Federal agencies are considering all options to dance around dwindling oil revenues triggered by tumbling prices of crude at the international market. One of such options is a request by the Mr. Babatunde Fashola, the minister of Housing, Works and Power, to access the N5.14 trillion pension fund to finance critical infrastructure. But, the Nigerian Labour Congress (NLC) has rejected the proposal, reports OMOBOLA TOLU-KUSIMO
Going by the words of Finance Minister Mrs. Kemi Adeosun, the Federal Government is in talks for concessionary loans worth $3.5 billion from the World Bank and African Development Bank the (AfDB) to finance this year’s budget.
But, the minister says no formal request has been made to the two international financial institutions ($2.5 billion from World Bank and $1 billion from AfDB). She said the government will tie the facilities to specific capital projects after the approval of the National Assembly.
With the budget estimate still undergoing scrutiny, the Minister of Works, Power and Housing, Mr. Babatunde Fashola, has hinted of a plan to access the N5.14 trillion pension funds to develop critical infrastructure.
The hint came on the heels of a presentation by the Director-General of the fund’s custodian – the National Pension Commission (PenCom) – Mrs. Chinelo Anohu-Amazu at the Villa during a meeting with President Muhammadu Buhari and all the 36 governors.
She told the chief executives that as at September, last year, about N4 trillion was available for infrastructure development out of theN5.1 trillion pension fund. According to her, the fund remains an untapped potential.
A World Bank report has said that Nigeria’s infrastructural deficit requires a yearly investment of $15 billion (about N2 trillion) for the next decade in critical areas like housing, transport and power sectors.
In times past, pension funds were invested in equities and bonds and the chunk held in government bonds as against the real sectors such as roads, bridges, hospitals, rail, airports, fee paying universities and prisons, among others.
In other climes, the economic strength of funds from contributory pension schemes play pivotal roles, especially in helping many countries like Canada, Japan, Australia and South Africa, among others, to aid economic growth and development.
Within a decade, pension fund witnessed phenomenal growth from a deficit of more than N2 trillion (about $12.9 billion) in liabilities in 2004 to over N5.14 trillion in total assets as at October last year.
The dilemma has been the inability of the Federal Government to access the funds owing to the strict regulation guiding Contributory Pension Scheme (CPS) to avoid bad management, corruption and policy inconsistency that characterised such schemes in the past.
But, the dilemma has been compounded by the Nigerian Labour Congress’ (NLC’s) rejection of any further involvement in the application and management of pension funds. The organised labour has threatened a showdown should the government tamper with the scheme.
Managers of the funds, including PenCom, the Pension Fund Administrators (PFAs) and Pension Fund Custodian (PFCs), have insisted on the creation of investable vehicles like infrastructural bonds and equity with low risk and the formulation of the right policy to provide a conducive ground rules.
Such measures, when taken, will enable the government to harness the exponential growth in the funds and channel it to achieve laudable infrastructural and structural transformation.
The question is how does the Federal Government meet these conditions to access the funds for the common good?
The pension funds are the proceeds of eight per cent deductions from employees’ salary and 10 per cent of employee’s total monthly emolument contributed by the employer, based on the requirement of the Pension Reform Act (PRA) 2004 as repealed by PRA 2014.
Experts argue that investing the funds in infrastructure development will yield more returns on contributors’ individual savings.
Fed Govt’s call for funds
The Minister of Power, Works & Housing, Mr.Babatunde Fashola has suggested that releasing the funds for investment in critical areas of the economy will be more beneficial.
Fashola, who made the suggestion in a keynote address he delivered at a retreat on “Nigerian Pension Industry Strategy Implementation Roadmap”, said he had foreseen a future for Africa, led by Nigeria, using the resources of the people to build a future for the people.
His words: “For over three decades, we have mouthed the need to diversify our economy in order to open up more sectors for productive activities, income, economic growth and jobs. But, we failed to follow through because of oil resources. It was quick and bountiful income even though there were boom and burst cycles.
“But today’s reality is that we are in another cycle of burst. Oil prices have crashed from over $100 per barrel, and is now hovering around $30 per barrel and there is a real chance that it will fall lower.
“Put very simply, our main source of revenue has taken a big blow. This household has lost its bread winner. However, it is not without options; it has assets; it can raise money; it has savings, such as the private money belonging to pensioners, but it cannot be used like oil money. Whatever is used must return. This calls for a new attitude. There is no free money.
“After three decades of prevaricating about diversification, diversification has walked into the front door of the Nigerian household. We must either embrace it with a new attitude or idle in agony and anguish, until when hopefully the price of oil will rise again, as it will surely do.
“The pension funds, which are under the management of PFAs, will not go into roads, rail, housing, hospitals or universities unless we change our attitude. Perhaps the appropriate starting point will be to acknowledge that pension reforms are just beginning to gain foothold across Africa in jurisdictions like Nigeria, Ghana, Botswana, Kenya and Uganda – to mention a few.
