Experts in the pension sector have countered the plan by the federal government (FG) to tap about N20 trillion from pension funds to accelerate economic growth, arguing that the plan is not feasible.
It will be recalled that the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, told State House correspondents on Tuesday, after a two-day Federal Executive Council meeting that the federal government plans to accelerate economic growth by tapping into N20 trillion internationally, including from pension funds. These funds according to the Minister will be utilized to finance crucial infrastructural and housing projects across the country.
The Minister was also said that initially, government will stand back and provide some support, particularly in the era of high interest rates but will lessen its involvement as interest rates stabilises.
Reacting to the development, experts stated that the plan is fraught with a lot of challenges and dangers.
Speaking to Vanguard on the issue, Director, Centre for Pension Rights Advocacy, Mr. Ivor Takor stated that pension funds are not liquid cash assets stored in a single bank account that the government can simply access.
He said: “The assertion by the Honorable Minister is fraught with a lot of challenges regarding the feasibility of sourcing such a substantial fund from pension fund assets and its potential impact on pensioners. In the first place, pension funds are not liquid cash assets stored in a single bank account that the government can simply access at will. Secondly, as of March 2024, the total pension fund assets amount to about N19.66 trillion. Additionally, monthly pension payments are made from these assets, highlighting the challenges of utilizing them for other purposes without affecting pensioners.
According to Takor, the announcement by the Minister gives the impression that the federal government can access pension funds at will or exert influence over bodies like the National Pension Commission (PenCom) and Pension Fund Administrators (PFAs).
He said: “However, it’s crucial to remember that Section 18(c) of the Pension Reform Act 2024 mandates PenCom to regulate, supervise, and ensure effective administration of pension matters and retirement benefits in Nigeria. Likewise, PFAs hold sole responsibility for investing pension funds.
“The available data on the investment of pension fund assets indicate that approximately 70% of pension funds are already invested in government securities. Given this significant allocation, it raises questions about where the Minister intends to source the pension funds he mentioned for investment in infrastructure and housing projects.
Shifting a substantial portion of pension fund investments from government securities to infrastructure and housing requires careful planning, risk assessment, and adherence to investment guidelines. It also necessitates identifying viable projects with sustainable returns to safeguard pensioners’ funds while supporting economic growth through infrastructure development.
The Minister’s proposal underscores the need for clear strategies, transparency, and collaboration between PenCom, PFAs, and relevant stakeholders such as trade unions, the Labour Centers, Nigeria Labour Congress (NLC) and Trade Union Congress of Nigeria (TUC) to ensure prudent investment decisions that balance risk and return, ultimately benefiting both pensioners and the economy as a whole. It remains to be seen how these intentions will be realized while upholding the safety and stability of pension fund investments.”
