Nigeria’s Pension Industry Creating Fresh Impacts But Looking Grim Over Leadership Crises

Nigeria’s Pension sector has maintained a steady outlook but apparently challenged by seeming leadership gap. Yemisi Izuora looks at developments in the sector amid leadership crises

Nigeria’s pension sector has steadily repositioned itself that all characteristics and elements of the Contributory Scheme are moving in tandem thus achieving its propensity of growth.

As at May this year, the Contributory Pension Scheme, CPS, recorded some milestone, with total pension fund assets standing at N8.14 trillion.

According to statistics the assets rose from N7.52 trillion in December 2017, to N8.14 trillion in May 2018. 

The pension assets as at December 2017 stood at N7.52 trillion and then moved up to N7.8 trillion in February and then to N7.94 trillion in March, after which it went up to N8.14 trillion in May.

In line with its investment strategies N5.2 trillion has been invested in Federal Government Securities by the Pension Fund Administrators (PFAs), representing 70.08 per cent of the N8.14 trillion pension assets. 

A breakdown of the investment, indicates that FGN bonds got N3.96 trillion; treasury bills, N1.68 trillion, agency bond like the Nigeria Mortgage Refinancing Company (NMRC) and the Federal Mortgage Bank of Nigeria (FMBN) got N6.54 billion, Sukuk bonds got N51.98 billion and green bond got N8.26 billion. 

The state government securities gulped N154.02 billion; corporate bonds, N393.27 billion; corporate infrastructure bonds, N8.36 billion; banks, N662.80 billion; commercial papers, N71.75 billion and estate properties, N228.86 billion. 

Other classes of assets include, supra-national bonds, N8.21 billion; open/close end funds, N10.16 billion; mutual funds, N1987 billion; private equity fund N3727 billion; infrastructure fund, N8.95 billion and cash & other assets N96.13 billion.

In a desperate move to enhance contributions into the scheme, the National Pension Commission, PenCom, is positioning itself to enroll about 30 million Nigerians in the next five years, to achieve about 275 per cent increase from current position.

The pension sector has eight million contributors presently and is canvassing other means to increase participation in the scheme to about 30 million people by year 2024. 

The Commission is working on enhancing its information technology infrastructure so as to include, at least, 20 million people into the CPS, in 2019. 

In addition it is boosting its IT infrastructure that will support the launch of the micro pension. 

Essentially, the agency sees the implementation of micro pension as supporting people in the informal sector who can now save in an account and receive the benefits when money is invested and this is protected under legislation.

The introduction of the micro pension plan would assist the Commission to achieve the objective of ensuring at least twenty million contributors join the scheme by the end of 2019, and already the PenCom has approved the guidelines for micro pension scheme.

It is a policy set to include self-employed and persons working in organizations with less than three employees. 

Three groups are captured under the scheme and they are the low-income earners, the small and medium scale enterprises (SMEs), and the high-income earners.

The system by its structure will be flexible, safe, convenient and simple with benefits which include decrease in the poverty associated with old age, enhanced economic development and macro-economic stability through investment in infrastructure and financial markets even as contributions will be transferred to designate beneficiaries in the event of a contributor’s death.

Also, to ensure strict compliance and to further tighten security around contributors funds, the PenCom, has directed all Retirement Savings Account (RSA) holders to provide their National Identity Number (NIN) to their fund managers.

In a new circular to pension fund administrators, PenCom said the

 new development involved both active and retired RSA holders.

The directive conforms to the policy of the federal government of Nigeria that has made it mandatory that all Nigerians must have a National Identity Number.

PenCom stated that to achieve the goal of all Nigerians having National Identity Numbers, all data generating agencies have been directed to harmonise their databases with the National Identity Management Commission (NIMC).

By law, the NIMC has the mandate to implement the National identity system in Nigeria and the harmonisation by all data gathering agencies may be part of federal government’s strategy to have a clean National Identity System.

To enable the pension industry comply, the National Pension Commission has directed all Pension Fund Administrators (PFAs) to update the records of their clients.

