I am not particularly an ardent fan of former President Olusegun Obasanjo administration, but one good thing that has continued to endear him to me is the fact that his administration enacted the 2004 Pension Reform Act (PRA), which introduced the Contributory Pension Scheme (CPS) and established the National Pension Commission to regulate and supervise pension matters in the country.
It takes great leaders with great vision to identify a problem and to take concrete steps to solve it. Obasanjo and his team, namely Malam Nasir El-Rufai, Mr. Fola Adeola and Mrs. Chinelo Anohu-Amazu now DG of PENCOM, among others, clearly thought about the future of many Nigerian workers, families, citizens and the country itself.
Prior to the CPS, the pension system called Defined Benefit Scheme (DBS) was indeed a national disaster, which bred corruption, crippled our economy and sent many innocent and poor pensioners to their early grave. Nigerian pensioners were routinely subjected to torture, inhuman and degrading treatment going through a tortuous process to get their pensions. Some of these pensioners do not even earn their pensions in their lifetime. From the experiences of my parents and relatives in the 80’s and 90’s, I got a very bad impression of our pension system as it takes prayers and divine intervention for one to receive this pension under the DBS or pay as you go.
Before I go to my main point, it is important to talk about that DBS so people can appreciate where I’m coming from. The problem with the DBS is that it is funded through government budgetary allocation and depends on availability of funds. Pension became a great burden to government as a result of inadequate funding, uncoordinated administration, and presence of ghost pensioners on the payroll and diversion of funds. Government could no longer cope with pension liabilities. It was such ugly situation as the whopping N43 billion underfunded pension liabilities in NITEL that triggered the reform of our defined benefit pension scheme.
Perhaps, the worst of all was the outright looting of billions of pension funds by greedy and fraudulent government officials that want to build their ‘heaven’ on earth while some even stash away cash for use in their next world. Therefore, when former President Olusegun Obasanjo declared last year, while receiving an award during the World Pension Summit ‘Africa Special’ Gala night that there has not been a single case of fraud under the contributory scheme in 10 years of its administration, it sounded impossible, but it is true. There is no doubt that the CPS has today addressed the weaknesses of the defined benefits and provided a sustainable pension system that will guarantee retirement benefits for pensioners.
Pension funds have been so fenced under the CPS that nobody can talk of looting it. Pension Funds Administrators (PFAs) that administer the funds do not have access to it and those in custody of the funds, the Pension Fund Custodians (PFCs), cannot administer it. This system ensures checks and balances and safety of the funds. And many pension stakeholders understand that this, coupled with prudent management, is the reason pension funds have so grown to almost 5 trillion this year. Obasanjo referred to is as “cool money, not hot money.”
One of the success stories of the CPS is that it is increasingly curbing corruption in the long run unlike the Defined Benefit Scheme (DBS), which bred corruption as non-payment of pension benefits and resultant uncertainties of life after retirement pushed many public servants into looting of public funds to prepare for the rainy days. Today, with the CPS, many Nigerian workers see the accumulation of their pension on monthly basis and can actually make projections as to their retirement benefits upon retirement. Thus, one of the greatest achievements of this system is that pensioners now have guarantee that their retirement benefits will be available for their personal use to carter for livelihood when they retire from service. This enhances motivation and discourages corruption.
Today with the CPS, the unsightly ‘Pension Pay Parades’ (PPP) have disappeared as payments are made directly to the bank accounts of beneficiaries. It is like a direct allocation, cutting off the Pension Departments and boards, which used to be the slaughtering slab of pensioners. There is also mobility of labour because job switches, whether in public or private sector, does not affect workers retirement benefits. However, the CPS is not without its challenges as there is no perfect system. Pension stakeholders have accused firms, government bodies, employers and even employees of non-remittance of funds to the retirement savings Accounts (RSAs). Recently, the PENCOM team during a visit to President Muhammadu Buhari confirmed this and described the non-remittance of pension funds as a crime.
But the good thing is that former President Goodluck Jonathan, the current PENCOM leadership, and the 7th National Assembly has put in place the Pension Reform Act (PRA), 2014 with stiffer penalties for defaulters. With Buhari’s tough political will and PENCOM’s hard stance on enforcement, such should ordinarily know that they could no longer go free. Effective monitoring, supervision and enforcement of the provisions of the PRA, 2014 will ensure a steady growth of the pension funds for the benefit of Nigeria and her citizens. The CPS has indeed shown that it is possible for our leaders to device institutional mechanisms to fight corruption and that the greatest war against corruption lies in denying people the opportunity to engage in corruption. The tamper-proof pension fund under the CPS also means that the constantly growing trillions of funds will be available for investment and the development of our economy.
Dankade wrote in from Bauchi.
