2018 Federal Government Budget: The Pains, Anger and Frustration of Federal Government Retirees and Families of Deceased Federal Public Servants

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2018 Federal Government Budget: The Pains, Anger and Frustration of Federal Government Retirees and Families of Deceased Federal Public Servants

By Ivor Takor, MNI

The failure to payment of retirement benefits including death claims as and when due, is at the heart of the public sector pension crisis in Nigeria. The cause beingthe irregular settlement of accrued pension liabilities of the Federal Governmentbecause of inadequate funding of the Federal Government Retirement Benefit Bond Redemption Fund account with the Central Bank of Nigeria and death claims of deceased federal public servants. Payment of retirement benefits to retired federal public servants and payment of death claims are being batched and payments made in batches only whenever funds are released for the purpose This is contrary to the spirit behind the pension reform, whose objective is stated in section 1 (c) of the Pension Reform Act 2014, as to ensure that every person who worked in either the Public Service of the Federation, Federal Capital Territory, States and Local Governments or the Private Sector receives his retirement benefits as and when due.

Consequently, the passing into law of the annual budget by the National Assembly and the signing of it into law, is something that is expected to brings relief and joyto those who are on the line awaiting payment. It is therefore understandable, why the revelation by President Buhari during the 2018 budget signing ritual, on Wednesday 20 June 2018 that the sum of 5 billion Naira was cut from the provisions of Pension Redemption Fund and Public Service Wage adjustment by National Assembly before passing the 2018 Appropriation Bill, brought pain,anger, sadness, frustration and disappointment to retired federal public servants, next of kins of deceased public servants and indeed stakeholders in the pension industry.

Section 15(1)(a) of the Pension Reform Act 2014 protects the pension rights of federal public servants who were in service before the commencement of the the Contributory Pension Scheme in 2004. The section provides that as from 25 June, 2004, being the commencement of the Pension Reform Act 2004, the accrued pension right to retirement benefits of any employee who is already under any pension scheme existing before the commencement of that Act and has over 3 years to retire shall in the case of employees of the Public Service of the Federation where the scheme is unfunded, be recognised in the form of an amount acknowledge through the issuance of Federal Government Retirement Benefits Bonds by the Debt Management Office in favour of the employees. The bond issued under this subsection shall be redeemed upon the retirement of the employee in accordance with Section 39 of the Pension Reform Act 2014 and the amount so redeemed shall be added to the balance of the retirement savings account of the employee and applied in accordance with the provisions of Section 7 of the Act.

The Federal Government Retirement Benefits Bonds issued by the Debt Management Office in favour of employee, is an instrument of indebtedness of the Federal Government. It is a debt security, under which the Federal Governmentowes employees a debt and is obliged to pay the employees interest or to repay the principal at a later date, termed maturity date in the instance case the date of retirement of individual employees.

Section 39 of the Act empowers the Central Bank of Nigeria to establish, invest and manage a fund to be known as the Federal Government Retirement Benefit Bond Redemption Fund in respect of Federal Public Service. The Federal Government shall pay into the Redemption Fund an amount not less than 5% of the total monthly wage bill payable to employees in the Federal Public Service.

The Act further provides that by the end of every calendar year, the National Pension Commission shall determine the adequacy of the Redemption Fund against projected pension liabilities of Government arising from voluntary and mandatory retirements, death of employees in service and advise the Budget Office of the Federation of shortfall, if any. In order to accurately ascertain Federal Government Pension Liability for each coming year, the Commission annually conducts verification and electronic enrollment of Federal Government Employees slated for retirement within the next fiscal year and adds the cost of the redemption of the the bonds of these employees with death claims for the year and forward same to the Budget Office.

The Act also provides that the Budget Office of the Federation on receipt of the advice from the Commission shall ensure adequate appropriation for the shortfall and subsequent payment. The amount in the Redemption Fund shall be used by the Central Bank of Nigeria, as prescribed by the Commission, to redeem any retirement benefit bonds issued pursuant to section 15(1)(a) of the Act.

Unfortunately, successive governments failed to adequately fund the Federal Government Retirement Benefits Bond Redemption Fund from where accrued pension rights of employees are redeemed. It is therefore sad for retirees and stakeholders in the pension industry, that the National Assembly, to whom retirees have always been complaining to for the non payment of their benefits to be the ones to cut off money meant for payment of retirees from the budget. The DeputySenate Leader, Senator Bala Ibn Na’Allah was quoted to have said that Senators are not worried about the President’s observations because they were doing their jobs and that if they had allowed the budget to scale through the way the President submitted they would have been in trouble with those who elected them. He was further quoted as haven said that they had to balance between the six geopolitical zones.

We concede that the Constitutional gives the National Assembly powers to scrutinise and approve budget proposals laid before it by the Executive Arm of government and in that process, the Assembly is not expected to rubber stamp whatever is laid before it and return same to the Executive Arm. However, incarrying out this Constitutional functions, members should have at the back of their minds that some sub heads such as pension are actual liabilities of government and not just estimates, therefore they require little or no alterations.

Mr President did say that all the issues raised notwithstanding, he signed the 2018 budget in order not to further slowdown the pace of recovery of the the economy, which has doubtlessly been affected by the delay in passing the budget. I quickly also add that it will help to reduce the suffering of retirees and relations of deceased public servant. That is if the money so appropriated for the payment of their benefits will be released timely. It is also heart warming, when the President said he intends to seek to remedy some of the issues he raised through a supplementary and/or amendment budget which he hope the National Assembly will expeditiously consider.

Mr President should therefore inline with the spirit of his pronouncement, cause to be laid before the National Assembly a supplementary and/or amendment budget,to remedy some of the issues he raised including the 5billion Naira cut from the provisions of Federal Government Retirement Benefit Bond Redemption Fund and Public Service Wage Adjustment. In the interest of retirees and families of deceased public servants, the National Assembly should expeditiously consider the request.

Ivor Takor, mni Esq
Is Legal practitioner and Executive Director, Centre For Pension Right Advocacy.

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