As a man with one leg in pension’s old Defined Benefit Scheme [DBS] and another leg in the Contributory Pension Scheme [CPS], I could not help but quickly read it when I stumbled upon an advanced copy of Fighting for the Future, a book written by Director General of the National Pension Commission [Pencom] Mrs. Aisha Dahir-Umar.
I am not a pension fraudster, thank you. I am in DBS for my ten years’ service in the old, government-owned New Nigerian Newspapers, Kaduna. I am in CPS due to my 13 years’ work at the privately-owned Daily Trust, Abuja. The two take-home pension pays combined may not take me home, but I am grateful for them because I earlier worked in three other places, two of them private, one public, but I did not receive sisi in pension from them. So, I read Mrs. Umar’s book to see if there is a place I can go to collect those arrears.
It is a rich book, to be frank, about an area of our national life that makes many Nigerians to yawn. PenCom’s first DG, Mohammed K Ahmed, said in his intro to the book that “Pensions used to be peripheral to the Nigerian financial sector, often discussed in negative tones because of unpaid arrears and the harrowing experiences of pensioners. The situation has changed substantially in the last two decades.” He said the Pension Reform Act initiated and signed into law by President Obasanjo, as well as industry regulator PenCom’s dynamic implementation of the law since then, completely changed the pension landscape.
I believe he told the truth there. It reminded me of a United Nations Human Rights Conference I attended in Geneva in the 1990s, where the Rapporteur issued a report very critical of Saddam Hussein’s Iraqi government. The Iraqi envoy condemned the report item by item but when he came to the section where the UN Rapporteur criticized the sanctions imposed on the country, he said in English, with heavy Arabic accent, “She told the truth.”
Back in 2000-02 AD, whenever I visited Abuja from Kaduna, I saw sick old men lying on the pavement across the road from Army Headquarters. They were retired soldiers who travelled from all over the country to press for payment of their pensions. Almost everywhere in Nigeria, civilian pension payment too was a scandal, too small and often many months or years in arrears.
Never mind his Third Term bid, but President Obasanjo scored a bit hit when, in 2003, he set up a pension reforms committee headed by top banker Fola Adeola. This resulted in introduction of the contributory pension scheme for both public and private sectors. Mrs. Umar, who was Secretary of the Adeola committee and has been working in PenCom since its inception, now says that pension reform in Nigeria was a revolution probably surpassed in the last three decades only by the telecoms revolution.
I believe she told the truth there. She said, for example, that when the reform started in July 2004, the national pension deficit was a “miserably red” N2.4 trillion but that by February 2023, accumulated pension assets are an “abundantly black” N15.45 trillion!” Registered contributors in CPS grew from 932,435 in 2004 to about 10 million this year. They are expected to grow further when all 36 States of the Federation adopt CPS and millions of self-employed persons join through the Micro Pension Plan for the informal sector.
With CPS, pensioners get paid as and when due, at mid-month in the case of my PFA. CPS stemmed the growth of government’s outstanding pension liabilities, reduced fiscal cost to government, stimulated domestic savings, generated long-term funds for developmental projects and increased private investments in Nigeria. It also opened up a new economy, created a cluster value chain, expanded financial markets and provides funding for infrastructural development.
The Contributory Pension System is fully funded from participants’ monthly salaries and does not depend on volatile budget releases. Besides, “it separated pension assets from the common pool and would allow capital to be built up for long-term investments.” Still, when it was unrolled, workers and trade union leaders didn’t like it. They didn’t like the idea of contributing to pension funds, preferring that government pays it in full, even when it had been doing so epileptically.
As Editor of New Nigerian in 2001, I interviewed then Governor Umaru Yar’adua in Katsina. He told me that the state government’s pension bill will overtake its salary bill within a few years and that the whole system was headed for collapse. Unlike the new method where employer and employee both contribute to pension, Federal and state governments bore the whole brunt under the old system, were most of the time far behind in funding it, hence pensioners went unpaid for long periods. By the way, it is still happening in many states that are stuck with DBS.
