NLC warns FG against borrowing N2trn from Pension Fund
• Says it'll undermine integrity of CPS
The Nigeria Labour Congress (NLC) has warned that the new Contributory Pension Scheme (CPS) will also go the way of the Defined Benefit Scheme, whose failure necessitated the introduction of the Scheme, if the Federal Government deep its hand to borrow from the accrued Pension Fund.
To this end, the Congress called on the Federal Government to immediately shelve its plan to borrow N2 trillion from the Pension Fund to fix its infrastructure.
In a communique issued at the end of its National Administrative Council (NAC) meeting, in Abuja, it also urged the government to reconstitute the board of National Pension Commission in line with the provisions of the Act setting it up.
The communique, signed by the President of NLC, Comrade Ayuba Wabba and the General Secretary, Comrade Emmanuel Ugboaja, said: “In light of this, the NAC resolved that the Federal Government should immediately shelve the idea of borrowing N2 trillion pension funds to fund the restoration of its infrastructure as it has the potential for undermining the integrity of the Contributory Pension Scheme or set the stage for bringing it at par with the Defined Benefit Scheme whose failure necessitated the introduction of the Contributory Scheme.
“The NAC also resolved to urge the government to reconstitute the board of Pension Commission in line with the provisions of the Act setting it up. The NAC further resolved to be vigilant as well as watch over the pension funds in order for their safety and interest of workers.”
The Congress expressed surprise at the approval given by the National Economic Council (NEC) to the Federal Government to borrow N2 trillion from the pension funds; which has been estimated at N10 trillion.
The NAC stated that while it acknowledges the parlous state of national infrastructure and the need to fix them, the approval given by NEC to the government was done in breach of extant provisions of the Pension Reform Act 2004 (as amended.
It pointed out that the Act only provided for investing the funds in safe and secure instruments and not lend or borrow, and without consultation with a core stakeholder like the organised labour.
The communique read: “The NAC said the pension funds are not government money to be taken at pleasure but are contributions in favour of workers, warehoused in the private individual retirement savings accounts of contributors who are workers and beneficiaries and for the payment of their pensions as when due.
“The NAC observed that five years down the line in clear violation of the Pension Reform Act 2004 (as amended), the board of the Pension Commission, a very critical market institution, is yet to be constituted.
“The NAC said the guidelines on investing pension funds which benefitted from the insights of the organised labour and the Pensions Union, have the primary objective of adequate return on investment and safety of the funds, adding that investment by Pension Fund Administrators is contingent on their risk and reward appetite and not based on coercion or cajoling.
“NAC further said its concern is deepened by government’s indebtedness to pensions of about N400 billion in accrued rights, pension differentials or harmonisation, minimum pension guaranty, pension increase, etc, and about which it has made no effort to offset.
“NAC disclaimed the view that direct borrowing from pension funds is consistent with practices in Chile, pointing out that in Chile, government accesses pension funds through the money market and such investments are fully guaranteed by government, both the principal and return on investment.”