Pension Review Magazine
Pension Fund Administrators (PFAS) have invested less than 3 per cent of Nigeria’s N7.17 trillion pension assets in real estate properties as at the end of September, 2017.
Data sourced from the National Pension Commission (PenCom) show that PFAs still prefer to invest in federal government bonds and treasury bills at the expense of investments in infrastructure that can impact bridge the infrastructure deficit in the country
Pension Review Magazine analysed the asset classes with pension fund investments and found that N3.88 trillion have been invested in federal government bonds, translating to 54.09 per cent of the total pension fund assets in the country as at the end of September.
Closely following federal government bonds are treasury bills with N1.27 trillion invested, being 17.73 per cent of the total assets.
Further analysis showed that as at the period under consideration, PFAs have invested N620.60 billion of pension fund assets in domestic ordinary shares, being 8.66 per cent of the total assets and N98.81 billion in foreign ordinary shares being 1.38 per cent of the assets.
Pension Review Magazine also observed that while PFAs are heavily investing in federal government bonds, they are cautious of investing in sub-national bonds and securities, including the ones issued by agencies.
For instance, during the period, PFAs invested N5.85 billion in bonds issued by the Federal Mortgage Bank of Nigeria (FMBN) and Nigeria Mortgage Refinance Company (NMRC), translating to 0.08 per cent of total assets.
A total of N155.70 billion have been invested in state government securities, being 2.17 per cent of the total assets while N264.71 billion have also been invested in corporate debt securities, being 3.69 per cent of the total assets.
Analysis also showed that investments in local money market securities such as banks, commercial papers and foreign money market securities remain low.
Under local money market securities, PFAs have invested N489.58 billion in banks, N55.42 billion in commercial papers and N26.69 billion in foreign money market securities.
Mutual funds, such infrastructure fund and private equity fund, are one of the least assets classes with pension fund investment.
Analysis of the data showed that PFAs have invested N24.06 billion in private equity fund, being 0.34 per cent of the total assets while N5.24 billion are in infrastructure fund, being 0.07 per cent of total asset.
An FCT High Court in Jabi, Abuja yesterday ordered the remand of four suspected military pension fraudsters in Kuje prison over their alleged complicity in stealing military pension funds to the tune of N339million.
The Economic and Financial Crimes Commission (EFCC) alleged that the suspects: Wing Commander Ishaka Yakubu, Lieutenant Commander Akinbamidele Odunsi, Abidemi Aderemi Kolade and Violet Ofoegbunam conspired to collect monies meant for payment of death benefits to deceased army officers, and converted same to personal use.
They were arraigned on a 6-count charge of conspiracy and stealing of pension funds to which they all pleaded not guilty.
In view of their plea, counsel to the EFCC, Steve Odiase, asked the court to fix a date for hearing and to remand the accused persons in custody pending trial.
Odiase invited the court to take note of the fact that, Yakubu and Odunsi had on several dates refused to come to court, “an attempt aimed at frustrating efforts to have them arraigned over the alleged offence”.
The trial judge, Justice D. Z. Senchi, while ordering the remand of the defendants adjourned to November 13, for hearing of their bail applications.
There is a loophole in the Contributory Pension Scheme (CPS) with respect to the accrued rights of some pensioners who worked with the Federal Government before the new scheme came into being.
The Federal Government is mandated by law to increase the accrued rights of retirees who retired under the contributory pension scheme every five years or whenever salaries are reviewed.
This is a loophole in the Contributory Pension Act, 2004, amended in 2014, which could not override Section 173 (3) of the Constitution: “Pensions shall be reviewed every five years or together with any Federal Civil Service salary review, whichever is earlier.”
A source with a pension regulatory agency in Abuja told Pension Review Magazine that by this provision, the accrued pension rights of federal civil servants who transited to the contributory pension scheme should also be raised whenever pensioners in the Old Defined Pension (ODP) scheme got an increment.
Federal Civil Service retirees who migrated to the contributory pension shortly before they retired are entitled to two components of retirement benefits: the contributions accumulated in their Retirement Savings Accounts (RSA) and their accrued rights from the time they joined the service to the time they migrated to the CPS.
Accrued rights are the benefits which employees who had worked for their employers prior to their joining the new scheme are entitled to.
So, in addition to the retirees’ contributions in their RSAs, the Federal Government must pay the retirees their accrued rights before the total benefits can be paid out.
The National Pension Commission (PenCom) insists that retirees entitled to accrued rights can only have access to their RSAs only when government pays the accrued rights into their RSAs.
