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Wale Edun: No Attempt to Illegally Use Pension Funds - THISDAY

MAY 19, 2024

*Says FG will be guided by rules

*Organised labour warns against tampering with funds 

*FAAC shares N1.2tn from N2.192tn gross revenue 

*Naira slides to N1533/$1 at official market, stable at N1,540/$1, parallel market

BY Ndubuisi Francis, Deji Elumoye, Onyebuchi Ezigbo in Abuja and Nume Ekeghe in Lagos

Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, yesterday, clarified that the federal government had no intention of illegally tapping into the N20 trillion pension funds for infrastructure development. The clarification followed media reports quoting the minister as saying, after the last Federal Executive Council (FEC) meeting, that the federal government was considering tapping into the pension funds to drive investment in growth areas, including infrastructure and housing.

Edun had said the move to use the pension funds was part of the government’s efforts to bridge Nigeria’s estimated 20 million housing deficit, and to provide massive housing and mortgage loans at 12 per cent interest rates, with 25-year repayment plans. The minister’s comments immediately ignited serious reactions from notable Nigerians, including the former vice president, Alhaji Atiku Abubakar, who advised the federal government to suspend such a move. Atiku said the move was misguided and potentially disastrous for retired Nigerians, who were dependent on their pensions.

Organised labour, led by Nigeria Labour Congress (NLC) and Trade Union Congress (TUC), also yesterday warned the federal government not to tamper with the workers’ pension fund. However, in a statement he personally issued yesterday, Edun said the stories making the rounds that the federal government planned to illegally access the hard-earned savings and pension contributions of workers were false. He stated that the pension industry was guided by rules, adding that the government will be strictly guided by extant rules in accessing the pension funds of workers. The minister explained that government will not go outside the stipulated limitations on what the funds could be invested in, to guarantee safety of the workers’ pension. The statement read, “It has come to my notice that there are stories making the rounds that the federal government plans to illegally access the hard-earned savings and pension contributions of workers. Nothing could be farther from the truth. “The pension industry, like most the financial industries, is highly regulated. There are rules. There are limitations about what pension money can be invested in and what it cannot be invested in.

“The federal government has no intention whatsoever to go beyond those limitations and go outside those bounds, which are there to safeguard the pensions of workers. “What was announced to the Federal Executive Council was that there was an ongoing initiative drawing in all the major stakeholders in the long-term saving industry, those that handle funds that are available over a long period to see how, within the regulations and the laws, these funds could be used maximally to drive investment in key growth areas, including infrastructure, housing, and, of course, to find a way to provide Nigerians with affordable mortgages. “Within this context, there is no attempt, nor is it being considered, to offer unsafe investments for pension funds or even insurance funds or any investment funds. No attempt whatsoever to increase the risk. No attempt whatsoever to lower the returns that would otherwise be earned.

“It is important to remember that the federal government possesses the ability to provide guarantees where stocks are needed in order to unlock funding that will lead to growth, creation of jobs and alleviation of poverty. “It is an ongoing conversation, a challenge, a test for the best and the brightest in the financial industry to come up with solutions that, while safeguarding the long-term savings do provide an avenue that help to boost growth in the economy.” However, just as Edun’s clarification was hit the news stand yesterday, NLC and TUC wrote warned the federal government not to tamper with the workers’ pension fund.

The labour movement said apart from the lack of transparency trailing the government’s move, seeking to borrow from the fund was not backed by the Pension Act. In a joint protest letter to the federal government, signed by NLC President Joe Ajaero and TUC Deputy President Etim Okon, organised labour urged the government to reconsider its plans to tap further into pension funds and, instead, explore sustainable financing options that did not compromise the retirement security of Nigerian workers. The statement said the recent announcement by the finance minister regarding the government’s intention to utilise the pension funds of N19.66 trillion for infrastructural development had ignited deep apprehension and unrest among Nigerian workers, who were the primary contributors and eventual beneficiaries of the funds.

It said the revelation that the government had already accessed nearly 70 percent of the entire pension fund value was not merely alarming, but also utterly unacceptable. Labour said in the statement, “Nigerian workers have entrusted their hard-earned savings for retirement security, not as a means for government projects. “It is imperative to halt any further plans to tap into these funds, especially given the lack of transparency and accountability in past government borrowing practices. “Your proposal to further leverage these funds for the purported betterment of housing and infrastructural sectors raises serious questions about fiscal prudence and responsible governance. “Where does the government intend to source the additional N20 trillion it seeks to acquire, especially considering the ambiguity surrounding previous borrowing practices?”

NLC and TUC said the lack of clarity on the matter only fuelled scepticism regarding the feasibility and sustainability of the initiative. According to labour, Nigerian workers rightfully demand assurances that their retirement funds will not fall victim to further federal government borrowing especially when the PENCOM Board had not been constituted as envisaged by the statutes. It stated, “Despite the government’s assurances of widespread consultation with major stakeholders in the pension industry, it is disheartening to note that the NLC and TUC, representing the owners of the entire pension fund contributions, have neither been consulted nor informed about the government’s intentions. “This lack of transparency undermines the sanctity of pension funds, which should be treated with the utmost reverence and protection at all times.”

