As the pension assets of the Contributory Pension Scheme, CPS, continue to rise, hitting N12.3 trillion as at November 2020, stakeholders have dismissed the move by the Nigeria Governors Forum, NGF, to borrow part of the fund arguing that majority of the states in the country have not keyed into the scheme. They, therefore, indicated their resolve to block the affected states from benefiting in the proposed infrastructure investment fund expected to be funded from the pension fund. Only 10 states and the Federal Capital Territory are implementing the Contributory Pension Scheme, CPS. Leaving the remaining 26 states out of the scheme.
It will be recalled that the NGF at the end of its 22nd meeting, proposed an infrastructure investment fund to be professionally managed by the Nigeria Sovereign Investment Authority (NSIA) and part of the pension fund will be invested in the proposed fund.
However experts argue that as the fund is growing and yields on federal government securities where substantial portion of the fund is being invested have continued to decline, there is need for more safe and profitable instruments for the investment of the fund. However they maintained that Pension Fund Administrators, PFAs, will not be permitted to invest in any infrastructure fund involving states that are not part of the scheme, irrespective of how professionally it is managed.
Speaking on the issue, Director, Centre for Pension Rights Advocacy, Mr. IvorTakor, who advised against the NGF position stated: “I am strongly of the view that pension funds have a strong social connection apart from its economic connection. Pension is an old age social security. ‘‘The Contributory Pension Scheme (CPS) that accumulated in the pension fund we are all talking about is a product of pension reform in the country, with the Pension Reform Act 2014 being the law.
‘‘There are several state governments that have not keyed into the Contributory Pension Scheme. Some that have keyed into it are in default of their own laws. These state governments should stay away from anything that has to do with investment of pension funds.
‘Let me say with all sense of responsibility that trade unions, the Nigeria Labour Congress and the Trade Union Congress, will not allow any state governments that has not fully keyed into the CPS to eye the fund for any of its investments. They should put their mouths where their hands are. They have no business with pension funds.”
He, however, said that the amount proposed to be accessed from pension fund is N2 trillion. “There is nowhere in the communique of Nigeria Governors Forum that was issued at the end of its 22nd NGF meeting held on Wednesday 2nd December 2020 where the borrowing of N17 trillion pension fund by the Forum for the development of infrastructure was mentioned.
‘‘What I read in the Communique was that Governor Nasir El Rufai, Chairman of the National Economic Council (NEC) Adhoc Committee on Leveraging Portion of Accumulated Pension Funds for Investment in Nigeria Sovereign Investment Authority (NSIA) briefed the meeting on the proposal.
The proposal is to create a National Infrastructure Investment Fund (NIIF) under the auspices of the NSIA. ‘‘The amount proposed to be accessed from pension fund is N2 trillion. The CBN has a similar proposal to access N15 trillion for National Infrastructure funding through INFRACREDIT at a lower interest rate of five percent.
‘‘The communique said the meeting endorsed the two proposals, noting that both were not mutually exclusive and could be adopted simultaneously with one streaming into the other.”
Takor, however, stated that pension funds are long term investable funds that can be leverage for economic development, given the right institutional as well as legal framework and economic conditions.
Also speaking, Chief Executive Officer, CEO, Pension Fund Operators Association of Nigeria, PenOp, Mr. Oguche Agudah, clarified that what is being referred to by the NGF is a proposed infrastructure fund to be professionally managed by the Nigeria Sovereign Investment Authority (NSIA). Agudah said: “There have been various discussions spanning months regarding how best to structure the funds to invest in infrastructure development and also attract local pension funds, local and international investors.”
He noted that there will be a legal and commercial framework in place for the proposed infrastructure fund, adding that to the best of the association’s knowledge, this is still in the proposal stage. He said: “When the fund gets finalized, pension funds can decide if they will invest in the fund, what level of investment they decide or if the fund suits their appetite.
“There are 22 PFAs and six Closed Pension Fund Administrators (CPFA). Each of these 28 entities have their individual boards, investment strategies, investment appetites, investment committees. It is not possible to compel all 28 of them to invest by fiat in something that does not suit their individual strategies or risk profile. “In addition, whatever investment they make has to follow the laid down PenCom guidelines on investment of pension funds,” he said.
Agudah maintained that the PFAs and CPFAs have a fiduciary responsibility to manage the funds they hold in trust for their contributors so that when they retire, they will have decent funds to fall back on. They have carried this function out successfully for the past 16 years.
“The industry has also been engaging with various parties on how best to individually and collectively fund infrastructure in a sustainable and responsible manner with a commercial return for the benefit of all stakeholders. The industry has recorded some success on some infrastructure funding across the country directly and through funds, investing in power plants, student accommodation, roads, telecommunication infrastructure, among others,” he stated.
While stressing on the safety of the pension fund, Managing Director, Access Pension Fund Custodian, PFC, Mrs. Idu Okwuosa, said that all pension investments in the industry are insured, therefore there’s not a chance that anyone can have access to the funds in the industry.
Okwuosa stated: “The public should be assured that all pension assets are traded in the name of the Pension Fund Administrator (PFA) and Pension Fund Custodian (PFC), in other words, the investments are made in the PFA/PFC’s name. “The returns are not paramount to the National Pension Commission or operators, as much as the safety of the funds,” she said.
She stressed that contributors under the CPS can be rest assured the PFAs and PFCs together with the regulator, PenCom, will continue to ensure the safety of pension assets for the benefit of all contributors.
Meanwhile the Contributory Pensioners Union of Nigeria, CPUN, also kicked against any move by states that have not adopted the pension scheme to benefit from it in the form of infrastructure investment. The Union said: “Members frowned at the Federal/State Government intension to borrow from Contributory Pension Scheme Fund at the expense of their members retired since last year that are yet to receive their retirement benefits. It is very unfortunate that states that have not queued into the contributing scheme want to reap where they have not sown.”