Already, banks and some other financial institutions have started integrating NINs into bank accounts as they did with BVNs.

PenCom also advised RSA holders to approach their PFAs to provide their Bank Verification Numbers (BVNs), NIN as well as other needed biodata.

While the industry is enjoying stability provided by the agency, a fresh leadership crises is about bringing suspicion into the scheme.

The House of Representatives, has proactively moved in to save the situation by setting up an ad-hoc committee to look into the activities of the National Pension Commission (PenCOM) from April 2017 to date.

The House has tasked the federal government to present the constituted board of PenCom, to the Senate for confirmation within seven days as prescribed by the Nigerian constitution.

The position of the lawmakers was sequel to the adoption of a motion moved by Hon. Benjamin Waya (Benue, APC) where he charged the House to investigate alleged violation of PenCOM Act, Illegal and unlawful appointments, and provisions and use of public funds.

According to Waya, “In April 2017, the Federal Government of Nigeria announced the constitution or composition of the Board of the National Pension Commission (PenCOM), made up of Chairman, Director-General and four members as executive commissioners respectively.

The appointment or the board members is made, subject to the confirmation of the Senate, upon the request of the president to that effect, but up till December the request has not been made to the Senate by the President 19 months since the announcement of the composition of the board.

Waya added that the Net Assets Value (NAV) of the contributory pension fund as at October 28, 2018 stands at N8.779 trillion and contributors have grown to 8.90 million.

He expressed worries that without proper structure such as the board in place, the N8.779 trillion contributed would be under the care of an acting Director-General.

 Waya alleged that “The acting Director-General, Mrs. Dahir Umar, increased her terminal benefits and that of other senior staff of the commission by 300 per cent against the provisions of the law, adding that “the number of PenCom General Managers were also jerked up from 10 to 17 in breach of extant laws governing the institution of PenCom.”

He therefore stated that “it is dangerous and too risky to leave a treasury of N9 trillion without proper custodians and regulators.”

The Leader of the House of Representatives, Hon. Femi Gbajabiamiila however, disagreed with Wayo on the non-submission of the list of Board members to the Senate, stressing that “It is the Senate that has refused to confirm the list,” adding that “It is not the fault of the president.”

Meanwhile industry sources have disclosed that the Presidency is yet to forward the list of nominees of the National Pension Commission, PenCom, to the Senate for confirmation. This development came nearly two years after the last Executive Management Committee of PenCom was dissolved.

It was gathered that the President appointed Mr. Funsho Doherty and Alhaji Aliyu Dikko as the Chairman and DG of PenCom, respectively, in addition to four commissioners, all subject to Senate’s confirmation, but given the protests over alleged illegalities in the removal of the management and in the fresh appointments, then Acting President, Prof. Yemi Osinbajo, appointed Funsho Doherty as DG, and moved the DG earlier appointed, Aliyu Dikko, to the Bank of Industry as Board Chairman. 

But again, the Presidency is yet to send the request for their confirmation, though Section 31 of PRA 2014 provides that there shall be an executive committee of the commission, consisting of the Director-General and four commissioners, the regulator has no substantive DG or commissioners. 

Furthermore, Section 31 provides for, among others, a Governing Board, consisting of a part-time chairman, PenCom, DG, four commissioners, and a representative each of the Head of Service, Federal Ministry of Finance. , Nigeria Labour Congress, Trade Union Congress of Nigeria, Nigeria Union of Pensioners, Nigeria Employers Consultative Association, Central Bank of Nigeria, Securities and Exchange Commission, Nigerian Stock Exchange, and the National Insurance Commission. However, both the Executive Management Committee and Governing Board empowered by the PRA 2014 to approve appointments, pay increase, structural changes, are vacant, hence the alleged illegality of the Acting DG’s actions. 

Meanwhile, the Acting Director General of the PenCom, Aisha Umar-Dahir, has said that the current transitional management in the Commission has no power to stall the appointment or assumption of duty of new Board members, as alleged.

