It is not a bad thing to borrow from the pension fund, but why we kick against it is that there are no safety nets; there is no guarantee that the government will pay back as and when due. However, in economics, it makes no sense to have idle funds. Funds such as the trillions of naira we have in pension savings should be invested. Whether the Federal Government is borrowing or not, the expectation is that it is following the rules.
There are guidelines that govern the utilisation of these pension funds. If the pension administrators ensure that these rules are followed before the release of such funds to government, then there are no problems; it is welcome. Why the (labour) unions will always kick against government borrowing these funds is that we do not trust government to deliver on its promises and we do not want what happened to savings made during the closed pension scheme to happen to the contributory pension scheme.
However, this borrowing is not justified because whoever comes to equity should come with clean hands. The government has not been fulfilling its obligation to the pension fund; you can find that out from the pension fund administrators.
That is why retirees, even in the contributory pension scheme, find it very difficult to get their pension’s as and when due when they retire. There is a delay because government has not paid what it should pay.
So, it is not justified for the same government to take from the workers, when it has not contributed its own quota. Going forward, the government should hands off the pension fund. It should allow portfolio managers to manage the funds the way they should in line with provisions of existing pension laws.
Government should be compelled to contribute/ remit its contribution to the fund as designed by the law setting up the fund. Government should be a law keeper and not a law breaker; that is the only way we can move forward.
Prof. Uche Uwaleke (Head, Department of Banking and Finance, Nasarawa State University, Keffi)
Faith in the Federal Government is usually what makes borrowing instruments issued by the government attractive. Except for the impact of inflation, they are generally considered risk-free.
Pension funds are not meant for high-risk investments. Liquidity consideration is paramount in managing pension funds. It is not surprising therefore, to have the bulk of pension funds lent to the Federal Government.
So, the borrowing is justified on the grounds that retirees’ funds are safe and especially so where the funds have been invested in critical capital projects.
It is therefore right to claim that pensions funds lent to the government have contributed in no small measure to the pace of economic recovery.
Dr. Michael Olugbile (World Bank official/ Senior Technical Adviser to Osun State Governor on Development Partners and International Relations)
There is nothing wrong with the N5.5tn the Federal Government borrowed from the pension fund.
The actual fund with pension managers is about N7.3tn or thereabouts and the fund is not immediately needed by pensioners. Many of those who are contributing money into the pool are still in active service. Most of them will not need the money this year or next year. So, instead of allowing the fund to stay idle, the Federal Government borrowed part of it and I believe that they will make good use of it. That is a good one.
The only caveat is that such funds should not be borrowed to finance recurrent expenditure such as payment of salaries and all that; they should be invested in projects which would address the infrastructural deficit of the nation.
These projects would bring about development and this development would boost the economy and bring the people out of poverty.
There is one thing which many of us need to know in Nigeria; when a government prepares a budget, the money is not always available in bulk; funds trickle in but if you borrow money from development banks or other lenders who offer low interest rates, it is good for the economy. But such money must be put to good use.
Borrowing money is not bad; but it has to be used for development projects which can boost the economy and not to use it to service debt or pay salaries. If borrowed money is invested in the economy, it is like a businessman who borrows and uses such funds to expand his business. It is wise to borrow and use the money for things which will bring about development.
Mr. Alagoa Morris (Coordinator, Environmental Rights Action)
Looking at pensions from a historical perspective, one can remember how retirees suffered and are still denied the benefit of the good life after serving their fatherland for so many years. I believe it is the desire to address this problem that the idea of a contributory pension scheme was introduced. It is actually not acceptable for government to touch these savings made by people, who are mostly civil servants, for the rainy days.
Even if the amount saved from the contributory pension is to be invested in ventures that will rake in interests, it will be unwise to invest such funds in risky ventures. For the Federal Government, which is not known for a culture of savings or prudence in the management of public funds, to dip its hand into that fund is worrisome.
It is truly unfortunate that with all the revenue accruing from crude oil and gas sales, all the federal and state governments do is to assemble in Abuja on a monthly basis to share the funds with little or no savings.
This culture of borrowing by the Federal Government and its inability to live within its means is indeed shameful and embarrassing.
My take is that anything that will lead our retirees into maltreatment and hardship is unacceptable.
Civil servants were convinced to buy into the contributory pension scheme with the hope that they would get good treatment through prompt payments of their gratuities and monthly pensions; this should be protected.
Auwual Musa (Executive Director, Civil Societies Legislative and Advocacy Centre)
Borrowing in itself is not a bad thing. The question to ask is why are you borrowing? I don’t know of any government anywhere around the world that is not engaged in one form of borrowing or the other. I don’t think it is out of place for the Federal Government to borrow from the pension fund because the nation is in dire need of infrastructure. And if the government can borrow from this fund and address this challenge, why not? The Federal Government has the capacity to repay this loan with interest. We as Nigerians also have a responsibility to ensure that the fund is judiciously used for the purpose for which the loan was collected in the first place. The government should ensure that this loan is repaid in good time. We cannot afford to have a situation where retirees have to take to the streets to protest before their retirement benefits are paid. It will be a sad commentary for the government to allow Nigerians, who subscribe to the contributory pension scheme, to suffer before they can benefit from their savings. There must be a conscious effort on the part of pension administrators and the government to avoid any situation which will expose pensioners’ savings to avoidable risks. For me, this is one of the best ways to help prevent corruption especially in the public sector when a public servant is sure that at the end of his service he/she can look forward to his/her pension savings to live comfortably when he/she retires.