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FG concludes plan to borrow N2 trillion from Pension Fund  

FG has concluded plan to borrow N2 trillion from the current N10 trillion pension funds to finance the development of infrastructure.

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The Federal Government has concluded plan to borrow N2 trillion from the current N10 trillion pension funds to finance the development of infrastructure. The disclosure was made at the National Economic Council (NEC) meeting presided over by the Vice President, Yemi Osinbajo, on Thursday in Abuja.

Briefing newsmen at the end of the NEC meeting in Abuja, Kaduna State Governor, Mallam Nasir el-Rufai, stated that the decision of the Federal Government to pull N2 trillion out of the pension funds was reached by a NEC sub-committee.

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El-Rufai: How Vodafone recorded its ‘biggest’ investment mistake in Nigeria, FG concludes plan to borrow N2 trillion from Pension Fund  

Bridging Infrastructural Deficit: According to el-Rufai, the country will never be able to address its road infrastructure deficit with the current budgetary allocation for road construction and maintenance. He explained that with the N200 billion in the 2019 budget and N169 billion in 2020 budget, roads cannot be properly fixed.

“In 2019 budget, N200 billion was budgeted for construction and maintenance of federal highways. In 2020, the budget is N169 billion. If we continue this way, we will never be able to fund highway infrastructure. We need to unlock funds to construct and maintain highways.

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“We will never be able to construct and maintain highways with N200 billion every year. Highway infrastructure and maintenance can only be done with long term funds.”

[READ MORE: Nigeria spends $1.31 billion to service external debt in 2019)

Speaking on the rationale to borrow from the N10 trillion pension fund, El-Rufai stated that the decision followed an interim report earlier presented to the council, and the decision to borrow N2 trillion from the pension fund was in compliance with the Pension Reform Act 2004, which empowers the government to borrow 20% of the fund to address national issues.

According to him, various countries of the world such as Chile and South Africa funded their infrastructure growth by borrowing money from workers’ pension funds. El-Rufai also stated that with Nigeria’s pension funds largely dominated by youths in their 30s, who still have several years ahead of retirement, utilising the funds for infrastructure would not generate any problem.

Other infrastructures mentioned by the El-Rufai included rail and power projects. According to him, the committee had identified three areas (rail, road and power) where the pension funds would be invested, He added that the borrowing would be done through bonds with private companies investing in road and rail infrastructure and paying within a period of 20 years.

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While lamenting on the moribund state of infrastructures in the country, El-Rufai stated that in the last three years, the Federal Government had invested N1.7 trillion in the power sector, without any meaningful effect. According to him, the committee has thrown open consultations on how to fix the endemic crises plaguing the power sector, by inviting memoranda from the general public.

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FG uses VAIDS to raise N70 billion from Nigerians 

What it means: The latest move by the government shows revenue crisis in Nigeria continues to linger.  In spite of Nigeria’s burgeoning debt profile, which currently stands at over N26.2 trillion, the figure is expected to hit a new height in 2020.

[READ ALSO: Debt profile: Bankruptcy looms, Obasanjo warns FG)

Speaking recently at the World Economic Forum (WEF) in Switzerland, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed reaffirmed that Nigeria does not have a debt problem but the challenge of under-performing revenues, which makes debt service obligation a struggle for the country.

Ahmed has consistently insisted that the nation faces no debt problem.

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Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

24 Comments

24 Comments

  1. Jay

    January 24, 2020 at 12:42 pm

    This a recipe for a major disaster waiting to happen. Never have we experienced this tremendous amount of borrowing from an administration

    • Edeh

      January 25, 2020 at 8:53 pm

      Why using pension money for another project when you have refused to pay those who have suffered the nation for 35merterious years thereby keeping them & their children in hunger and untold hardship the federal Govt need a change of heart E

  2. Akib Abiola

    January 24, 2020 at 6:28 pm

    A scheme to loot and scam Nigerian pensioners!

    Borrow and borrow government. This is a dangerous precedent. Nigerian pensioners are at risk of losing their pension payment because this government is running on a deficit. Meaning, they are not generating enough revenues to meet their expenses. They won’t be able to replenish the money they borrowed from the Pension Fund.

