by Debo Adejugbe
I’m just a lowly engineer, but with all that I have read on this issue, it portends grave dangers to the administration of the funds as these funds are already invested.
The Jonathanian push is here again, and this time, the Nigerian worker is at the receiving end. This is neither about salary negotiation, nor the implementation of a structured minimum wage for the benefits of civil service workers. The battle has shifted to the future; the pension savings that Nigerian workers look up to after they might have retired from public service is under serious attack from the presidency and her cronies in the legislature.
In truth, an amendment to an existing law or act is a commendable way to make such laws better and facilitate a better regime for administering it. In so many ways, the proposed Pension Reform Act of 2013 -a replacement for the Pension Reform Act of 2004- will achieve a lot, but in less subtle ways, some proposed changes might be to the detriment of the workers who toil night and day to save a minute part of their earnings for the future.
Some of the amendments proposed in the new bill sent to the National Assembly are:
- Harmonizing the management of the pension regime in the office of the Head of Civil Service of the Federation with National Pension Commission,
- Enhanced coverage of the scheme; increased informal sector participation in the pension scheme –the scheme will now be applicable to employers with three or more employees,
- Utilization of pension funds for national development – i.e. investment in the real sectors, infrastructure and housing development inclusive.
- The total rate of contribution will now be 20% (currently 15%) of monthly emolument with a minimum of 12% (currently 7.5%) by the employer and a minimum of 8% by the employee (currently 7.5%),
- Prohibition of Chairman and Members of the Pension board from owning stakes in PFAs or Custodians,
- Relaxation of the qualification requirements for appointing the director-general of the National Pension Commission to a minimum of 15 years as against 20 years,
- Exemption of the Armed Forces, Intelligence and Secret Service, University Professors and those already covered before the existing law, and
- Stiffer penalties for persons and/or organizations involved in the mismanagement or embezzlement of pension funds.
The bill passed second reading on the floor of the House of Representatives on Thursday, May 30th, 2013 and it has equally sailed through first reading in the Senate. It calls for celebration that our representatives now give a “damn” about our future and they are doing something about it, right? Look at the proposals closely HERE if you have time or I can go straight to my grouse (and that of many others) concerning some points.
Laws, to the best of my knowledge, are made to strengthen institutions and processes but in this case, several laudable amendments are proposed while the most important aspect of the set up–the person who manages the scheme-is being tampered with to favour a person whose interest the Presidency represents. The clause relaxing the qualification requirements of the DG –which is on page 23 of the proposed bill-, has already generated lots of controversies as it is seen as tailored to ease Mrs Chinelo Anohu-Amazu’s path.
Anohu-Amazu ought to have gone on retirement leave in September 2012, having served at directorate cadre for the maximum eight years stipulated. But by a stroke of executive wizardry, one we are used to by now, she was directed to take over as Acting DG from her outgoing boss on the strength of a memo from the Secretary to the Government of the Federation, Anyim Pius Anyim. By that memo, the Presidency threw existing civil service rules into the waste bin and got away with it (or not, depending on the next outcome).
The ease at which they got away with making Anohu-Amazu the acting DG when she ought to have retired emboldened them to further test waters by bending reasonable and well-meaning parts of existing laws to serve their interest.
Another contentious part of this proposal is the utilization of pension funds for development with “housing and infrastructure” written all over it. I’m just a lowly engineer, but with all that I have read on this issue, it portends grave dangers to the administration of the funds as these funds are already invested. As the case is in Nigeria that we totally lack infrastructure, it makes sense. But then, where do we get the money back when the pensioners come running for their hard-earned investments (that is, if the money is even available)?
A look at Pencom’s website and their last updated quarterly report in 2012 (Q2) HERE shows that majority of the pension funds are invested in government sector with 63% of the over N2.7trn (almost N1.8trn) going into Federal Government bonds and around 22% (N590bn) invested in Money Market Securities and Domestic Shares, with N240bn sitting in other assets. The question this coughs up is: where is the money to be invested in housing and infrastructure coming from? It looks like someone is politicizing “infrastructure and housing” to draw our attention away from more cogent provisions in the bill.
I have to commend some members of the Senate that have stoutly risen against the 15 years clause at a time when the House of Reps dozily passed the bill through second reading, but more needs to be done –they have to unanimously remove contentious clauses without jeopardizing the whole bill. For David Mark, as cynical as he is to reasonable laws, to get in on the act by saying: “That we want to reduce the years of experience of those who will manage it (PenCom) from 20 to 15 years, I think that that is not in the best interest of the nation”; says all we need to know.
