In a significant move, the Nigerian Senate has approved a bill that will establish a Police Pension Board, effectively exempting the Nigeria Police Force (NPF) from the existing contributory pension scheme (CPS) and reinstating the old defined benefit scheme (DBS).
Taking to Twitter, the upper chamber announced the successful passage of the bill, despite previous rejections by federal lawmakers and a 2014 federal government white paper dismissing similar demands.
Under the current CPS, both employees and employers contribute to the pension fund, whereas the DBS places the entire burden on the government. The CPS had been associated with the accumulation of unfunded pensions and mounting pension liabilities running into trillions of naira before the industry reform implemented during the administration of Olusegun Obasanjo in 2004.
The recently passed bill places the full responsibility of police pensions on the federal government, a move projected to entail substantial costs amounting to trillions of naira in the long run.
During a public hearing held on January 20, 2023, by the Senate Committee on Police Affairs, the National Pension Commission (PenCom), the Pension Fund Operators Association of Nigeria, and the Nigeria Labour Congress (NLC) voiced their opposition to the bill.
Former Secretary to the Government of the Federation (SGF), Boss Mustapha, corresponded with the Inspector General of Police, referencing an SGF circular dated July 20, 2021 (Ref. 59149/S.1/C.1/11/266), which reiterated the police’s obligation to remain within the CPS, noting that the directive remained unchanged.
Mustapha further cited the White Paper on the report of the Presidential Committee on Restructuring and Rationalisation of Federal Government Parastatals, Commissions, and Agencies, which explicitly prohibited any government body, except the military and intelligence services, from opting out of the CPS.
In 2004, the administration of Olusegun Obasanjo implemented a comprehensive pension reform aimed at addressing the plight of pensioners who consistently faced significant arrears.
Remarkably, Nigeria’s pension landscape has witnessed a substantial transformation, transitioning from pension liabilities amounting to N2.4 trillion to accumulated pension assets totaling N15.45 trillion as of February 2023.
Under the newly passed Senate bill, the Federal Government assumes full responsibility for police pensions, with actuarial assessments conducted by industry stakeholders projecting an additional N2 trillion in pension liabilities for the approximately 300,000 police personnel.