Oshiomhole clarifies position on N3.5trn pension fund
He said, rather, his position is about how pension funds operators invest hard-earned workers' money in FGN Bonds and Treasury Bills, which in turn was grossly mismanaged through funding consumption.
In a statement personally signed by him, Oshiomhole said: "recently, a section of news media attributed comments to me regarding the way and manner in which pension funds to the tune of 3.5 trillion Naira were drawn down to support recurrent expenditure and not infrastructure development. In the said reports, the impression created was that I had accused the National Pension Commission (PENCOM) of colluding with the Federal Ministry of Finance to divert the said amount.
"Considering the manner in which this serious economic issue that borders on the future of the Nigerian economy and the welfare of the Nigerian workers who make contributions to the pension funds, is being misrepresented and trivialized in the media, I wish to make some clarifications and set the record straight.
"As someone involved from the outset in the crafting of the PENCOM Act, I am very much aware that under the law, PENCOM is a regulator of the financial institutions and operators that deal directly with the management of the pension funds and pension assets, namely: the pension funds administrators (PFAs) and the pension funds custodians (PFCs). I could not have said therefore that PENCOM diverted pension money because it has nothing to do directly with pension money in the first place.
"Indeed, I recall that when the pension reforms, which led to the creation of PENCOM were being formulated, the selling point of the contributory pension scheme was that pension funds should be source of cheap and long-term funds that would be used to support programmes and investments that will enhance workers welfare such as workers' housing and the creation of a robust mortgage system.
"However, what turned out in the management and operations of the pension funds was a completely different ball game. It is open knowledge that the PFAs are among the major subscribers of Federal Government of Nigeria (FGN) Bonds and Treasury Bills, which are instruments of FGN's domestic borrowing, issued periodically by the Debt Management Office (DMO) and the Central Bank of Nigeria (CBN) respectively, on behalf of the Federal Government. FGN Bonds as debt securities are generally considered safest relative to other debt instruments in the capital market because they are governed by the "faith and credit" principle; offer attractive rates and guaranteed returns, at least in theory.
"It is, therefore, not a new revelation that total subscriptions of pension funds to the FGN Bonds are in excess of 3.5 trillion Naira or about 70% of the total funds (estimated at 5.1 trillion Naira) so far accrued under the contributory pension scheme. It is also not a secret that in the last five years under the previous administration, the Federal Government had engaged in monthly bond issuances as a means of raising finance to fund recurrent expenditure and service domestic debts, rather than finance capital projects, which was the main purpose of bond issuance if domestic borrowing was to be a productive and beneficial activity to the national economy. These are facts that could easily be verified from the PFAs and PFCs; DMO, Securities and Exchange Commission, as well as CBN, if journalists and the media they represented have gone the extra mile to find out.
"The issue clearly was not about PENCOM diverting pension funds. It was about how pension funds operators invest hard-earned workers' money in FGN Bonds and Treasury Bills, which in turn was grossly mismanaged through funding consumption (recurrent expenditure, payment of salaries for federal employees, financing budget deficits and domestic debt servicing) rather than concrete investment in critical infrastructure, housing, etc.
"Pensions as workers savings, rather than being invested in capital projects with multiplier effects on jobs and incomes, are being invested in bonds which go into funding wasteful recurrent spending. Spending borrowed money on unproductive ventures typically generates inflationary pressures that lead to devaluation of the currency and purchasing power of workers. The net effect is that by the time these savings are required to pay pensioners in the future their real value would have been eroded quite significantly. As we have seen even in advanced economies, such kind of mismanagement of pension funds had easily sparked economic crisis that undermined the welfare of workers and retirees.
"I have followed the recent World Pensions Summit organized by PENCOM and all through experts and analysts kept emphasizing that pension funds should be invested in infrastructure like roads, power and other productive ventures to develop the national economy. The point here is that pension funds should not be invested in instruments that mobilize funds only for unproductive and wasteful ventures.
"It is in the public domain that federal budgets in the last four years have devoted as much as 85% of the budgetary outlay to recurrent expenditures including salaries. The National Assembly on whose onus rests the approval of the budget has been lamenting year-in-year-out, this is clearly bad economics, a situation in which only a paltry 15% of the budgetary outlay was devoted to capital projects and investment in the last five years. Federal legislators have also openly complained about the fact that even the 15% capital expenditure is hardly executed fully, implying that the amount devoted to recurrent expenditure will be even much higher than the 85% reported officially.
"Based on the foregoing, let me reiterate that nothing I have said about pension funds and how they have been managed in the last five years is new. Everything I have said is in the public domain and can be verified. It behooves the media and journalists to refrain from twisting and misrepresenting critical national issues such as this one, so that they will not give individuals or institutions that mismanage the national economy an escape route to divert attention or muddle-up the issues. This is a responsibility we all owe Nigeria and the future generations."
