The federal government’s (FG) proposal to take N20 trillion out of pension funds to boost economic development has been met with resistance from experts in the pension industry, who claim that the idea is not workable.
Recall that on Tuesday, following a two-day meeting of the Federal Executive Council, Mr. Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, informed State House correspondents that the federal government intended to accelerate economic growth by accessing N20 trillion abroad, including from pension funds. The Minister states that these money will be used to support important housing and infrastructure initiatives all throughout the nation.
According to the Minister, the government would first take a backseat and offer some assistance, especially during the period of high interest rates, but will become less involved as interest rates stabilize.
Experts responded to the development by stating that there are several risks and obstacles associated with the idea.
Director of the Center for Pension Rights Advocacy, Mr. Ivor Takor, discussed the matter with Vanguard and said that pension funds are not easily accessible liquid cash assets kept in a single bank account by the government.
“The assertion made by the Honorable Minister regarding its potential impact on pensioners and its feasibility of sourcing such a substantial fund from pension fund assets is fraught with a lot of challenges,” he stated. First of all, pension funds aren’t just easily accessible liquid financial assets kept in a single bank account by the government. Second, the entire assets of the pension fund as of March 2024 are around N19.66 trillion. These assets also provide monthly pension payments, which emphasizes the difficulties of using them for other reasons without negatively impacting pensioners.
Takor claims that the Minister’s statement suggests that the federal government has the authority to control organizations such as the Pension Fund Administrators (PFAs) and the National Pension Commission (PenCom) or to obtain pension money at will.
But it’s important to keep in mind that PenCom is required under Section 18(c) of the Pension Reform Act 2024 to oversee, control, and guarantee the efficient administration of pension concerns and retirement benefits in Nigeria. Similarly, PFAs are in charge of pension fund investments alone.
Approximately 70% of pension funds are now invested in government securities, according to data on pension fund asset investments that is currently accessible. It begs the issue of where the Minister plans to obtain the pension money he specified for housing and infrastructure projects, given this hefty allocation.
It will need careful planning, risk assessment, and adherence to investing criteria to shift a significant amount of pension fund assets from government securities to housing and infrastructure. It also requires finding projects that are feasible and will yield sustainable profits in order to protect pension funds and promote economic growth via infrastructure development.
In order to ensure prudent investment decisions that balance risk and return and ultimately benefit pensioners as well as the economy as a whole, the Minister’s proposal emphasizes the need for clear strategies, transparency, and collaboration between PenCom, PFAs, and relevant stakeholders like trade unions, the Labour Centers, the Nigeria Labour Congress (NLC), and the Trade Union Congress of Nigeria (TUC). How these goals will be accomplished while maintaining the security and stability of pension fund assets is still to be seen.
Be the first to comment