The source told Pension Review Magazine that government’s initial assumption was that once the accrued right is paid into the retiree’s RSA, government would not have anything again to do with the pension of the retiree.
“That assumption is wrong. The constitution is clear about it. Government will continue to increase the accrued right periodically, but what we see is that they are increasing the pension of the ones under the old scheme and forgetting the accrued right,” he said.
He said the attention of the Federal Government was drawn to it when a committee was set up to determine the total government pension liability and government accepted to pay the accumulated increases on the accrued rights.
However, it is unclear if the Federal Government has done the actuarial valuation of the accumulated increment or decided to flout the constitutional provision.
If the Federal Government decides to flout it, then it may also be a breach of Section 173 (1) of the Constitution that states that any benefit to which a pensioner is entitled to “shall not be withheld or altered to his disadvantage.”
A source within PenCom, who also asked not to be named, said that the commission was aware of the loophole in the law but could not initiate a constitutional amendment to save government the huge liability because of the lengthy and cumbersome constitution review process.
The source said PenCom would have to do something about it otherwise government would continue to shoulder huge retirement liabilities for a long time.
A pension expert, Mr. Olajide Gbenga, said that the whole essence of contributory pension is to take away all pension liabilities from the Federal Government.
Gbenga, who is also an economist, said the loophole was a setback to the contributory pension scheme and must be blocked.
He observed that the loophole had created a problem because when the accrued right is paid into the retiree’s RSA, he took between 25 to 50 per cent of his total balance in the account as lump sum.
He said what was left in the account was used for either programmed withdrawal or annuity for monthly pension.
He wondered whether government should be increasing the monthly pension, which was not a factor of the accrued right or the total accrued right, which the pensioner had depleted.
He advised PenCom to initiate a legislative review to clear the grey areas and ensure that once a government employee retired, government was free from any retirement liabilities.
The National Association of Nigerian Students (NANS) has called for an open public investigation into the alleged corruption in the pension fund.
In a letter to President Muhammadu Buhari, dated November 2, 2017, NANS President Aruna Kadiri claimed the probe will unravel the circumstances surrounding the Abdulrasheed Maina reinstatement and disengagement.
NANS wants the president to probe the allegation of diversion of the sum of N1.6 trillion and the disbandment of Maina’s Pension Reform Task Team.
“The Director of Finance of Maina-led PRTT is now the Director of Pension in PTAD while Mr. Ibrahim Lamorde of the EFCC heads the Police Special Fraud unit in Lagos. We believed that it is not possible for the chairman to steal such huge amount without the finance director and other team members if they actually stole public fund.
The Minister of Finance, Mrs. Kemi Adeosun, has said the thought of saddling future generations with unserviceable debts is not part of the President Muhammadu Buhari-led administration’s agenda.
Adeosun stated this in an article entitled, ‘The debt debate: Deconstructing the debt story’, in which she explained the debt history, the short-term strategy and the medium to long-term outlook for the economy.
She said anyone who thought that the economy the administration inherited in 2015 was in need of minor adjustment was deluded.
The minister stated, “Oil prices had plunged from a height of over $120 to a low of $28 per barrel, yet the country had foreign exchange reserves of $28.34bn (having declined by $16bn in the two years to June 2015 from a high of $44.95bn).
“Despite just 10 per cent of the budget allocated to capital expenditure, debt had (in a period of unprecedented oil earnings), inexplicably risen from N7.9tn in June 2013 to N12.1tn in June 2015. Depending on the candour of the commentator, the outlook was at best challenging, and at worst, bleak.”
She said to deliver a fundamental structural change to the economy that would reduce the country’s exposure to crude oil, an expansionary fiscal policy was adopted with an enlarged budget, which would be funded in the short-term by borrowing.
As the economy recovers and returns to growth, borrowings will be systematically replaced by revenue, according to the minister.
“Through the implementation of the Efficiency Unit and enrolment of Ministries, Departments and Agencies on the Integrated Payroll and Personnel Information System, we have successfully saved N206bn in payroll costs using technology to drive the cleansing process, with the removal of 54,000 fraudulent or erroneous entries. This was attained without the negative social impact of retrenchment.” Adeosun said.
She added that the economic modelling team correctly forecast that in the short-term, there would be acceleration in the accumulation of debt and an increase in debt servicing costs.
The minister, however, said this would be ameliorated by correcting the low tax to Gross Domestic Product ratio through revenue mobilisation, releasing funds to sustain investment in capital and repaying the debt.