Joe Attueyi:Except for the issue of Oshiomhole - where you don't want to give him a benefit of the doubt while I do - our positions are very close on the desirability to invest these trillion-naira pension funds conservatively for national development purposes, under sovereign guarantee as well as possibly re-insurance of the pension funds.Nor be so?So let us both quit while we are ahead- while you keep your $1000! :-)And there you have it.Bolaji AlukoOn Thu, Oct 8, 2015 at 1:08 PM, 'Joe Attueyi' via AfricanWorldForum <africanworldforum@googlegroups.com> wrote:--but you are being PENDANTIC about languageProf AlukoIf by pedantic you mean being excessively concerned with minor details then I must say you are wrong.First, like I said in my opening, the person making a statement has an impact on the value placed on a statement.My little understanding of the English language tells me there is a huge difference between a claim that1) Pension fund contributions in the custody of PFCs, managed by PFAs and regulated by PENCOM 'were withdrawn from PENCOM and spent on recurrent expenditures'Which is the allegation Oshio is reported to have madeAND2) Government's pension obligations were not paid to PFCs but (the monies) were used by Govt to fund its recurrent expenses.Which is your new interpretation of what Oshio may have meant. If the monies have not been transferred to the PFCs how can it be 'withdrawn from PENCOM '?I am 100% sure that (1) is not right.If and when you get confirmation from Oshio that he meant (2) then we can debate that. I doubt it adds much value to be reading Oshio's mind ---I can only read what he said literally!For education purposes, the stealing of pension funds by Govt officials as evidenced by the article you posted below and common stories of pensioners dying on queues triggered the Adeola pension reform commission that put management of Pensions in the private sector while the managers are regulated by the public sector.If you and/ or Oshio can show just one incidence of pension monies stolen since the reform was implemented I'll pay $1000 to a charity of your choice.While I cannot speak for whether or not the Federal Government pension obligations are fully funded, I can say without fear of contradiction that public and private sector pension contributions paid into the PFCs is one of the most regulated funds in Nigeria today. We recently had a debate hereabouts whether the regulator & custodians should loosen the rules to allow more access to the funds for capital projectsThe current pension system is proof that the separation of management ( private sector) and regulations ( public sector) of commercial enterprises is what suits NigeriaJoeSent from my iPhoneTo view this discussion on the web visit https://groups.google.com/d/msgid/africanworldforum/CAORq2DBNCoJyh3nADgeRRg817e02u9mNJKoQnn-6tXTrHFVnnw%40mail.gmail.com.--Joe Attueyi:You wrote:QUOTEWhen a person of the status of a state governor makes a statement one ought to take it seriously. However if it is founded on so flawed a premise as that excerpted above then one has to worry whether 'everything is alright'.PENCOM is a public institution that REGULATES activities of PRIVATE SECTOR institutions--Pension fund administrators and Pension fund custodians. PENCOM has neither custody nor control over pension fund contributionsIt is NOT possible to withdraw N3.5 trillion from PENCOM---simply because PENCOM does NOT have N3.5 trillion.If you and/or Oshio can show that anybody withdrew N3.5 trillion from PENCOM I'll pay $1,000 to any charity of your choice no questions askedUNQUOTEOkay, okay, now I understand you....but you are being PENDANTIC about language. You would rather Governor Oshiomhole to say "funds meant for PENCOM administration (through PFAs and PFCs) were spent on recurrent expenditure?"Is that it?Okay, do you agree that funds are TRANSFERRED to the PFAs and PFCs from the coffers of the Federal Government, and that before that transfer, an unscrupulous government can (but should not) SPEND the money - ie misappropriate it - on either recurrent or capital expenditure?Meanwhile, while you are preparing your response, please read the following:QUOTEPension Funds Theft: N32bn Police Pension Fund
Submitted by Grassroots and Gender Devel... on Tue, 2013-06-04 14:32Offender(s)
Charged: NoConvicted:NoSectors: pensionStory
The cry of Nigerians pensioners is likely been heard by the "Most High" as cases of pension frauds has been unravelled recently in various sectors of the Nation. This was discovered when a fraud of over N5billion was uncovered in the Pensions Unit of the Office of the Head of the Civil Service of the Federation by the operatives of Economic and Financial Crimes Commission (EFCC) in April 2012.
While the nation was still whirling from this news another scandal broke out. It was reported that there had been massive embezzlement of Police Pensions Funds, with several billions of naira diverted into the private accounts of some government officials. Following these scandals, there was widespread condemnation by the media and general populace about the government's unwillingness to decisively tackle the issue of corruption, which has become a bane to the country's development. The Police Pension Fund theft could be best described as an embarrassment to the National.