We are hoping that the Senate committee on Establishment and Public Service, that has been saddled with the responsibility of conducting a public hearing on the bill would listen to the true yearnings of the people for a law that truly serves the “people’ and not the “presidency”. N2.9trn and counting is what is involved; and when you juxtapose with our national budget of N4.9trn, you will understand that so much is involved in these proceedings.
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Debo Adejugbe is a trained Telecommunications/Electronics Engineer and a certified IT professional living in Lagos. Dad to amazing Hailey and an advocate against Sexual and Domestic Abuses. Debo has political sympathy for the Labour Party. He tweets from @deboadejugbe
Op-ed pieces and contributions are the opinions of the writers only and do not represent the opinions of Y!/YNaija.
Tunde, I’m really happy I replied your earlier comment and I have definitely learnt something from this. Your points really make sense, but my fear is the type of structure and leaders we have on ground.
Ours is a country where banks prefer to lend to those who wont pay back (but share the loot), a place where a debtor bank acquires its creditor and all manner of absurdities. That is why we have to be sure someone good and experienced enough is managing these funds, and when they come with reasonable investment plans, we would listen.
Another thing I’m scared of, is the way our politicians (especially Senators and Reps) are trying to give us the impressions that the pension funds are just sitting idle. This shows that they are already eyeing those funds as the next corruption deck they can berth hence the “Idle funds” debate. It is so hard to trust a Nigerian politician with money, looking at how well they have fared with what we have in their care.
I believe that we have to get a good process in place first (solid 2013 act) and make sure someone willing and very able is given the job; then we can start an earnest discourse on what to do with the money-if needed.
Hi Debo,now you’ve provided clarity on the type of experience and the condition that requires her to quit the institution after serving as a Director. Your points are valid and taken. I feel your concerns about investment in infrastructure. It’s unfortunate we’re still struggling with it here,but trust me, that’s the way to go. In other climes, infrastructure development leverages so much on long-term funds like pension funds. And there are several other ways of recouping infrastructure investments other than tolling. “Shadow-tolling” is a brilliant concept we have not really explored around here. For example,you invest in a road and as part of the deal with the govt, you retain the right to all paid adverts along the stretch of the road for an agreed duration. With that, you can significantly reduce whatever you choose to collect as tolls or even do away with the conventional tolling completely provided the figures work for you. Another thing PenCom should look at in reviewing their investment guidelines is the introduction of “multiple funds” like they have in Chile where we borrowed the 2004 reforms from.What they do in Chile is to vary the portfolio mix depending on the age of the employee. For example, for folks who have less than 10 years to retire, you typically wouldn’t put their funds in high-risk instruments like equities. For those people, their funds would be investment mainly in govt securities (fixed income; low risk).For younger folks who still have like 2 decades before retirement, you can afford to take higher risks with their funds. I want to believe someone is thinking about that. Have a great day bro.
I don’t have facts about your allegations on Anohu-Amazu’s retirement date, so I won’t dwell so much on that. But if you are insinuating that the reduction of 20 years of experience to 15 years was designed to accommodate her as DG, then I think there’s some contradiction in there.If she’s been due for retirement since 2012, then one would naturally expect she must have put in over 20 years of service.Or does she have just 15 years work experience out of which 8 were in the capacity of a Director at PenCom? I stand to be corrected, but that’s very unlikely.Secondly, u queried where the investments in infrastructure will come from since the funds have already been invested in govt bonds and other instruments.Simple, there’s a word every investor knows about.It’s called ‘divestment’.If it becomes law, the PFAs will simply have to divest their investments in other instruments.
Thanks for the comment, Tunde. L
ooking at the links I provided and glance at the Pencom’s website, you will understand that certain experiences counts when it comes to Pencom which she definitely lacks. Another thing is that, after spending 8years at directorate level, she ought to have retired from that institution as stipulated by civil service rules and those guiding the running of Pencom.
On the issue of divestment, i will like to ask you a candid question: How viable are investments in infrastructure, for example, roads and bridges in Nigeria for now? Lets put the imbroglio that surrounded tolling of Lekki express and the commuters’ continued protest into perspective here. How will the money invested in those roads, bridges etal be recouped to pay back the pensioners when they need their money, putting in mind that most of them are dependent on their retirement benefits? The “divestment” you talked about cannot be safer than FG bonds, can they? An outlook of all the investments is in a link in the article as well.
Lastly,I will advice that you go through the document links in the article and Pencom statues to understand how the work experience/8 years at directorate level pans out, then give me your thoughts afterwards. Pencom act is not just like the blanket rule that governs all other working experiences; “Financial” experience at certain levels and for a numberof years is a must.
Thank you once again.