Among the many debilitating problems of the old pension system, Mrs. Umar listed weak administration due to lack of regulator of public sector pensions; cumbersome processes leading to long delays in processing claims; lack of proper identity management system resulting in “ghost pensioners” syndrome, as well as fraudulent practices. She did not say so, but I personally knew some states where the richest civil servants were pension officials.
Mrs. Umar’s book recounts a rich history of pension systems dating back to Roman times. Nigeria’s pension system began when the British colonial government issued Circular No 19 of 24 March 1945, later consolidated in the Pension Ordinance Act of 1951. Thoroughly recounted in the book is the story of National Provident Fund, Nigeria Social Insurance Trust Fund and all the committees set up by military and civilian regimes to reform pension. They include the major effort by Technical Committee on Privatisation and Commercialisation [TCPC] and Bureau of Public Enterprises, BPE, from where the author went to PenCom. The only part of the pension history that annoyed me was when she mentioned pension reforms in Chile under General Augusto Pinochet. As an old Communist, I will never forgive Pinochet for killing our hero, President Salvador Allende, in the CIA-backed coup of 1973.
Mrs. Umar did not expressly say so, but she told a story which suggested to me that President Obasanjo did not undertake pension reforms because of God, so to speak. Under him, BPE advertised many Government agencies that were slated for privatisation. “The Bureau received loads of expressions of interests. Due Diligence rooms were activated. Local and international companies expressed interests, carried out due diligence, left and never returned.” When BPE asked them why they never came back, “They all gave the same answer: the quantum of pension liabilities of the enterprises being offered for sale was too much for them to deal with. They promised to return only if the Federal Government would commit to absorbing the pension liabilities of those enterprises.” That was what gave birth to the Pension Reform Committee, she said. I believe she told the truth there.
Despite its apparent success however, CPS is threatened by the clamour by several segments of government to pull out and return to Defined Benefit Scheme, which they believe government will fully fund and it could earn them fatter amounts. In 2011 the military and intelligence services were exempted from CPS. Six years later, Mrs. Umar recounted, Head of the Civil Service of the Federation (HCSF) and Permanent Secretaries were also exempted from CPS via a controversial presidential directive. Others quickly scrambled to follow suit. National Assembly passed a law exempting its staffers from CPS. In May this year, it also passed a law removing Nigeria Police Force from the scheme. Former President Muhammadu Buhari signed the bill into law on the eve of his departure from office.
A private member soon sponsored a bill to exempt Nigeria Security and Civil Defence Corp (NSCDC), Nigeria Customs Service (NCS), Nigeria Correctional Service (NCS), Nigeria Immigration Service (NIS) and Economic and Financial Crimes Commission (EFCC) from the CPS.
This would be a disaster for the public treasury, which would resume footing the entire pension bill for these agencies. In the 2022 Appropriation Act for example, there was a provision under the Service Wide Vote of N577.3 billion for pension and gratuity. Of these, military pensions alone gulped N263.3 billion while intelligence services’ pension gulped N21 billion. The vote can only balloon with more exemptions from CPS.
Eroding the number of participants in a pension scheme could also affect its viability. Mrs. Umar wrote that exemption of the police and any other agency from CPS would erode the pool of long-term investible funds accumulated under the scheme, which in turn will affect funding the huge infrastructure gap in the country.
Yet another matter worried the PenCom boss, as I could glean from the book. She complained about a Nigerian “industrial complex [of commission insiders, some Civil Society Organisations and some online media houses] built around blackmailing and intimidating public servants.” She had her fair share of these, from distorted documents, cooked up petitions intended to extort, threatened petitions to EFCC and “World Press Conferences” to disparage officials. It was alleged on one occasion that the minimum wage at PenCom is N3million a month, when in fact the highest paid PenCom official does not earn a million. And that during the COVID lockdown when the whole world shut down, the DG collected millions of dollars in travel estacode, all totally fictitious.
I was interested in the section about Pension Transitional Arrangements Directorate [PTAD], which pays one of my two pensions. It was created by PRA 2004 to handle pension matters for public servants who would still be operating under the Defined Benefit Scheme. Mrs. Umar said, to my alarm, that “There is a sunset clause for PTAD. It is expected to cease to exist in 2039…when the last pensioner under DBS dies.” So, by government’s estimate, I will be dead by 2039? That was news to me.