The unfolding multi-trillion naira federal pension fraud advertises to the entire world that corruption has overwhelmed the Nigerian state. When the Senate, the upper legislative chamber, throws up its hands and says it has handed over an official it accuses of pilfering public funds "to God", it signposts its utter helplessness over the very important task of tackling corruption in public places.
The former Director of Pension in the Police Affairs Ministry, John Yakhubu Yusufu had who pleaded guilty to the 20-count charge of criminal conversion of N32.5 billion belonging to the Police Pension Fund. EFCC had alleged that the accused persons conspired and sequentially withdrew monies from Police Pension funds in an account domiciled at First Bank of Nigeria and shared it among themselves, adding that the 3rd accused person, Inuwa Wada, collected N18million from Unity Bank Plc, as his reward for retaining the Police Pension Account with the bank.
According to the EFCC, the offence is punishable under section 27 (3) of the Economic and Financial Crimes Commission (Establishment e.t.c) Act Cap E1 2004. Yusufu was hitherto facing trial alongside a Permanent Secretary in the Office of the Head of the Civil Service of the Federation, Mr. Atto see wheiku Abubakar Kigo and six others, Esai Dangabar, Ahmed Inuwa Wada, Mrs. Veronica Ulonma Onyegbula, Sani Habila Zira and Christian Madubuike.
The scale of the fraud in public sector pensions is as massive as the twists in official efforts to impose order are bizarre. Abdulrasheed Maina, Chairman of the Presidential Pension Reform Task Force Team, reckons that about N3.3 trillion has been released by the Federal Government for public sector retirees since 1976 "without accountability". Over the years, not only has the country been treated regularly to the awful spectacle of elderly retirees collapsing and dying in the contrived pensioners' verification queues, mind-boggling revelations of massive, systematic and brazen theft have also been making the headlines, confirming our rating as one of the world's most corrupt nations.
It is still not clear to many citizens of the country why the Justice Abubakar Talba, the Federal High Court, Abuja, sentenced John Yusufu, former director in the Police Pension Office, to two years in prison with an option of N250, 000 fine on each of the three counts. The ruling drew anger from many Nigerians, including legal experts, who believe that granting an option of fine for such a monumental fraud would encourage corruption by public officers.
UNQUOTEWe shall be waiting, to see whether Oshiomole is the target, or our interest in enhancing a discussion that Pension funds should be properly invested conservatively in developmental projects under sovereign guarantee.And there you have it.Bolaji Aluko--On Thu, Oct 8, 2015 at 11:17 AM, Joe Attueyi topcrestt@yahoo.com [NaijaObserver] <NaijaObserver@yahoogroups.com> wrote:1) Was N3.5 trn drawn from PENCOM during this period?
Prof AlukoWhen a person of the status of a state governor makes a statement one ought to take it seriously. However if it is founded on so flawed a premise as that excerpted above then one has to worry whether 'everything is alright'.PENCOM is a public institution that REGULATES activities of PRIVATE SECTOR institutions--Pension fund administrators and Pension fund custodians. PENCOM has neither custody nor control over pension fund contributionsIt is NOT possible to withdraw N3.5 trillion from PENCOM---simply because PENCOM does NOT have N3.5 trillion.If you and/or Oshio can show that anybody withdrew N3.5 trillion from PENCOM I'll pay $1,000 to any charity of your choice no questions askedJoeSent from my iPhone
On Oct 8, 2015, at 10:56 AM, Ibimgm via AfricanWorldForum <africanworldforum@googlegroups.com> wrote:Just too much speculation! What actually did happen?GMI.--In a message dated 10/8/2015 4:09:14 A.M. Eastern Daylight Time, alukome@gmail.com writes:--
My People:Here is what Oshiomhole is quoted to have said:QUOTEYou challenge Pencom and Ministry of Finance, you will discover that over N3.5tn was drawn by the previous government from pension funds to support recurrent expenditure, not to support infrastructure.UNQUOTEAssuming he was quoted correctly - no embellishment or fabrication - there are two issues here:1. First is the very character of MISAPPROPRIATION. If that is what Oshiomhole is hinting at, then misappropriation/misapplication means not spending a particular money the way it was meant to be spent, sometimes by the person who has custody of the money, who may do it under the influence of another person. I am not sure that is what Oshiomhole is stating here. It is therefore trite to say that something CANNOT happen, when in fact the very POSSIBILITY/REALITY of its happening is the ILLEGALITY being hinted at.2. Secondly, and more importantly, is to ask certain questions:(1) Was N3.5 trn drawn from PENCOM during this period?