She stated, “Mobilising revenue aggressively is not advisable, nor indeed possible, in a recessed economy. But as Nigeria now reverts to growth, our revenue strategy will be accelerated.
“This is being complimented by a medium-term debt strategy that is focusing more on external borrowings to avoid crowding out the private sector. This would also reduce the cost of debt servicing and shift the balance of our debt portfolio from short-term to longer-term instruments.”
Commenting on the inherited debt, Adeosun noted that the Federal Executive Council in July 2017 approved that N2.7tn of hidden liabilities would need to be addressed.
According to her, these obligations include salaries, pensions, oil importation, energy bills and contractor payments, some of which date back to 2006.
She said, “It is instructive to note that the recent Academic Staff Union of Universities’ strike that crippled our tertiary institutions is one of many examples of commitments made by previous administrations that were saddled on this team.
“ASUU’s dispute relates to an agreement reached with the Federal Government in 2013 (when oil prices fluctuated between $102 and $116 per barrel), which was not honoured.”
According to the minister, previously undisclosed obligations are uncovered on a daily basis, with the most recent relating to oil importation in 2014.
She added, “The figures recently released by the Debt Management Office indicate that while total public debt in dollar terms had remained relatively stable since 2015; our debt, when denominated in naira, has increased from N12.1tn to N19.6tn.
The Office of Secretary to Government of the Federation, SGF, and some stakeholders have opposed the proposed exemption of para-military organisations from the contributory pension scheme.
The OSGF made its position known at the public hearing organised by the House of Representatives Committee on Pension on a Bill to exclude personnel of paramilitary and anti-graft agencies from the contributory pension scheme.
Representative of the OSGF, Roy Ogor, disclosed that the white paper issued by the Federal Government, prohibited all Ministries, Departments and Agencies, MDAs, and paramilitary outfits from pulling out of the contributory pension scheme.
He explained that the provisions of the exemption bill contravenes federal government’s position, so it should be jettisoned.
Mr. Ogor urged the National Assembly to jettison any proposed legislation that could further compound the socio-economic predicaments of the country and Nigerian workers,
He also noted that status quo should be maintained to enable the public and private employers to meet their 18 per cent pension obligations as encapsulated in Pension Reform Act, 2014.
He lamented that public and private employees were currently struggling to comply with the current contribution of 18 per cent as the lingering economic recession affects both public and private employers.
He, however said that rather than the proposed amendment which seeks to exempt paramilitary personnel, the Pension Reform Act has provision for increase in pension contribution by employers.
Meanwhile, the Speaker of the House of Representatives, Mr Yakubu Dogara, and other stakeholders have warned against the return of corruption riddled era of Defined Benefit Scheme (DBS).
Mr. Dogara urged the committee and all stakeholders at the public hearing to examine the bill critically.
“We are conscious of the fact that the pension industry has become a crucial sector that is playing a formidable role towards the development of the economy in terms of availability of huge investment funds of about N6.4 trillion.”
He said money provided by the scheme could be deployed both in the real sector as well as in the capital market sector.
On his part, Nigeria Labour Council, NLC, President, Ayuba Wabba, said that the Federal Government had in excess N1.6 trillion pension liabilities under the DBS when the CPS was introduced in 2004.
Chairman, House committee on Pension, Hassan Shekarau, in his remarks, informed the stakeholders that the 33 per cent pension arrears had been paid to personnel of Nigeria Customs Service; Nigeria Prisons Service; and Nigerian Immigration Service.
Earlier on Thursday, a labour leader, Issa Aremu, said Pension Reform Acts of 2004 and 2014, were ”outcomes of executive bills which addressed the delicate interests of the pensioners, government and the economy.”
Mr. Aremu, a national executive committee member of NLC, said that the new bill was informed by “narrow and vested interest consideration” and cannot do justice to all.
The labour leader also said any private member bill which seeks to erode the gains of the 13-year-old N7 trillion Contributory Pension Scheme in terms of coverage and resource pools is “counterproductive” and should not be encouraged.
He said pensions of the nation’s working men and women in security services are better secured in a national contributory scheme than the old “unfunded and unsustainable discredited” Defined Benefits Scheme, DBS.
According to him, until the recent contributory pension reform, “all stakeholders bore witness to ugly features of corruption, inefficiency and share looting,” which he claimed characterized the old DBS.
The labour leader said that to return to the old era means, “bringing back corruption to pension administration through the National Assembly.”