Pension funds in crisis
Whereas on one side of the coin it is portrayed as an achievement that Imo and one or two other state governments are willing to pay retirees their entitlements, on the other side it is pension money that is looking for profitable investment outlets.
In a way, pension funds on both sides of the proverbial coin are in crisis. On one side the crisis is of reluctance to pay retirees and pensioners because the beneficiaries are seen as a liability. On the other side it is pension funds that are looking for investment outlets after all pensioners are paid as and when due.
It is still good that the Imo state government is determined to pay pensions and gratuity by setting aside N100 million and N50 million monthly for the payment of gratuities to state government pensioners and local government council pensioners respectively.
Paying an inadequate 150,000,000 monthly as pension and gratuity by the Imo state government to offset pension and gratuity liability totalling a verified N60 billion is evidence that there is a serious pension crisis in that state.
But the crisis of funding pension in Imo State where that N150 million will be on the table monthly pales into insignificance relative to the situation in next-door Abia State, where elderly, mostly unkempt and generally distraught retirees were on the street protest over their unpaid pensions and gratuity.
One of the marchers explained their lot thus: “It is 22 months now (without paying us) and this is aside what the past government owes us. This is what the present government owes us. If we add five months owed by the previous governor, Dr. T.A Orji, it will be making up to 27 months unpaid pension. We are not even talking about gratuity that has been stopped for over 19 months."
Another crisis that might manifest sooner or later is hinged on two very important happenings. The first happening was the N499.1 billion fine imposed on 12 banks by the Central Bank of Nigeria (CBN) for disregarding its policy directive on extending more credit to the real sector of the economy. The second happening was the ostensibly positive report by the National Pension Commission that Pension Funds Administrators (PFAs) in the country have so far invested N1.03 trillion of pension savings in the banking sector.
A possible linkage between the two events in the preceding paragraph raised the question whether part of that N1.03 trillion invested in some of the 12 banks was used by them to pay that hefty N499.1 billion fine. It is noteworthy that none of the banks cried out over the fine as if it does not represent a real loss and setback for them. Could this lead to a crisis in the country's Contributory Pension Scheme?
T h e question is in the context of the notoriety of the banking sector for unwholesome activities that led to several failed banks, consolidation of weak banks, mergers and takeovers, and even the liquidation of banks jointly by the Nigeria Deposit Insurance Corporation (NDIC) and the CBN. There are ongoing litigations over massive frauds in some existing or liquidated banks.
The three actors in the matter, PenCom, CBN and the 12 banks fined by the CBN should as a matter of accountability, allay and clear public fears and concerns about the possible linkage.
The other type of crisis faced by pension funds elsewhere is about getting profitable investment opportunities. The $440 billion Denmark pension fund market is in that crisis, according to Pensions & Investments (P&I). Interest rates are at sub-zero level over there, at 0.02 per cent. So investing in bonds or time deposits in banks will not yield much gain, threatening the funds' ability to cope with liabilities. The funds are looking to invest in infrastructure development. Finding partners is another crisis.