FG and pension funds

LAST month, Vice President Yemi Osinbajo indicated that the Federal Government would tap into pension funds for the actualisation of infrastructure projects.  Professor Osinbajo, who spoke at the World Economic Forum in Davos, Switzerland, stated that, to actualise that objective, the Federal Government intended to  first de-risk such financing models for infrastructure. He noted that,  beyond the welfare of Nigerians, their empowerment was at the heart of the N500 billion Social Investment Programme initiated by the Muhammadu Buhari administration.

He told the forum: “This is about investment in people, in their skills, in youths. We had a N500 billion allocation in our budget last year and proposed for this year also. It is an investment in education and educating large numbers of people in a short time. It’s a radical thing to make that kind of serious investment in education.”  Osinbajo cited the N-Power scheme’s training component for young graduates and non-graduates as well as the planned N100,000 grants to students of higher institutions in Science, Technology, Engineering and Mathematics as part of the programmes designed by the Federal Government for the uplift of Nigerians, adding that the planning of the 2017 budget was based on the Economic Recovery Growth Plan which, according to him, would be formally launched this month.

It will be recalled that in September last year, former President Olusegun Obasanjo had challenged pension managers to invest a portion of the estimated N5.8 trillion naira pension funds in housing and key infrastructure in order to speed up development in key sectors of the economy. Speaking in Abuja at the third edition of the World Pension Summit, the former president had made reference to Singapore as a country that maximally utilised pension assets to solve housing challenges. As he argued:  “We must find a way of using the pension funds to help our infrastructure development.  Singapore is a good example; pension has been used to ensure that no Singaporean is without a house.  There is no reason why we can’t go along that route here.” Obasanjo, whose tenure laid the foundation for the Contributory Pension Scheme, advised pension managers to be cautious in rolling out innovations, as pensioners must be protected.

Based on the prevailing contributory pension scheme, employers and employees jointly and mandatorily contribute 15 per cent monthly of the employee’s allowances every month into  the  pension pool. The Pension Fund Administrators (PFAs) are supposed to trade with the money and generate returns for their clients. Pension funds are thus private investment. It must be emphasised that the pension fund contributions are not government money. That being the case, the Federal Government should not commandeer the money through the Pension Commission (PENCOM). The money represents the sweat and hard labour of the contributors, and is being held in trust by the PFAs on their behalf.

If the Federal Government intends to deploy the pension funds in actualising projects,  it must go through the normal process of borrowing through the capital market. In this regard, the money should be converted to bonds. That done, the owners of the money would be assured of returns on their investments. This is necessary because, over the years, the integrity of the Nigerian state has been called into question following the failure of government to honour its pledge to different sectors of the population, including contractors. Policies and projects have been abandoned on the altar of crass politicking, and it will be foolhardy to expect Nigerians to trust the government to utilise their money judiciously, honestly and responsibly. For instance, with regard to the contributory pension scheme, many state governments have regularly failed to remit their 7.5 per cent contributions into their workers’ retirement savings accounts. The Federal Government must protect the nation’s pensioners.