Controversy over N17trillion borrowing from Pension Fund Assets: NECA calls for adherence to PRA 2014 Provision

The Nigeria Employer’s Consultative Association (NECA) has expressed its position regarding the controversial and alleged attempt by State Governments to borrow several Trillions of Naira from the Pension Fund Assets for infrastructure development.

Speaking in Lagos, the Director-General, Dr. Timothy Olawale stated that “the issue of investment and borrowing from the Pension Fund Asset has remained contentious and vexatious to many Stakeholders. While it is obvious that the nation needs huge investment to address the current infrastructure deficit, the contention remains on how to fund the deficit. While Sections 85-91 of the Pension Reform Act 2014 stipulated the classes of assets that Pension funds should be invested in,  with over-riding provisions for the funds’ safety, past and present alleged misapplication of loans by the Government has created deep mistrust in the minds of citizens and eroded the confidence in Government”

While shedding more light on the provisions of the Pension Reform Act, 2014, the Director-General noted that “We are not unaware that part of the watertight Investment Regulations issued by PenCom to Pension Fund Administrators stipulated that investment of pension assets for infrastructure development must:

• be through infrastructure Bonds
• and up to a maximum of 15% and 5% of Assets under Management respectively
• have Risk Management and Investment Committees of the Board to instill high level of governance and
• ensure that all investments are as stipulated in the Pension Reform Act and meet the quality requirements enshrined in the Regulations.

Dr Olawale further noted that “from the foregoing, it is clear that given the valuation of the pension assets as at October 2020 (which is N12.05 trillion), up to the sum of N2.4 trillion is the maximum that could be invested by the PFAs in infrastructure funds and bonds and not N17trillion as being speculated. Even then, this is not given or automatic, considering the non-availability of eligible instruments (funds and bonds) in the financial market to invest the pension assets for infrastructure development”

Responding to the imperative of balancing safety and reducing national infrastructural deficit, Dr. Olawale affirmed that “we have no reason to believe that the relevant extant laws: PRA 2004 and 2014 and the Investment Regulations won’t be adhered to by the PFAs and PENCOM, the Regulatory Body. As long as any decision to invest part of the Pension Fund Assets are strictly based on the provisions of the PRA 2014 and existing Regulations of Investment, which guarantees safety, transparency, fair valuation and thus removing all ambiguity, there won’t be any need for concern, at all”

He concluded that Employers of Labour in Nigeria has implicit confidence in PENCOM, especially now that the confidence of Contributors and Stakeholders have been reinforced with the setting up and the inauguration of the Governing Board for oversight responsibilities.”