Exit of paramilitary from CPS threat to over N5.31trn invested in FG securities

From left: Acting Director General National Pension Commission, Mrs. Aisha Dahir-Umar and Director Corporate Service Department, Pension Transitional Arrangement Directorate, Sulayman Shelleng at the event.

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Chuks Udo Okonta

Exempting some government agencies would lead to divestment from the over N5.31 trillion invested in Federal Government of Nigeria (FGN) securities before maturity, the National Pension Commission (PenCom) has cried out.

PenCom stated this in a position paper on the Bill for an Act to amend the Pension Reform Act (PRA) 2014 to exclude some government agencies from the application of the Contributory Pension Scheme, presented at the public hearing on the matter in Abuja.

According to the pension industry regulator, the divestment from FGN securities would have ripple negative effects on not only the finances of Government, but on the entire financial system.

Pension Fund Administrators (PFAs) as at May this year have invested N5.31 trillion out of the N6.73 trillion pension assets in Federal Government’s securities.

PenCom stated that 73.63 per cent of the total funds had been invested in the Federal Government of Nigeria’s securities.

According to PenCom, the FGN investments are: N3.80 trillion; N1.12 trillion and N39.37 billion amounting to 56.47 per cent invested in the FGN bonds,16.67 per cent of the funds invested in the FGN treasury bills and 0.59 per cent invested in Agency Bonds (NMRC & FMBN) respectively.

Its Acting DG, Mrs. Aisha Dahir-Umar, noted that another immediate negative impact of exempting these agencies is the erosion of the pool of long term investible funds accumulated under the CPS, which is suitable for economic development of any nation as illustrated in other jurisdictions including developed economies.

This, it stated, would thereby undermine the process of the attainment of development initiatives in the infrastructure, housing and real sectors of the economy, which are largely hinged on the utilization of a portion of the pool of pension fund assets. Indeed, the pension industry had actively participated in the establishment of the Nigeria Mortgage Refinancing Company and had already invested the sum of N83.36 billion in its securities and other mortgage refinancing initiatives of the Federal Government, it said.

PenCom also expressed worry that the exemption of some agencies of Government would result in loss of confidence in the pension reform and other reform initiatives of Government, stressing that the growing culture of national savings built within the last decade would be destroyed.

“It is pertinent to note that due to the successful implementation of the pension reform, the discipline with which the industry players have been discharging their responsibilities and the resultant impact on the Nigerian economy, foreign investors have invested heavily in some major Pension Fund Administrators.

There are still some expressions of interest by foreign investors to obtain stakes in the pension administration business in Nigeria. Indeed, the private sector, including these foreign investors in the Nigerian financial sector and the Nigerian economy, would question the commitment of Government to the pension and other reforms due to such policy reversals,” PenCom stated.

It maintained that the exemption would also be contrary to public policy for the Federal Government to succumb to the clamour for exemption of its employees from the CPS, which has so far proven to be efficient, effective and beneficial as a pension administration system.

PenCom added that indeed, it is the benefits of the CPS that are attracting increasing number of State Governments in Nigeria as well as other African countries to adopt and implement the Scheme in favour of their respective employees.

The regulator noted that the feats record since the inception of the CPS have become models in Africa with countries like Malawi, Tanzania, Ghana and Uganda coming to PenCom to understudy them with a view to adopting same in their countries.

The Central Bank of Nigeria (CBN), also kicked against the exemption of paramilitary, adding that the government may not have the fund to cater for pensions of the workers if they are exempted.

CBN noted that going by current realities, especially now that the nation depends more on oil which most developed nations are presently turning away from, it would be difficult to cater for the pension of members of the paramilitary if they are exempted.

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