What the rules say about deployment of pension fund for infrastructure devt Section 8.0 of the Regulation on Investment of Pension Fund Assets, 2019 deals with the investment limits of pension funds. The section stipulates the maximum investment limits under the Multi-Fund Structure. Subsection 8.1 indicates that: “Not more than 10 per cent of the total pension assets under management aggregated in all the Retirement Savings Account (RSA) Funds, shall be invested in all securities (equity, money market and debt) issued by a corporate entity.”

Also, 8.2 stresses that:” A PFA may invest the pension fund assets of any one Fund in the ordinary shares of a listed company, subject to a maximum limit of 7.5  per cent of the issued share capital”, adding that “Cumulatively, in the six Funds under the Multi-Fund Structure, a PFA shall not hold more than 20 per cent of the issued share capital of a listed company. While the global limit for infrastructure fund is 10 per cent, there’s a maximum of 5 per cent of value of pension assets to any one issuer, with a maximum of 20 per cent of the value of any one Fund. So, essentially,  there’s N732 billion of unallocated funding for infrastructure, while there is also N2.2 trillion of allocated funding to mutual funds within which real estate sits.

Equally, yesterday, the Federation Account Allocation Committee (FAAC) shared a total of N1.208 trillion April 2024 Federation Account revenue from a gross revenue of N2.192 trillion generated in the month, to the federal and state governments, as well as the local government councils in the country. The revenue was shared at the May 2024 meeting held in Abuja. Quoting the communiqué issued at the end of the meeting, a statement from the Office of the Accountant-General General of the Federation (OAGF) revealed that the N 1,208.081 trillion total distributable revenue comprised distributable statutory revenue of N284.716 billion, distributable Value Added Tax (VAT) revenue of N466.457 billion, Electronic Money Transfer Levy (EMTL) revenue of N18.024 billion and Exchange Difference revenue of N438.884 billion.  

Total revenue of N2,192.077 billion was available in the month of April 2024, while total deduction for cost of collection was N80.517 billion; total transfers, interventions and refunds was N903.479 billion.   Gross statutory revenue of N1,233.498 trillion was received for the month of April 2024. It was higher than the sum of N1,017.216 trillion received in the month of March 2024 by N216.282 billion.  The gross revenue available from the Value Added Tax (VAT) in April 2024 was N500.920 billion.  This was lower than the N549.698 billion available in the month of March 2024 by N48.778 billion.   The statement noted that from the N1,208.081 trillion total distributable revenue, the federal government received a total sum of N390.412 billion, states got N403.403 billion and the local government councils received N293.816 billion.

A total sum of N120.450 billion (13 per cent of mineral revenue) was shared to the benefiting states as derivation. revenue. On the N284.716 billion distributable statutory revenue, the communiqué stated that the federal government received N112.148 billion, the state governments received N56.883 billion while the local government councils received N43.855 billion.

The sum of N71.830 billion (13 per cent of mineral revenue) was shared to the benefiting states as derivation revenue. The federal government also received N69.969 billion, states got N233.229 billion while the local government councils received N163.260 billion from the N466.457 billion distributable Value Added Tax (VAT) revenue. A total sum of N2.704 billion was received by the federal government from the N18.024 billion Electronic Money Transfer Levy (EMTL). States received N9.012 billion, while the local government councils received N6.308 billion. The federal government received N205.591 billion from the N438.884 billion Exchange Difference revenue.

The state governments received N104.279 billion and the local government councils received N80.394 billion. The sum of N48.620 billion (13% of mineral revenue) was shared to the benefiting states as derivation revenue. According to the statement, in the month of April 2024, oil and gas royalties, Companies Income Tax (CIT), Excise Duty, Petroleum Profit Tax (PPT), Electronic Money Transfer Levy (EMTL) and CET Levies increased significantly while Import Duty and  Value Added Tax (VAT) recorded considerable decreases. The balance in the Excess Crude Account (ECA) remained static at  $473,754.57. Meanwhile, the naira, yesterday experienced a reversal of fortune at the official window, witnessing a depreciation against the United States dollar, while maintaining stability at the parallel markets.

At the Nigerian Autonomous Foreign Exchange (NAFEM) window, the naira recorded a decline as it closed at N1,533.99/$1, a N74.97 loss compared to N1,459.02/$1 which closed on Wednesday. Conversely, the parallel market concluded at N1,540/$1, remaining unchanged from the previous day’s rate. The daily turnover recorded a decline in transactions of 5.63 per cent, to $272.86 million yesterday compared to the $289.14 million recorded on Wednesday. Furthermore, the highest spot rate observed yesterday stood at N1,590, with the lowest spot rate recorded at N1,399.20

What the rules say about pension funds & infrastructure According to the Regulation on Investment of Pension Fund Assets 2019, Section 8.0 which deals with investment limits, states that; Essentially, there’s N732bn of unallocated funding for infrastructure. There is also N2.2 trillion of allocated funding to mutual funds within which real estate sits.


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