Devolution of Powers Bill No. 3 And Pension Matter in the Constitutional Amendment


The current constitutional amendment exercise being undertaken by the National Assembly continue to attract the attention and keen interest of Nigerians in view of the importance of the document especially as Constitutional amendment is not an exercise that is regularly embarked upon in view of the cumbersome procedures involved. One major area of the exercise that has attracted and is still attracting attention, is Bill No. 3 on Devolution of powers, which among other things seeks to ensure that the Central Government cedes certain powers to the States.

When, therefore, the Devolution of Powers Bill proposed certain amendments introducing the subject of pension under the Concurrent Legislative List, the Centre For Pension Right Advocacy was compelled, as a stakeholder in the pension industry, to take more than a passive interest in the provisions of the Bill, especially as it has to do with pension. We are of the opinion that pension should not have been made an issue on the proposed Bill.

Our opinion flows from the point that the 1999 Constitution (as amended) has adequately addressed the issue of devolution of powers between the Federal and States Governments on pension matter, by making adequate provisions for both the National Assembly and States Houses of Assemblies to legislate on pension. It is addressed both as an enforceable right accruing to certain categories of employees and also as a persuasive requirement under Chapter 2 of the 1999 Constitution, dealing with Fundamental Objectives and Directive Principles of State Policy, which Governments at all levels and tiers, are encouraged to observe and apply its provisions for the benefit of all citizens.

Section 16(2)(d) of the 1999 Constitution provides that the State should strive to provide for the citizens a number of social security benefits, including “old age care and pensions”. Consequently, organs of Governments at all levels (Federal, States and Local Governments) as well as all public authorities are expected to strive to provide these benefits for all citizens regardless of whether they work under the public or private sectors, formal or informal sectors, or do not work at all. Old age care is based on need assessment, while pension is earned through extant laws and collective agreements by those who have worked. However, Section 16 of the 1999 Constitution is only persuasive and not enforceable, having fallen under Chapter 2 of the 1999 Constitution dealing with the Fundamental Objectives and Directive Principles of State Policy, which is not justiciable.

In a deliberate statement of enforceability, the 1999 Constitution under Sections 173 and 210 and in similar wordings, unequivocally elevated public sector pensions to the status of enforceable rights accruing to employees of both the Federal and States Governments respectively. Thus, Section 173 of the 1999 Constitution provides as follows:
(1) Subject to the provisions of this Constitution, the right of a person in the public service of the Federation to receive pension or gratuity shall be regulated by law.

(2) Any benefit to which a person is entitled in accordance with or under such law as is referred to in subsection (1) of this section shall not be withheld or altered to his disadvantage except to such extent as is permissible under any law, including the Code of Conduct.

(3) Pensions shall be reviewed every five years or together with any Federal civil service salary reviews, whichever is earlier.

(4) Pensions in respect to service in the public service of the Federation shall not be taxed.

A similar provision was made for the public services of States under Section 210 of the 1999 Constitution.

The 1999 Constitution reinforce the provision of Section 173 by providing under Item 44 of the Exclusive List, Part 1 of the Second Schedule to enable the National Assembly to make laws on “pensions, gratuities and other-like benefits payable out of the Consolidated Revenue Fund or any other public funds of the Federation”. These constitutional enablement, it is submitted, provided the vehicle for the development of both the legal and institutional frameworks for the administration of pensions in Nigeria. It is further submitted that this responsibility is being discharged by the National Assembly by the enactment of pension legislations, including the Pension Reform Act 2014, which prescribed, harmonized and standardized the system of administration of pensions for both the public and private sectors in Nigeria.

Similar powers are being exercised by the respective States Houses of Assemblies pursuant to the provision of Section 210 of the 1999 Constitution and other provisions conferring the powers of appropriation of funds for the States to their respective legislatures.

The constitutional definition of ‘public service of the federation’ as captured in Section 318 of the 1999 Constitution, appears to include every employee of the Federal Government of Nigeria, regardless of whether he or she works in the civil service, national assembly service, judicial service, military service, intelligence services, police service, paramilitary service, and indeed employment in any of the Federal Government Parastatals, Extra-ministerial Departments and Agencies.

Therefore, to segregate persons in the military service, the police force and other paramilitary and security agencies in the federation (paragraph (1)(iii) from federal employees, persons in the public service of the federation… Etc (1)(i) under pension in Bill No. 3, without altering the Constitutional definition of public service of the federation in section 318 of the Constitution to exclude persons in military service, police force and other paramilitary and security agencies in the federation, caries an element of mischief.

