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Concerns over plans to exit police from CPS as liabilities hit N213bn

Industry players in Nigeria’s pension sector have raised concerns over the plan by the Senate to exit personnel of the Nigeria Police Force from the…

Industry players in Nigeria’s pension sector have raised concerns over the plan by the Senate to exit personnel of the Nigeria Police Force from the Contributory Pension Scheme (CPS).

Currently, there are two bills before the upper legislative chamber; the Police Pension Board (Establishment) Bill, 2022 (Sb 1009) and Nigeria Police Special Forces (Establishment) Bill, 2022 (Sb 846) held by the Senate committee on Police Affairs.

The bill, which was jointly sponsored by senators Ishaku Abbo, representing Adamawa North and Mohammed Ali Ndume, Borno South, is seeking the establishment of a Police Pension Board that will take over the administration of pension for the Nigeria Police Force and, the establishment of Nigeria Police Special Forces for the training of police officers.

The lawmakers say the rationale behind sponsoring the bill arose from the low amount of benefits payable to the police under the contributory pension, an issue the National Pension Commission said could be addressed by enhancement of the rate of pension contribution under the CPS, rather than an outright exemption.

In the same vein, the Inspector General of Police, Usman Baba Alkali, who was represented by Police DIG Sanusi Lemu, said the swift passage of the bills would boost the morale of the police officers to tackle the range of criminalities, including armed robbery, kidnapping and terrorism facing Nigeria today.

Checks by Daily Trust show that the key reason why the federal government was unable to sustain pension payments under the Defined Benefits Pension Scheme was the huge amount accruable and the resultant effect on its budget.

Subsequently, it directed that only the military and intelligence agencies be exempted from the CPS. 

The exemption of the military and the intelligence agencies is contained in Section 5 of the Pension Reform Act (PRA) 2014.

Consequently, at a public hearing on the two bills over the weekend, the Director General of the National Pension Commission, Mrs Aisha Dahir-Umar, pointed out that exiting the police force from the contributory pension will have dire consequences on the economy.

Daily Trust recalls that the federal government’s liability under the CPS for police personnel now stands at N213.4 billion as accrued pension rights and monthly employer pension contributions.

Accrued pension rights are retirement benefits of government employees who were in service before July 2004, prior to the enactment of the Pension Reform Act 2004, which means that these liabilities were inherited from the old pension scheme.

Represented by Mr Clement Oyedele Akintola, commissioner in charge of the Inspectorate division at the commission, the PenCom DG said, “It is evident that the Defined Benefits Scheme is not sustainable as exempting the Military, Department of State Security and the Nigeria Intelligence Agency has resulted in the very high allocation of resources to fund their retirement benefits.

“It is also important to note that the exemption of the NPF and any other agency from the CPS would erode the pool of long-term investible funds accumulated under the CPS,” he stated.

He told the audience that PenCom did not see a reason for the police to exit the CPS but saw reasons for enhancement.

PenCom argued that exclusion of the NPF from the CPS would also affect existing retirees under the Retiree Life Annuity, which would negatively affect the flow of capital into the insurance industry, thereby undermining the Economic Recovery and Growth Plan (ERGP) of the federal government.

Pension liabilities will be huge burden to economy – Operators 

Making a presentation on the bill, the Chief Executive Officer of the Pension Fund Operators Association of Nigeria (PenoP), Oguche Agudah, said allowing the police to exit the contributory pension will mean taking Nigeria back to the dark days of owing retirees pensions and gratuities. 

He said the concern is about the sustainability of the funding of the police board, transparency of the system as entrenched in the CPS and its risk for the nation’s financial system.

“In the 2023 budget, Nigeria has a deficit of about N10 trillion, as such adding another huge wage bill from the police force to this deficit will slow down economic growth. 

“The system is not perfect, I must admit. What is needed to be done is to rejuvenate the system and make it work perfectly,” Oguche said.

Also speaking to Daily Trust, a non-governmental organisation, Contributory Pension and Happy Retirement Advocacy (COPEHRA), said the grievances making the police want to exit the CPS could be resolved within the system.

The legal adviser of the team, Barr. Ayinla Mahmod, while making the presentation, said all the grievances of the police could be corrected within the CPS.

He said: “Currently, the government is saddled with heavy recurrent statutory expenditures as well as providing funding for necessary and important capital projects.

“A 3–year review of our country’s budget performance has shown that a large chunk of the budget is dependent on borrowed funds by virtue of rising budget deficits.

“The government is always finding ways to cut down on the cost of governance, overhead and recurrent expenditures in a bid to provide more for capital and developmental programmes and projects.

“Incurring a life-long recurrent pension liability with increasing funding by the year is of no benefit to the economic viability of the nation,” he added.