“But perhaps, the biggest and most advanced of the pension funds, especially in sub-saharan Africa, is the South African pension fund. While the sizes of these funds are happily growing, and the number of contributors is increasing, the impact in the quality of life on the continent is not yet anywhere near minimum globally acceptable standards.
“The reason is not far-fetched once we take a look at where the funds are being invested. The funds are largely invested in equities and bonds, and in the case of Nigeria, so much of it is held in government bonds.
“But, while these funds are not serving the real sector, it is tempting therefore to argue that although the pension funds contain contributions of the working class, they do not as yet penetrate enough into giving value to the lives of the contributors.
“Across Africa, there is a visible infrastructure deficit. No country-to-country rail service across most parts. The highways that connect most of the countries such as in the ECOWAS (Economic Community of West African States) region are in very poor shape and these are roads that can easily be built, and tolled to earn income to secure the return of pension funds invested in building them. Air travel is no better. Airports are not of the quality of design and construction or efficiency that is obvious in Europe. These are places where pension funds can be impactful.
“It must be mentioned of course that the attitudes that once mired pension funds management in scandals and lack of transparency, had led to very stringent legislative interventions that limited the scope of activities that pension funds could participate in.
“For example, until recently, the Nigerian pension fund law limited the contributor from using part of his pension to secure a mortgage. How, one may ask, is a person supposed to finance or part finance ownership of a home if he cannot use his own savings?
“In contrast to the mismanagement that used to be the story of our own pension funds, the most prolific of the pension funds in Africa, which is the South African Public Investment Corporation (PIC), has over $150 billion assets under management.
In Nigeria alone, they have $289 million in Dangote Cement , $98 million approved but yet-to-be drawn for Notore Fertilizer, $230 million in MTN Nigeria, $270 million in Erin Energy (formerly CAMAC) and $150 million in Mainstream Energy Solutions (in the power sector of Nigeria).
“By contrast, the question to ask is what is the ‘home based’ pension fund doing? If as I have shown, the visiting pension fund from South Africa has a total of $897 million in our economy.
“The answer is obvious, that is why we are here, that is why my host in their invitation spoke of ‘…suitable investible vehicles with low risk profiles and sufficient comfort…; as the reason that ‘…continues to hamper the drive to make visible economic impact’ in the letter to me. But, I can say that those investible vehicles exist.”
The minister said such funds should be invested in roads that can be tolled, housing, the Fourth Mainland Bridge, coastal road linking several states from Lagos to Bayelsa; the new seaport in Lekki and Badagry, the refinery by Dangote, Ajaokuta Steel, a petrochemical plant in the Niger Delta; the broken textile mills in the North and South of Nigeria that require new equipments and disciplined fiscal, technical and organisational management.
“Such funds”, he went on “could also be used to upgrade prisons in each of the six geopolitical zones that can help strengthen our justice system and decongest the colonial prisons we have kept as relics of our own sense of justice; in hostels for students in the universities, embedded power plants in the universities, most of which have teaching hospitals and provide an opportunity to power education and healthcare and the list is endless.
“It is as long as we can imagine and the time for it is now. This is the biggest opportunity to act towards diversification rather than sloganise about it. This is the time to show that our country and our national economy is bigger than the challenges posed by the dwindling oil prices.
This is the time to diversify and change the face of our economy once and for all. But, the risks that stand in the way are caused by us and they must be changed by us. My recommendations which I concede may not be exhaustive, but which I believe will begin our journey of change that will reduce the risk and increase the appetite of our local pension fund administrators to get their feet wet and test the waters in the place we call home.”
NLC beats the drum of war
Following the minister’s proposal to PenCom and other operators to release the funds to develop infrastructure, the NLC has rejected the deployment of the pension funds for infrastructure. It has threatened a showdown.
In a statement issued by Secretary-General, National Union of Railway Workers (NUR), Mr. Segun Esan, who spoke for NLC President Joe Ajaero titled: “Pension Fund for Infrastructure Development: A Recipe for Crisis”, the president stated the passage of the comprehensive Pension Reform Act (PRA) 2004 was heralded by many as a watershed in the nation’s pension administration.
It reads: “All over the world, pension funds are shielded from the vagaries of the market and the political arena. Its deployment is rather towards activities that would not compromise its value both qualitatively and quantitatively.
“This is borne on the premise that anything that compromises its value puts into jeopardy the lives of many Nigerians that retire daily from active work life and have placed enormous hope on the proceeds collectable from the fund which they have toiled day and night to contribute to since their active working days. The capacity of the fund to deliver on workers expectations at all times and in all situations must be assured and held sacrosanct by all especially policy makers.
“It is on this foundation that the NLC views with utmost anxiety the proposal by the Minister of Power, Works and Housing, Mr. Babatunde Raji Fashola that pension funds should be used for infrastructural development.
“This proposal is not only unfortunate but also constitutes a threat to the future of Nigeria workers. We have not seen the details of that proposal and we hope that the minister was just flying a kite or testing the waters and he is therefore not serious about pursuing it. Nevertheless, we make haste to say that this is a very dangerous proposal that exposes and threatens the security and future of Nigerian workers.
•To be continued