The only rational explanation of the obvious legislative drafting mischief, is that the National Assembly intends to give constitutional backing to its ongoing attempt, aimed at killing the Contributory Pension Scheme introduced by the Pension Reform Act 2014 by attempting to exclude certain categories of officers and employees of the Public Service of the Federation, including persons in military service, police force and other paramilitary and security agencies in the federation from the Contributory Pension Scheme, vie the private member Bills that has already gone through second readings. It is important to state here that the Federal Government as represented by the Office of the Secretary to the Government of the Federation, including stakeholders in the pension industry, such as Employers Associations, the Nigeria Union of Pensioners, the Nigeria Labour Congress (NLC), the Trade Union Congress (TUC), operators in the industry, Civil Societies Organisations and the Nigerian Police at a Public Hearing Organised by the House of Representatives Committee on Pension, to deliberate the Private Member Bill, held on Thursday 28 September 2017 at the House of Representatives New Auditorium , Room034 National Assembly, Abuja, roundly condemned the Bill and asked that it be withdrawn or be thrown out the House of Representatives.

The main objective of the pension reform, which introduced the Contributory Pension Scheme (CPS) is to ensure that every person that worked in either the public or private sector in Nigeria receives his or her retirement benefits as and when due. This is made possible through monthly contributions by both employers and employees. The contributions, which are paid into individual Retirement Savings Accounts of employees are invested. The contributions, the returned on investment and accrued pension rights for service prior to the take off of the CPS, creat a ready pool of funds for the payment of retirement benefits.

Another objective of the Contributory Pension Scheme is to assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age.

Any Constitutional amendment, aimed at taking personnel of the Police force and other paramilitary out of the CPS is putting in jeopardy, the welfare of these personnel after they have retired. This is because there won’t be a ready pool of fund to pay their retirement benefits, thereby leaving the payment of their benefits at the mercy of annual budgetary provisions and monthly allocations, based on resources available to government.
Secondly, one of the reasons for the provision of Retirement Savings Account and making them personal to employees, is to protect pension benefits already earned by an employee from being tampered with by an employer under any guise.

The second most important issue in the Devolution of Power Bill No. 3, under pension is the attempt by the National Assembly to bring a dichotomy among workers in the private sector and how their pension will be legislated. In the proposed amendment, under pension, in paragraph (1)(i) the Bill seeks to limit the powers of the National Assembly to make laws on pension for employees of incorporated companies regulated by federal enactment, while in paragraph (2), it seeks to give powers to make laws on pension for employees of business enterprises resident within the state and subject to state regulations to Houses of Assemblies of States.

This dichotomy is not necessary as employees in the Private Sector are already covered under Section 2 of the Pension Reform Act 2014 enacted by the National Assembly. Secondly, if the amendment is being done only for the sake of devolution of power from the Central government to the States, then this particular devolution is not in the overall interest of the concern employees.

State governments have not shown any commitment in the welfare of their workers and pensioners. How then is it expected that they will be interested in the welfare of workers of private enterprises or self employed persons in the informal sector. It is on record that about 20 states out of 36 states of the federation owe their workers and pensioners about N200 billion. 28 are still struggling to put in place pension laws for their states and local government employees, 13 years after the repeal of Pension Act 1990, which was of universal application in the public services all over the country. Even those that have enacted pension laws for their workers, only Lagos State and few others are implementing the laws enacted by their Assemblies.

States that are not paying pension to their workers, lack the right or are morally bankrupt to compel employers of business enterprises within their states to contribute for or pay pension to their workers neither can they compel/persuade workers in the informal sector (self employed individuals) to make contributions for their pension.

Pension reform was necessitated by many problems bedeviling the public and private sectors’ pension schemes in Nigeria. Many private sector organisations did not have any pension arrangement for their employees and where it existed, it was characterized by lack of supervision and regulation. The Federal Government therefore decided to take measures aimed at developing a system that is sustainable and has the capacity to achieve the ultimate goal of providing a stable, predictable and adequate source of retirement income for employees in both the public and private sector. This culminated in the enactment of the Pension Reform Act 2004, which introduced the mandatory Contributory Pension Scheme. The Pension Reform Act 2004 was repealed and replaced in 2014 with Pension Reform Act 2014.

The total pension fund assets as at July 2017 was N6.5 trillion, with 7.6 million contributors. To date, about 200,000 private sector employers of labour are implementing the CPS and have contributed 60% of the total pension fund assets.

In order to consolidate the gains so far recorded in the orgainsed private sector, the National Pension Commission has with inputs from stakeholders, put in place guidelines for the introduction of micro pension, targeting the informal sector (self employed) in order to secure a better life for these category of citizens in their old age.

Consequently, there is a dire need to consolidate the gains of the CPS and avoid any legislative amendment of the Constitution and the Pension Reform Act 2014, that will bring confusion in the pension industry or may not be beneficial to employees and the self employed.

The proposed Constitution amendment Bill No. 3 on Devolution of powers with regard to pension and the on going process of amendment of the Pension Reform Act 2014 are unnecessary as they will bring unintended negative consequences on employees, the self employed and the economy.

Barr. Ivor Takor, mni
Executive Director
Centre For Pension Right Advocacy

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