industry, like most of the financial industry, is highly regulated. There are rules, there are limitations about what pension money can be invested in and what it cannot be invested in.

“The Federal Government has no intention whatsoever to go beyond those limits and go outside those bounds which are there to safeguard the pensions of workers. Now what was announced to the Federal Executive Council, merely for noting, merely for information, no approval was sought for any action whatsoever, was that there was an ongoing initiative drawing in all the major stakeholders in the long-term savings industry, those that handle funds that are available over a long period.

“To see how within the rules, within the regulations and the laws, these funds could be used maximally, most effectively, to drive investment in key growth areas, infrastructure, housing, and of course, to find a way to provide Nigerians with affordable mortgages,” he stated. Stressing the strict regulatory framework governing the pension industry, he assured Nigerians that the government was committed to compliance to safeguard workers’ pensions. Edun stated that the government has not attempted to increase the risk of the pension funds or to allow their investments to be less safe.

“Within this context, there’s no attempt or consideration to provide less safe investments for pension funds, or even insurance funds, or any investment funds that are made available. “No attempt whatsoever to increase the risk; no attempt whatsoever to lower the returns that would otherwise be earned, and we must remember that the Federal Government possesses the ability to provide guarantees, where such are needed to unlock funding that would lead to growth, creation of jobs, and alleviation of poverty.

“It is an ongoing conversation, a challenge, a test, for the best and the brightest in the financial industry to come up with solutions that, whilst safeguarding the long-term savings, do provide an avenue that can help to boost growth in the economy,” Edun said.

Pension fund as a trust fund

Professor of Economics at Babcock University, Segun Ajibola, said that the pension fund is a trust fund which the trustees (government and other stakeholders) owe the contributors the sacred responsibilities of guarding it jealously. “It is not for government to deep its fingers in whenever it wishes.”

“The announcement by the Hon. Minister gives the impression that the Federal Government can access the pension funds at will or exert influence over the bodies like the National Pension Commission (PenCom) and Pension Fund Administrators (PFAs). However, it’s crucial to remember that Section 18(c) of the Pension Reform Act 2024 mandates PenCom to regulate, supervise, and ensure effective administration of pension matters and retirement benefits in Nigeria. Likewise, PFAs hold sole responsibility for investing pension funds,” he said.

Government already borrowed 70% of the pension fund–Organised Labour

Earlier on Thursday, the Nigeria Labour Congress and the Trade Union Congress(TUC) had asked the Federal Government to refrain from any plan to tamper with the pension funds. The NLC President, Joe Ajaero and the TUC Deputy President, Tommy Okon, in a joint letter on Thursday, advised the government not to risk the future of workers by borrowing the money to fund infrastructure development.

The letter, which was signed by NLC President, Mr Joe Ajaero, and TUC Deputy President, Mr Tommy Etim-Okon, was titled: “Leave our Pension Fund Alone: Do not Tamper with Workers’ Funds”. According to Ajaero, the announcement has ignited deep apprehension and unrest among Nigerian workers, who are the primary contributors of these funds.

“We, therefore, urge the government to reconsider its plans to tap into pension funds and instead explore sustainable financing options that do not compromise the retirement security of Nigerian workers. “Organised Labour will resist any action that seeks to undermine the retirement savings of Nigerian workers,” they said.

The letter, however, noted that the government had allegedly accessed nearly 70 per cent of the entire pension funds, adding that it was not merely alarming; it was unacceptable. It said that Nigerian workers had entrusted their hard-earned savings for retirement security, and not for government projects. “It is imperative to halt any further plans to tap into these funds, especially given the lack of transparency and accountability in past government’s borrowing practices.

New Telegraph

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