When the news filtered recently that the Nigeria Governors’ Forum (NGF) is reportedly planning to borrow the sum of N17 trillion from the pension fund for infrastructural development, many Nigerians rightly thought that it was a huge joke or at best fake news. This is because many of these governors have not even met their pension obligations to the retirees several years after they retired.
Even worse, the profligate tendencies of some the governors make the idea of getting close to the fund a terribly bad one.
It was when this newspaper sighted the communiqué issued by the governors that it became obvious that they were serious. Nigerians, therefore, have good cause to be concerned. If pension funds are mismanaged by governors that have nothing to show for the billions of naira they received from federal allocations over the past five years in terms of infrastructural development, regular salary payment or payment of pensions to pensioners, how can anyone hold them accountable when they leave office?
The communique indicated that the Forum was adopting a proposal by the National Economic Council (NEC) ad hoc committee on leveraging a portion of accumulated pension funds for investment.
It said in addition to borrowing a total sum of N2 trillion for the National Infrastructure Investment Fund, it was aligning with a recent proposal by the governor of the Central Bank of Nigeria (CBN), to access N15 trillion funding through InfraCredit at a lower interest rate of five per cent.
The move was rightly condemned by many Nigerians and groups including the Socio-Economic Rights and Accountability Project (SERAP) which argued that such borrowing would “be detrimental to the interest of the beneficiaries of the funds”. This is even as the governor of Ekiti State, Kayode Fayemi had said that there is nothing wrong in borrowing N17 trillion, partly from the pension funds, to enable the government provide infrastructure across states. He explained that the funds would be used for the creation of revenue-generating infrastructure projects.
The governors had agreed to borrow N2 trillion at nine per cent interest from the growing funds under the Contributory Pension Scheme, as well as accessing N15 trillion for national infrastructure funding through InfraCredit at a lower interest rate of five percent.
However, reacting to the development, members of the Nigeria Union of Pensioners (NUP) and other groups have kicked against the plan of the state governors to borrow from the pension fund, stating that they have no authority over the money.
The Socio-Economic Rights and Accountability Project (SERAP) also in an open letter urged President, Muhammadu Buhari to use his “good office and leadership position to urgently instruct the Director-General and Board of the National Pension Commission [NPC] to use their statutory powers to stop the governors from borrowing and/or withdrawing N17 trillion from the pension funds purportedly for infrastructural development.”
This paper is adding its voice to that of other well meaning Nigerians that are opposed to the governors accessing the pension funds. Good enough the Pension Reform Act of 2014 did not support accessing pension funds by governors for ‘infrastructural development or whatever. The Pension Reform Act of 2014 which regulates how pension funds can be used does not provide for direct borrowing as being sought by the NGF. The Act only provides for the investment of pension funds in viable options that would in turn promote the country’s economic development. Financial experts have suggested that the governors may want to tie their bonds to infrastructural projects, but there are conditions precedent and pension fund administrators (PFAs) are not allowed to invest in such bonds if those conditions are not met. Besides, most states are not compliant with the contributory pension scheme and are, by regulation, not able to benefit from pension funds by raising of bonds.
To ensure the safety of such funds as provided by the Act, the PFAs are required to conduct several risk analyses to decide if investing in such bonds meet expected yields and risk appetite. In the event they do not meet such criteria, the administrators are at liberty not to subscribe to a state bond. There are strict conditions to be met by each state — such as having enacted a contributory pension law and being up to date with payments — which many of them cannot meet. As a result, PFAs cannot invest in state bonds.
The Nigeria Governors Forum should look to other legitimate ways of raising funds to drive infrastructure development in their various states. This they can do that by thinking outside the box or go to the capital market and raise money to develop their infrastructures. In fact this newspaper recommends going to the capital market to raise funds for infrastructural development in the states because such funds would not be easily frittered away without accountability like funds raised through statutory allocations to states. Pensioners of Nigeria have been through a lot over the years and the federal government should not allow governors jeopardize their hard earned savings by allowing them access to the funds under any guise. The President has a duty to protect the pension funds of Nigerian workers from governors and others who could put it in jeopardy and create more problems for workers when they retire. The Nigeria Labour Congress must add its voice to condemn this move by the Governors Forum.