Her response is a desperate attempt to exonerate herself from probe initiated on November 28, 2018, by the House of Representatives through a motion moved by Rep Iorember Benjamin Wayo for the investigation of the management of the Commission for unduly creating impasse in the matter of appointment and resumption of duty of members of the Board of the Commission.

The motion accused the interim management of PenCom of illegal creation of additional directorates and appointment of additional directors thereby increasing the number from 10 to 17 directors; and illegal increase of the Commission’s staff severance package by 300 per cent.

But in a memo circulated to PenCom staff to educate them on the issues, Umar-Dahir explained that the Commission was ready and waiting to be invited to clarify the issues and defend the allegations.

She stated that the transitional management in PenCom at the moment is run by career staff, with no influence on decisions taken by either the Executive or Legislative arms of the Federal Government in the matter of appointment to the Board of the Commission.

“It is, therefore, not only illogical but also unfounded to allege that the current transitional management is stalling the appointment or assumption of duty of the new Board members,” the Memo stated.

Federal Government on April 13, 2017, announced the dissolution of the erstwhile management of PenCom and announced the names of a new management team subject to confirmation by the Senate and on May 27, 2017, it reconstituted the nominated team subject to Senate confirmation.

Umar-Dahir, as the most senior career staff, was directed to superintend the affairs of the Commission in acting capacity pending assumption of duty by the appointed members of the Executive Management.

On the allegation of creation of additional directorates in the Commission, the acting management of PenCom described it as “completely false” as the Commission’s current organogram was approved by the Board of the Commission at its 46th meeting held on 12 June, 2015, with a structure of 5 Divisions and 20 Departments.

“This structure subsists to date and has not been altered. The Commission has not appointed or recruited any additional Director (i.e. General Manager) during the transitional period. What happened was a normal and duly approved promotion exercise for career staff of the Commission, where three Deputy General Managers were promoted to General Managers after duly satisfying the established criteria in accordance with the terms and conditions of their employment,” the memo stated.

The PenCom interim head also described as false the allegation that she increased the staff end of service benefits by 300 per cent.

She explained that on June 30, 2017, the Secretary to the Government of the Federation had approved a new set of end of service benefits for General Managers in which the amount payable to each exiting General Manager would vary and would be dependent on the length of time spent up to retirement.

By virtue of Section 17(5) of the Pension Reform Act, 2014 and Section 9 of the First Schedule to the Act, both the Commission and its Board report to the President of the Federal Republic of Nigeria.

Meanwhile, the President had directed in a circular in July 2015 to the effect that Parastatals whose governing Boards were dissolved should refer all board issues and matters to Mr. President through their respective supervising Ministries for consideration and decision.

Further on allegation of increase in the staff End of Service Benefits by 300 per cent, PenCom’s acting DG explained that following the implementation of the federal government’s policy on eight-year tenure for Directors, the Board of the Commission approved at its 46th meeting held on 12 June, 2015, an End-of-Service Benefits package for General Managers who have served for a minimum of five years on the grade.

“Meanwhile, the Federal Government subsequently cancelled the policy on 8-year tenure of Directors, which substantially formed the basis of the End-of-Service benefits package for General Managers. Thus, with the removal of the tenure system, the amount payable to each exiting General Manager will vary and will be dependent on the length of time spent up to retirement. There was therefore a need to standardize the eligibility and payment criteria in order to make it affordable and sustainable,” she stated.

She stated that in the absence of a functional Board, the harmonisation and streamlining of the changes in the End of Service Benefits was submitted to the Secretary to the Government of the Federation (SGF) for approval, which was granted on June 30, 2017.

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3 thoughts on “Nigeria’s Pension Industry Creating Fresh Impacts But Looking Grim Over Leadership Crises

  1. The response of PENCOM about the increase of the retirement benefits of PEN COM management staff is ambiguous.Was the retirement benefits of PEN COM management staff increased YES or NO?

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