The Federal Government has refuted claims that it intends to borrow N20 trillion from the pension fund for infrastructure development. The clarification was made by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, in a statement issued on Thursday.
The minister said the government is committed to adhering to the legal frameworks that regulate the pension industry.
“It has come to my notice that stories are making the round that the Federal Government plans to illegally access the hard-earned savings and pension contributions of workers. Nothing could be farther from the truth,” he said.
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Nigeria’s pension industry is governed by the Pension Reform Act of 2014, which established the National Pension Commission (PENCOM) to regulate, supervise, and ensure the effective administration of pension matters. The Act mandates that pension funds be managed by licensed Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs), who must adhere to strict investment guidelines to safeguard the interests of contributors.
There have been prior instances where the Nigerian government considered leveraging pension funds for development projects. Under former President Muhammadu Buhari, the government proposed using pension funds for infrastructure development, which met with significant resistance from labor unions and other stakeholders. These attempts were ultimately unsuccessful due to concerns over the safety and security of workers’ retirement savings.
Edun’s statement comes in response to the backlash and concerns raised by labor unions and other stakeholders. He assured that the government respects the stringent regulations governing the pension industry and emphasized that there is no intention to exceed legal limitations.
“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.
“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,” Edun clarified.
Union Responses
The Nigeria Labour Congress (NLC) and the Trade Union Congress of Nigeria (TUC) have been vocal in their opposition to any potential misuse of pension funds. In a joint statement, NLC President Joe Ajaero and TUC Deputy President Tommy Okon emphasized the importance of protecting workers’ retirement savings.
“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,” the statement read.
The Nigerian Union of Pensioners also expressed strong opposition to the alleged plans. Bunmi Ogunkolade, Head of Information for the union, urged the government to find alternative sources for funding infrastructure projects.
“Simply put, we are not in support. We have told the government to go and look for where to get their money. Pension funds belong to workers and should not be used for infrastructure projects,” Ogunkolade stated.
Economists and financial experts have also weighed in on the matter. Kalu Aja, a prominent economist, had earlier highlighted the risks associated with using pension funds for high-risk investments like infrastructure development. But on this, he noted that “no one can deduct a kobo from funded defined contributions Retirement Savings Accounts.”
Edun reiterated that the government has no intention of increasing the risk associated with pension funds or allowing their investments to become less secure. He clarified that the initiative discussed aims to explore how long-term savings could be used to drive investment in key growth areas within the bounds of existing laws and regulations.
“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,” Edun said.