States And Pension Scheme

A recent report revealed that 20 years after the enactment of the Pension Reform Act (PRA) 2004, 26 states of the federation have not been able to fully implement the Contributory Pension Scheme. The report, which was said to have emanated from the National Pension Commission (PenCom) showed that, while some states are partially implementing the scheme, others are yet to join, just as others also have the bill to domesticate the scheme stuck at their respective state legislative assemblies.

The Pension Reform Act 2004 introduced the Contributory Pension Scheme for payment of retirement benefits of employees in both public and private sectors, which is being managed by the National Pension Commission (Pencom).

The Act, which came into effect during the Olusegun Obasanjo administration, brought a perceived sustainable alternative to the Defined Benefit Scheme, which relies on budgetary allocations and is currently managed by the Pension Transitional Arrangement Directorate (PTAD).

We recall that on July 1, 2014, former President Goodluck Jonathan signed into law, the new Pension Reform Act (PRA) 2014, which repealed the Pension Reform Act 2004. Though similar to the repealed Act, the new PRA governs and regulates the administration of the contributory pension scheme for both the public and private sectors in Nigeria. By the provisions of the Act, the employer and the employee are required to make a minimum contribution of 10 per cent and 8 per cent respectively.

It sad to note, in the opinion of this newspaper, that in spite of this legal instrument, only six states and the Federal Capital Territory (FCT), as revealed by a quarterly report of the pension commission, have fully implemented the pension scheme as at the end of June 2023. According to that report, states that are fully implementing the contributory pension scheme are Edo, Ekiti, Kaduna, Lagos, Ondo, Osun, and of course FCT.

The report listed states that are yet to implement the contributory pension scheme as Abia, Bauchi, Bayelsa, Ebonyi, Enugu, Imo, Kogi, Nasarawa, Oyo, Sokoto, and Taraba while Akwa Ibom, Borno, Cross River, Katsina, Kwara, Plateau, and Yobe, are at the law enactment stage of adopting the scheme.

Delta State, to a large extent, had started implementing the scheme, Anambra, Benue and Kebbi states are partially implementing it while Niger, Ogun and Rivers states extended their transition periods to the scheme.

The report showed that Jigawa is fully implementing the Contributory Defined Benefits Scheme (CDBS), just as Kano had a partial implementation of the CDBS but Adamawa, Gombe and Zamfara states have not started implementing the CDBS.

The CDBS, which according to the regulator is hybrid, is contributory, but the benefits are defined. This implies that every month, pension contributions are deducted from workers, while the funds are pooled together and used to pay retirees.

We are nonplussed as to why some state governments have consistently failed to meet the essential requirement of governance and employee compensation, thereby subjecting their workers to harsh living conditions and a future devoid of hope.

In the considered opinion of this paper, with a good living wage, and all the states of the federation embracing the new pension laws, naturally, there would be good savings for civil servants to rely on after retirement. That, in our view, will eliminate stories of hardship that retired persons are subjected to.

It is disheartening, in our opinion, that pensioners retire into penury and find themselves at the mercy of state governors who decide to play politics with their welfare. The unintended backlash of this is that the corruption in civil service is traceable to the mistreatment of these senior citizens as those still in service decide to make hare to avoid those bad experiences when they retire.

Yet, in what could be described as insane absurdity, most of these states have bogus pension benefits for ex-governors, even as governors, constitutionally, are not entitled to life pensions.

We are compelled to remind states yet to key into the contributory pension scheme that they are suffering their pensioners unduly. It is pertinent to emphasise that unfunded pension arrangements leave all the pension stakeholders dissatisfied. Experts warn that part of the challenge of not abiding by the provisions of the PRA is that states affected will rely on budgetary allocations which may make the payment of pension to beneficiaries burdensome and unattractive.

We therefore appeal to the states yet to domesticate PRA to do so without further delay. In our opinion, unless such monies for civil servants are deducted at source, pensioners, especially at the state level, will continue to suffer. State governors ought to know that pension funds can also be leveraged for infrastructure investments. That, in itself, should encourage them to domesticate PRA.