    These people are borrowing money to be shared among themselves like they shared the $321 million they received from Abacha’s loots and several billion dollars they received through assets and looted funds recovery.

    It is time Nigerian media, legislators, senators, press, social media and public hold this government accountable and demand that they give account details of all the revenues and looted money received since taking office.

    The only thing this government knows how to is how to borrow money. They don’t know how to create revenue generating opportunities. They don’t know how to create jobs for Nigerians and they don’t know how to create alternative sources of revenues for the government.

    Nigerians are being scammed and it is time to put a stop to it.

  3. Ghotkid

    January 25, 2020 at 7:21 am

    This is unfair ooo because pensioners are really suffering even we the son

  4. The Total Entrepreneurs

    January 25, 2020 at 7:40 am

    I pity for Nigeria workers.

    If this clueless government is allowed to borrow 20% of pensioners money, without stating clearly how to or when to repay back, then I foresee more crises for pensioners in the future.

    Remember, these monies borrowed by these lazy, unreasonable thinking politicians will never affect their own pension when the time for it comes.

    They remain in the elite and get their entitlements before the hardworking career civil servants that put more effort into building a vibrant system for the country. Remember how much the politicians earn and how poorly these civil servants earn. Making them to actually retire with no savings at all.

    Will Nigeria youths ever wake up against these evil happening in the land or are they expecting God to come down and do it for them?

    Will they ever stop for once thinking across ethnic and religious lines and think about the future of this country and the need to relegate these brainless men from politics?

  5. Excess

    January 25, 2020 at 7:44 am

    If they want to borrow hundred trillions let them do, since I was young and now I am old I have been hearing government to borrow, every year I have not hard government paid, and no one has come and collect Nigeria for refuses to pay depths, so this depth of a thing is not real to me it may be politician way of making the people not to expect much, from government,

  6. Anonymous

    January 25, 2020 at 9:37 am

    And where are the NLC in all of this.they will not voice out at all.as if pensioneers are not once workers.

  7. uche raymond

    January 25, 2020 at 9:39 am

    And where are the NLC on this.they will never voice out against this at all.as if the pensioneers were not once workers.

  8. In-box

    January 25, 2020 at 10:22 am

    I think it may be a bad idea to borrow from the pension fund. This is what workers would fall back on. There is a major crisis looming.
    Past funds have not been fully accounted for, the recovered loots and so on.
    This is a scary move that all should be concerned about.
    If after retirement , to get you cash and someone comes to tell you stories.
    What is the repayment plan, it should be transparent and visible for followup and accountability.
    All we see from this finance minister woman is just to borrow and borrow, dragging our presidents administration constantly into public worries and talks.
    We all know we cannt solve the problems all at once hence a need for gradual process, taking each sections at a time and seeing the wins before going into another.
    The amount of money is Too much and again, from the pensions that should have been independent of the government.
    God help us.

  9. PEP Grace

    January 25, 2020 at 11:23 am

    If 1.7 trillion spent in three years has not yield any meaningful result, what is the basis for assuming that taking 2 trillion at once from pension funds will do the magic????

    What is the repayment plan over the twenty years? At what rate of interest?? Or is supposed to be free because its the government???

  10. Anonymous

    January 25, 2020 at 11:26 am

    FG concludes plan to borrow N2 trillion from Pension Fund but what’s the economic importance to the Pensioners.

    • Anonymous

      January 26, 2020 at 7:25 am

      Hmm 💯

  11. PEP Grace

    January 25, 2020 at 11:26 am

    If 1.7 trillion spent in three years has not yield any meaningful result, what is the basis for assuming that taking 2 trillion out of pension’s fund will do the magic????

    What is the repayment plan over the twenty years?
    At what rate of interest?? Or i is it supposed to be free because its the government taking the loan?

  12. Winner's

    January 25, 2020 at 12:28 pm

    No no way for this to happen we shall stand to protest for this let them show us standard accountability for pas spending, recovered loot’s and probes the economic wastage past regime of NNPC, Electricity privatization/investment thereafter there will be referendum on it, TO HELL WITH THAT AUTHORIZED PENSION ACTS.