(2) How much of it was invested in INFRASTRUCTURE?(3) Is there ANY other CAPITAL category OUTSIDE of Infrastructure that PENCOM spent part of the money on?If NONE was invested in Infrastructure or any other Capital Project - as Oshiomhole is likely to be hinting - then the ONLY other category that PENCOM must have spent the money on would be RECURRENT - to pay for(A) its (PENCOM) own workers (salaries + allowances)(B) to pay for its own overhead operations(C) to pay for retirees - its primary aim.I believe that is what Oshimhole is hinting at - that the N3.5 trn was not INVESTED to generate more money - maybe beyond interest income from banks - and was used to do (A), (B), (C) above, rather than to include(D) Investment in Infrastructure (Roads, Railway, Power, Water), for which citizens will be required to pay(E) Low-Interest Loans for Education(F) Low-Interest Loan for Agriculture(G) Low-Interest Loans for Manufacturing Industries(H) Conservative Investment in Foreign SecuritiesA successful investment in these will not only DEVELOP the country, but a portion of the return on investments will be ADDED to the income of the retirees via (D) to (G) above.That is what is done all the world over - except in Nigeria apparently - out of fear of corruption? We must rise above that, and be confident that we can put the proper controls.In conclusion, I fully support the conservative use of the trillions of PENCOM in developing our country. Not doing so is ridiculous, and is like that story of the Bible where one man was given a talent and he BURIED it and returned it to its owner who upbraided him, while the others invested theirs, and where given even more money.And there you have it.Bolaji Aluko
On Wed, Oct 7, 2015 at 10:42 PM, 'Leye Ige' via AfricanWorldForum <africanworldforum@googlegroups.com> wrote:
"The funds are held by one independent institution while the investment decisions are made by a different private sector entity. All regulated by PENCOM..No Government can use pension funds as before because the funds neither belong to Govt nor controlled by Govt."--Joe Attueyi
(1) The funds need NOT belong to or be controlled by the Government BEFORE the government can access it. The Government appoints whoever will be the directors of PENCOM and associated entities.
(2) The government does NOT have to "use it as before"; that is, simply dipping its hands into it; BUT the government can utilize it via "Investments"--which is what Pension funds are all about-- just that in this case, the "investment" is in recurrent expenditure.
Leye Ige
--------------------------------------------
On Wed, 10/7/15, Joe Attueyi topcrestt@yahoo.com [OmoOdua] <OmoOdua@yahoogroups.com> wrote:
Subject: [OmoOdua] Re: [NIgerianWorldForum] Re: Jonathan spent N3.5tn pension fund on recurrent expenditure – Oshiomhole
To: OmoOdua@yahoogroups.com
Cc: OmoOdua@yahoogroups.com, "Segun Sanni therealsegun@yahoo.com [NaijaPolitics]" <NaijaPolitics@yahoogroups.com>, "Oyo State Intellectual Forum" <Oyo-forum@yahoogroups.com>, "NAIJA Dream Team Intellectuals" <naijadreamteamintellectuals@yahoogroups.com>, "Buddies" <Caucusmen@yahoogroups.com>, "Ode- Besilu's Group" <NaijaObserver@yahoogroups.com>, "AfricanWorldForum" <AfricanWorldForum@yahoogroups.com>, "Naija News" <TalkNigeria@yahoogroups.com>, "yahoogroups" <Egbeodua@yahoogroups.com>, "Unilorin friends" <Universityofilorinalum@yahoogroups.com>, "Yan" <YanArewa@yahoogroups.com>, "Professionals" <capitalmarketroundtable@yahoogroups.com>, "Ra'ayi Riga" <raayiriga@yahoogroups.com>, "NaijaEvent@googlegroups.com" <NaijaEvent@googlegroups.com>, "African GM" <africanworldforum@googlegroups.com>
Date: Wednesday, October 7, 2015, 12:29 PM
Post Adeola commission restructuring of
the pension system:
the pension
funds contributed
under the auspices of
the National Pension Commission
(PenCom) are
managed by privately owned Pension Fund
Administrators (PFAs) and kept in custody by
Pension Fund
Custodians
(PFCs).
as Segun
rightly educated those who are interested in knowing how the
pension system currently works in Nigeria. The funds are
held by one independent institution while the investment
decisions are made by a different private sector entity. All
regulated by PENCOM.
No Government can use
pension funds as before because the funds neither belong to
Govt nor controlled by Govt.
Some state governments
have not adopted these pension reforms. Edo is probably one
of them -- which would explain Oshio's
confusion
Joe
Sent from my iPhone
On Oct 7, 2015, at 4:48 PM, Leye Ige ige.leye@yahoo.com
[NIgerianWorldForum] <NIgerianWorldForum@yahoogroups.com>
wrote:
the pension funds contributed
under the auspices of the National Pension Commission
(PenCom) are managed by privately owned Pension Fund
Administrators (PFAs) and kept in custody by Pension
Fund
Custodians (PFCs).
Posted by: Joe Attueyi <topcrestt@yahoo.com>
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