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You must have read the news: the Nigeria Governors’ Forum (NGF) is reportedly planning to borrow the sum of ₦17 trillion from the pension fund for infrastructural development.

A communique from the 22nd NGF teleconference meeting said the forum was adopting a proposal by the National Economic Council (NEC) ad hoc committee on leveraging a portion of accumulated pension funds for investment.

It said in addition to borrowing a total sum of ₦2 trillion for the National Infrastructure Investment Fund, it was aligning with a recent proposal by Godwin Emefiele, governor of the Central Bank of Nigeria (CBN), to access ₦15 trillion funding through InfraCredit at a lower interest rate of five per cent.

The move has, however, been condemned by many Nigerians and groups including the Socio-Economic Rights and Accountability Project (SERAP) which argued such borrowing would be “be detrimental to the interest of the beneficiaries of the funds”.

TheCable carried out a check to find out if such a plan from the NGF is practicable and legal. Here is what we found.

Government borrowing from the contributory pension scheme is not a new practice in Nigeria as this has been done more than once in the past although through investment opportunities.

For instance, when pension funds are used to buy federal government bonds, the funds are by implication, being lent as money to the bond issuer — that is the federal government.

However, the Pension Reform Act of 2014 which regulates how pension funds can be used does not provide for such borrowing as being sought by the NGF. The act only provides for the investment of pension funds in viable investment options that would in turn promote the country’s economic development.

Section 85 of the act states that the objections of such investments must be for “safety and maintenance of fair returns on the amount invested.”

Further down in section 86, the act states that subject to the guidelines issued by the National Pension Commission (PenCom), pension funds and assets shall only be invested in:

a. bonds, bills and other securities issued or guaranteed by the Federal Government and the Central Bank of Nigeria

b. bonds, bills and other securities issued by the States and Local Governments;

c. bonds, debentures, redeemable preference shares and other debt instruments issued by corporate entities and listed on a Stock Exchange registered under the Investments and Securities Act;

d. ordinary shares of public limited companies listed on a securities exchange registered under the Investments and Securities Act;

e. bank deposits and bank securities;

f. investment certificates of closed-end investment fund or hybrid investment funds listed on a securities exchange registered under the Investment and Securities Act with good track records of earning;

g. units sold by open-end investment funds or specialist open-end investment funds registered under the Investment and Securities Act;

h. real estate development investments; ori. specialist investment funds and such other financial instruments as the Commission may, from time to time, approve.

Section 89 subsection 1(c) also prohibits a pension fund administrator from applying “pension fund assets under its management by way of loans and credits or collateral for any loan taken by a holder of retirements savings account or any person whatsoever”.

Notwithstanding the aforementioned provisions relating to bonds issued by state governments, industry experts argue that to ensure the safety of such funds as provided by the act, the pension fund administrators are required to conduct several risk analyses to decide if investing in such bonds meets expected yields and risk appetite.

In the event they do not meet such criteria, the administrators are at liberty to not subscribe to a state bond.


Even if the governors found a way around the provisions of the law, it is not practically possible to borrow ₦17 trillion from the pension funds since accumulated funds are far less than the amount.

The fund, which has been depleted over the years, stood at ₦11.56 trillion as of September 30, 2020, according to the last quarterly report from PenCom.

The fund comprises ₦8 trillion of the retirement savings account (RSA) ‘active’ funds, ₦934.19 billion of the RSA retiree fund; ₦1.44 trillion of the closed pension fund administrator (CPFA) fund; and ₦1.19 trillion for the approved existing schemes funds.

Source: The Cable

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