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N1.6 trillion idle pension funds

Nigeria’s National Pension Commission (PenCom) recently announced that about N1.6 trillion representing 20% of a total investible pension of N7.94 trillion earmarked for infrastructure and financial instruments, is sitting idle, due to the absence of bankable projects. This revelation was made by the Acting Director General of the Commission Mrs Aisha Dahiru-Umar at the June Edition Breakfast Seminar of the Chartered Insurance Institute of Nigeria (CIIN) in Lagos. According to the PenCom DG who was represented by the Commission’s Head of Contribution and Bond Redemption Department, Olulana Loyinmi, out of the N1.6 trillion, just a little over N1 billion or 5% is being utilised. 

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Bankable projects refer to investment options that have sufficient collateral, guaranteed future cash flows and high probability of success.  The implication of Pencom’s query is that the idle funds cannot be accessed for infrastructure development as well as investment in financial instruments due to their inability to meet the strict requirements as listed above. The primary concern of the PenCom with respect to the idle state of the funds under consideration is the scope of opportunity list by the country over the non-utilisation of the funds. As was pointed out by the PenCom DG at the CIIN forum, pension funds in countries across the globe are veritable sources of ready fund for investment in development of infrastructure, and other areas with long term gestation. 

It is significant that the idle state of the pension funds is reported at a time the government is junketing around the world soliciting for loans under often demeaning terms and conditions, whereas all it has to do is to revert to the exploitation of the huge stock of investible funds as available in the coffers of PenCom. Nevertheless, the inability of the government to tow the path of pension funds constitutes a metaphor that captures the sordid state of public sector financing in the country. 

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 Infrastructure is the stock of physical and organizational structure on which the society operates. It, therefore, goes without saying that the state of infrastructure in a society defines the citizenry quality of life. For a country like Nigeria that is facing a severe state of emergency as far as infrastructure is concerned, the situation of the idle pension funds remains unacceptable. Especially when all the government has to do is to upgrade its investment management culture to meet the exacting standards of bankable status for its projects and instruments. For in the final analysis, it will still be of more economic value to exploit home grown funding sources than resorting to foreign loans. 

It is in this respect that the government should encourage the deepening of the nation’s capital market to enable public utilities that service the infrastructural needs of the country, qualify for quoting on its floor. It is a travesty that core infrastructural projects like the power Generating and Distribution Companies (GENCOS) and (DISCOS) and several others are not fully on the stock exchange. By virtue of their absence at the stock exchange, they remain restricted with respect to investible funds like the pension funds under consideration.

Nevertheless, it is also important that the state of idleness of the funds should not be exploited by the government to spend same under any guise. Pension funds belong to pensioners for whom it is saved for disbursement to them as and when due. This advisory is informed by the sad history of mismanagement of pension funds in the country. A case in point was that of police pensions, which were exposed to the manipulations of nefarious individuals with catastrophic consequences for the country. Also in the same category was the sordid tales of  the ‘Mainagate’ scandal associated with massive fraud in the reform of pension management in the country. 


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