Groundswell of opposition to FG’s N20trn pension fund infrastructure plan
May 20, 2024452 views0 comments
Cynthia Ezekwe
Wale Edun, the finance minister and coordinating minister of the economy, recently announced the federal government’s intention to access N20 trillion from the nation’s pension funds following the recent Federal Executive Council (FEC) meeting chaired by President Bola Tinubu.
Edun dwelled on the importance of investing in infrastructure as a key driver of economic growth, particularly in the face of high inflation and interest rates. He explained that tapping into the over N20 trillion pool of long-term funds available in Nigeria’s pension, life insurance, and investment funds is a strategic step towards implementing President Tinubu’s ambitious reform agenda.
Despite the government’s assertion that tapping into N20 trillion from pension funds is aimed at driving economic growth, the finance minister’s announcement has been met with strong opposition and concern from Nigerians. Many fear that the risks associated with this decision could severely jeopardise workers’ financial security at retirement.
Pension sector experts also voiced their objections, arguing that the government’s plan is not feasible. They assert that pension funds are meant to secure the financial future of millions of Nigerians and should not be used as a quick fix for infrastructure development.
In a media chat, Ivor Takor, director of the Centre for Pension Rights Advocacy, called attention to the challenges surrounding the government’s plan to access N20 trillion from pension funds for infrastructure development. Takor pointed out that pension funds are not liquid cash assets stored in a single bank account, which poses significant obstacles to the government’s proposal.
Takor cautioned that attempting to source such a substantial amount from pension fund assets raises concerns about the potential impact on pensioners.
According to him, as of March 2024, total pension fund assets stood at roughly N19.66 trillion, with monthly pension payments being made from these assets, and diverting funds for other purposes could directly affect pensioners’ financial security during retirement.
Takor stressed that the announcement may erroneously suggest that the federal government can access pension funds at will or exert undue influence over regulatory bodies such as the National Pension Commission (PenCom) and Pension Fund Administrators (PFAs).
Takor clarified that Section 18(c) of the Pension Reform Act 2024 empowers PenCom to regulate, supervise, and ensure effective administration of pension matters and retirement benefits in Nigeria. Additionally, PFAs are solely responsible for investing pension funds.
Given the substantial portion of pension funds already committed to government securities, Takor questioned where the minister plans to source additional funds for the proposed infrastructure investments.
“The available data on the investment of pension fund assets indicate that approximately 70 percent of pension funds are already invested in government securities. Given this significant allocation, it raises questions about where the minister intends to source the pension funds he mentioned for investment in infrastructure and housing projects,’’ he said.
Takor noted that the minister’s proposal underscores the need for clear strategies, transparency, and collaboration between PenCom, PFAs, and relevant stakeholders such as trade unions, the Labour Centers, Nigeria Labour Congress (NLC) and Trade Union Congress of Nigeria (TUC) to ensure prudent investment decisions that balance risk and return, ultimately benefiting both pensioners and the economy as a whole. It remains to be seen how these intentions will be realised while upholding the safety and stability of pension fund investments.”
The Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC) also joined forces in expressing their concerns over the government’s plan to deploy funds from the national pension fund to finance infrastructure projects across the country.
In a “save our soul” letter addressed to key government functionaries, including the minister of finance and coordinating minister for the economy, the labour unions noted that the announcement has sparked apprehension among civil service workers, who are primary contributors and beneficiaries of the fund.
Expressing concern over the government’s plan, the labour unions noted that the revelation of the government having already accessed nearly 70 percent of the entire pension fund value is not only alarming but also unacceptable.
In the statement jointly signed by Joe Ajaero the NLC president, and Etim Okon, first deputy president of the TUC, the labour unions pointed out that Nigerian workers have entrusted their hard-earned savings for retirement security, not as a means for government projects.
The statement partly read: “It is imperative to halt any further plans to tap into these funds, especially given the lack of transparency and accountability in past government borrowing practices. Your proposal to further leverage these funds for the purported betterment of housing and infrastructural sectors raises serious questions about fiscal prudence and responsible governance.
“Where does the government intend to source the additional N20 trillion it seeks to acquire, especially considering the ambiguity surrounding previous borrowing practices? The lack of clarity on this matter only fuels scepticism regarding the feasibility and sustainability of your initiative.
“Nigerian workers rightfully demand assurances that their retirement funds will not fall victim to further Federal Government borrowing especially when the PenCom board has not been constituted as envisaged by the statutes. One is left to wonder which board superintends over such discussion with the government. Seeking to borrow from this fund is not backed by the Pension Act,” they pointed out.
The unions stressed that the government has a responsibility to explore alternative sources of funding that do not threaten the financial security of Nigerian workers. They argued that leveraging pension funds for national development must be carried out with complete transparency, accountability, and a strong commitment to respecting the rights and interests of workers.
Seeking to clarify his position, Edun explained that contrary to allegations from oppositions, the initiative aims to engage key stakeholders within the long-term savings industry to explore how funds can be utilised effectively, within the existing regulations and laws, to stimulate investment in crucial growth sectors.
Addressing concerns about potential risks, the minister stated that the government has no intention of increasing the risk associated with pension funds or jeopardising their safety. He added that the federal government has the capacity to offer guarantees where necessary, unlocking funding that will result in economic growth, job creation, and poverty alleviation.
In his words: “It has come to my notice that there are stories making the rounds that the federal government plans to illegally access the hard-earned savings and pension contributions of workers. Nothing could be farther from the truth.
“The pension industry, like most financial industries, 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 limitations and go outside those bounds which are there to safeguard the pensions of workers.’’
Edun further admitted that the pension industry, similar to other sectors in the financial industry, is strictly regulated by specific legal frameworks, adding that the federal government does not plan to surpass these legal boundaries, as it is committed to protecting workers’ pensions.
The minister characterised the ongoing conversation about utilising pension funds for development as a challenge for the nation’s financial industry. He highlighted the need to strike a balance between protecting workers’ long-term savings and identifying avenues to stimulate economic growth.
According to Edun, this delicate task demands innovative solutions from the brightest minds in the financial sector. He explained further that by engaging in a collaborative dialogue, the government aims to ensure that the financial well-being of Nigerian workers remains a top priority while simultaneously exploring opportunities to leverage long-term savings for the nation’s economic development.