  13. Innocent

    January 25, 2020 at 2:35 pm

    What is NLC saying about this broad day robbery from the govt. This money can’t even serve as collateral for the suffering workers and now they have perfected plans to loot this money in the name borrowing for infrastructure when they claim to share $323million from Abacus loot the poor in order to remain in power. Great Nigeria workers the time has come for us to rise up and fight our what is ours before this looters will succeed impoverished us for eternity

  14. Kendrick

    January 25, 2020 at 8:12 pm

    “Clueless” , the only way to qualify this present administration. It’s really bad that all FG thinks of is to borrow and not to generate

  15. Anonymous

    January 25, 2020 at 8:13 pm

    “Clueless” , the only way to qualify this present administration. It’s really bad that all FG thinks of is to borrow and not to generate

  16. Solawer

    January 25, 2020 at 9:40 pm

    This is serious!

    Some reasoning:
    Premise 1:- there is much money in pensions fund.
    Premise 2:- pensioners are not paid a dime until at least a minimum of 1 year of recent (it was worse though) because government could not pay pensions deduction up to date, I presume.
    Premise 3:- government could neither pay up to date nor direct pensions board to pay off the recent retirees in lieu of when itself would pay up or to date from the too fat fund.
    Premise 4:- there is infrastructural deficit whereby contracts would be involved: we all know the dynamics of contract award, the contractors and the execution.

    Conclusion 1:- it morally and unethical and in fact impossible, to pay the retirees immediately from the pensions fund.
    Conclusion 2:- the most reasonable thing to do is dip hand into the pensions fund to finance the deficit in infrastructure.

    Questions:-
    1- assess the brain that came up with this logical reasoning in the fec: there is a provision to borrow up to 20 percent but non to pay entitlement immediately on retirement.
    2- identify the fallacy/cies, if any, in this argument.
    3- give an analytical response expected of the Union body for those who contributed to the fund ab initio.

  17. Change!!!

    January 26, 2020 at 7:41 am

    Paying attention to road construction is never a bad thing but borrowing funds which is meant for Pensioners is going to be seen to many of the citizenry as so to say, wickedness on the side of the FG.
    The question is, why do you think it’s this particular fund meant for workers who have served the nation successfully for 35yrs, would be the best to lend ?
    Anyone with an answer pls

  18. ilya alti

    January 26, 2020 at 11:56 am

    Dear my friend’s

  19. tonkist

    January 26, 2020 at 12:01 pm

    Am sadened by this recent development by the federal the government to borrow from the pension fund,they sat down and after so much deliberation,they decided to borrow from the down trodden,am short of words because its an act of wickedness, that must be challenged.there has to be other sources of borowing, or better still reduce all the bogus allowance for the law makers and flamboyant spending for goverment officials in order to have more funds to service the infrastructure.we must rise against this plan.its our sweat.we have the right to refuse the borrowing.

  20. Alaks

    January 26, 2020 at 1:46 pm

    Is it must to borrow. Nigerian case is far away from borrowing money. What about all the money been retrieved yahoo boys and politicians. People try hard to work hard for government yet after retirement u deprive dem of there right

  21. Anonymous

    January 26, 2020 at 2:52 pm

    This is serious, FGN will one day borrow the salary of it’s worker.

  22. Clifford Ann

    March 8, 2020 at 11:17 am

    This is clear madness. How can they even suggest such. They are trying to loot another money.
    May God help us in this country.

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Economy & Politics

What Nigeria is not getting right with PPPs

We need to develop greater capacity for our public service to engage in public private partnerships. PPP is not a gift. The public sector is not charity and so you need to understand what you are doing with them.

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To achieve the Sustainable development goals, public-private partnerships (PPP) is not just an option for Nigeria but a necessity. That is because it is not possible for government alone to raise the kind of money needed for it.

According to Dr Joe Abah, Country Director, Development Alternatives Incorporated (DAI), the government needs to provide a safe and stable environment for the private sector to invest, and also restructure public-private partnerships in order to get more value out of it.

