Glory Etaduovie

The Editorial of The Guardian Newspapers of 2nd June, 2021 report a widely broadcasted BBC investigation report of shocking corruption in pension from Cross Rivers state. It revealed how some elderly people were left sick, “penniless” and helpless. Government workers were soliciting bribes before paying out pensions, arbitrarily declaring them dead, until they prove again that they are alive. This matter transcends Cross Rivers state. Stories of woes abound in virtually all the states and federal levels.

The Mainagate is another case in reference. Abdulrashid Maina, was the Chairman of the defunct Pension Reform task Team. He was, in a case of irony, arraigned before the Federal High court on a 12 count charge bordering on money laundering of suspected pension funds to the tune of N2 billion. It is no wonder that confidence in the pension money is wobbly.

Apart from the burden and challenges of consistent remittance of backlog of defined benefits payments of workers who had a leg in there, and in the new Contributory Pension Scheme, other challenges have bedeviled the confidence of the public in the sincerity and effectiveness of the pension program in the country. They are also confused about the clear differences and challenges facing the transition from the defined benefits scheme (DBS) to the contributory pension scheme(CPS). Comments and complaints are of thus general application, so to say.
Yet, there are some very efficient pension plans and packages in the country. These are from many blue chip organizations, many private organizations following clearly what the provisions of the Pensions reforms Acts of 2004 and 2014, as well many self-funding government organizations with minimal bureaucratic bottle-necks. These of course will be silent. The public will not know how efficient pension is working out. The more ‘noises’ are coming from the largely inefficient ‘environments’.
The country has truly grown in population. The Government cannot continue to pretend to be a “superman”, when it is being stretched tight by infrastructure inadequacy and catching up with the fast pace of changes in the dynamics of governance and the economies locally and globally. Defaults in those contributions were inevitable without a deliberate change in the approach of handling this very vital aspect of the economy.
What is thus the reality on ground, and how can the confidence of the public be reinstated? How can the various state governments and government structures restore this greatly desired confidence? How safe indeed is the already accumulated over N13 trillion fund?
The good news is that our Pension Funds are safe! The dynamics of the financial world creates often uniqueness in tightening transactions to near watertight settings. The Regulator of the Pension Industry has so far shown grit and backbone in the administration of the players and the fund. The scheme was novel at the start. It will not be without teething challenges and an active ‘learning curve’.

Thus, while objective criticism is necessary to continually improve, it would thus be unfair to make unfettered and deliberate negative evaluations of the CPS and pension without looking at where we were coming from. Attempts at pulling down the CPS would lead to the question of what is the next viable alternative, if any, given the uniqueness of the country.?
A lot has happened to continue to strengthen its operations and the players. Highly computerized systems are continually being evolved and driven with energy. The biggest challenge remains transiting the employees of the defined benefits into the contributory pension scheme. This however, is making great progress. The agitations are ‘voices from the past’, not current happenings.
This is how secure the funds are: There is in place a major tripartite security checks and balance in place. The Regulator, the Pension Fund Administrator – PFA and the Pension Fund Custodian PFC. No one payment goes out without passing through the labyrinth of collective and internal scrutiny processes. All are expected to raise ‘red flags’ as soon a transaction looks suspicious. The PFA, has no custody of the funds. They just manage the funds for growth for their fees and customer service. The PFC is the ‘securityman’. PenCom is the umpire. All players are active – no any form of docility. They are a story of working PPP – public, private, partnership. This is far different from when the government was carrying the burden alone. The transparency level is very high. It is even the rare transparency that is eliciting even increased scrutiny from the public. It is good for everyone.
The Investments:
I had spent over twenty years in Insurance marketing and administration as a professional, yet I was surprised to know little of the investment world. I further learnt that the dynamics of each of the financial sectors cannot just be easily presumed on unless you are deeply involved. Just as I see a lot of ignorance of the pension world by experts in other financial sectors, I have seen same in the case of Insurance, Investment and banking those not playing there, including a lot of elite.
The investment basket is designed for high security, while optimizing all potential benefits that ordinary man on the street can never harness on his own because of group effects and benefits of inclusiveness. That is why the funds are even hedged in very difficult economic times, like when money market, T-bills etc dropped unimaginably low as 0%. The dynamics here can never be understood easily or harnessed by the man on the street or the poorly informed. Despite the previous true obstacles, challenges, corruption, pension has moved forward with firm and long strides.
Some have been bothered by claims of ‘poor reportage’ of government borrowing the pension funds. The public should be told that the PFAs are doing great business with the government to grow the fund. Bonds are one of the safest investment instruments world over. Failure in making good bond transactions is a reputation no responsible system; organization wants to trifle with. It would hurt more than imaginable. The world is watching. Ratings are critical anyone time, or the government cannot borrow easily even internationally. Investment and endowment funds are never idle. Due processes and clearances of several layers of scrutiny are made before investments are made, guaranteeing clear entry and exit points of every transaction. The government is just like any other client. They have to be attractive in offers and security, without which no PFA will touch its offers to the public.

State governments employ a huge population of Nigerians. When the governments fail, hands are pointed the pension industry, not the governments quickly. The state governments will need a political and a desire to serve the people to initiate and follow through with the process of structuring its pension plans and execution. Execution is the most critical, not the rhetoric. Many states are still caught up the process of domiciling the law in their states. There are a lot of hiccups on the part because of various interests as well. Help can come their way if they are truly sincere in this initiative.

By Glory Etaduovie, a pension expert and consultant