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Proposed exemption of Nigeria Police Force from Contributory Pension Scheme sparks heated debates and fears of potential economic repercussions

When the Nigerian Pension Reform Act of 2004 was launched under the leadership of former President Olusegun Olusegun, hopes were high for a swift transformation of the country’s troubled pension system and a boost to the economy. However, nearly 19 years later, there are growing concerns that a new financial burden is poised to be placed on the already strained federal treasury.

Recently, a bill seeking to exempt the Nigeria Police Force (NPF) from the Contributory Pension Scheme (CPS), similar to their counterparts in the military, and establish a police pension board, was passed after a fierce battle between police officers, the pension regulator National Pension Commission (PenCom), and pension fund operators. The bill faced strong opposition from PenCom, pension operators, and the Nigeria Labour Congress.

The impetus behind the agitation and subsequent passage of the bill stems from retired members of the police force claiming that they are not receiving their full accrued benefits. Many retired officers argue that their monthly pensions are significantly lower compared to their military counterparts, making it challenging to make ends meet. Some retirees complain of receiving as little as N30,000 ($39.8) as pension.

“The Contributory Pension Scheme currently addresses several shortcomings of previous Nigerian pension schemes, but it has been unable to fully accommodate the peculiarities of the Police Force,” stated the police while advocating for their position. They highlight factors such as the pending reconciliation of police personnel data, which is crucial for obtaining pension contributions from the Central Bank of Nigeria and ensuring effective pension administration, as reasons to justify their request for exemption.

This is not the first time the police force has made efforts to leave the CPS, but previous attempts were strongly discouraged by the federal government in a white paper.

If the bill is eventually signed into law, it could potentially reverse the gains achieved through the pension reform process. Under the bill passed by the Senate, the federal government will assume full responsibility for police pensions, a situation that PenCom and its allies warn will cost the government trillions of naira over time. Prior to the 2004 pension reform, such practices led to unfunded pensions and accumulated liabilities amounting to trillions of naira in fiscal debt.

Experts in the industry believe that both the short-term and long-term sustainability of the current contributory pension scheme, represented by the total contributory pension scheme fund and Retirement Savings Accounts (RSA) managed by Pension Fund Administrators (PFAs), would be adversely affected, potentially impacting the per capita income of all Nigerians.

As of March 31, 2023, official records from PenCom indicate that total pension assets had exceeded N15.58 trillion. These funds are available for borrowing by the public and private sectors to finance public infrastructure and stimulate economic growth. It has been reported that the federal government had already borrowed N9.2 trillion from the pension funds by 2022, with a significant portion of the money also being invested by the PFAs. The police reportedly contribute the largest sum to the pension funds, with approximately 320,000 staff members.

Opponents of exempting the police from the CPS argue that it poses a dangerous risk to Nigeria’s financial system. Oguche Agudah, the Chief Executive Officer of PenOp, emphasizes that divesting and unwinding investments made in long-term bonds, corporate debt, and illiquid real sector investments before maturity would burden the financial system since the financial ecosystem is interconnected. Granting the police’s request for exemption from the CPS, according to Agudah, would mean regressing to the era before pension reforms when retirees relied on a defined benefit


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