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Speaking during a virtual conference on Saturday, he referred to a report from the United Nations general assembly which stated that Africa needs “an incremental amount from $200 billion to $1.3 trillion per annum to be able to achieve the SDGs”.

This, he noted, calls for restructuring of public private partnerships, to harness the strengths of both sectors towards sustainable development.

“We need to develop greater capacity for our public service to engage in public private partnerships. PPP is not a gift. The public sector is not charity and so you need to understand what you are doing with them.

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“We need to monitor performances very closely and that is one thing that the private sector does very well that we don’t do in the public sector,” he stated adding that the public sector needs to have delivery target tied to remunerations.

Removing socio-economic constraints

In his presentation, chairman of Citibank Nigeria limited, Yemi Cardoso stressed the need to remove constraints that hinder people from thriving.

“In one of the studies done where they looked at 8 high-growth countries, they discovered that there were no identical policies in all of them, but there was a common theme – liberate people from their societal economic constraints and they flourish,” he said

He explained how tax rates and regulations that frustrate free enterprise could also impede a countries growth and pointed out countries that had removed such bottlenecks.

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According to him, the negligible tax rates in Hong Kong are a source of encouragement to businesses, and so is the ease of doing business in Singapore.

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“There is also Macedonia where the sectoral competitive strategy is focused on attracting foreign direct investment (FDI) in automotive industry. Malaysia has also reduced dependence on agricultural exports by paying attention to manufacturing,” he added.

If Nigeria could focus on her competitive advantage, tweaking it as the time changes and attracting strategic investments to the country, she would well be on her way to economic prosperity.

 

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Economy & Politics

Can a lower MPR rate really prevent this recession?

We are on the brink of a recession. Whilst policies like these could offer a buffer, the prolonged existence of the pandemic on the economy is one nail in the coffin that can only be halted by the provision of a vaccine.

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The world is in a fix. Covid-19, unprecedented as it is, has led to economic shocks owing to severe disruptions in the global supply chain, rising levels of corporate and public debt, rising levels of unemployment, negative shocks to commodity prices, and more. To cushion the negative impacts on economies around the world, global leaders have put policies in place hoping that it will stop or, at least, slow down the negative trajectory of these failing economies. It was in the same light that the Central Bank of Nigeria decided to lower the MPR rate to 12.5% from 13.5%.  

How the Decision Came About 

In a meeting held by the CBN’s Monetary Policy Committee (MPC) on Thursday this week, a majority of the members voted to cut the rate from 13.5% to 12.5%. During an earlier meeting held in March, the decision to hold rates had been unanimous. However, given the deepening challenges of the present time, seven out of the 10 members at the MPC meeting voted to cut the rate. Even more interesting is the fact that the rest of the panel opted for a more aggressive easing, with two voting for a 150 basis-point reduction and one for 200 basis points. 

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Why the Decision Was Made 

COVID-19’s adverse effects on the global economy have been unprecedented and severe. During the meeting, which was broadcast live on Thursday 28th May, the MPC had noted key observations in the macroeconomic environment resulting from the adverse impacts of COVID-19 as well as the drop in crude oil prices. Some of the key highlights of the current economic situation include: 

  • The significant decline in Manufacturing and non-Manufacturing Purchasing Manager’s Indices (PMIs) to 42.4 and 25.3 index points, respectively, in May 2020, compared with 51.1 and 49.2 index points in March 2020. 
  • The marginal growth in broad money (M3) to 2.66 percent in April 2020 from 2.42 percent in March 2020, largely due to increases in Net Domestic and Foreign Assets.
  • The significant growth of aggregate net credit by 8.07 percent in April 2020 compared with 4.90 percent in March 2020 (still below the indicative benchmark of 16.85 percent for the year. 

The committee also mentioned the gradual improvement in macroeconomic variables, particularly the improvement in the equities market, the containment measures of the COVID-19 induced health crisis, as well as the impact of the increase in crude oil price on the external reserves. It also noted the stability in the banking system as shown by the increase in total assets by 18.8 percent and total deposits by 25.52 percent (year-on-year).  

Given the overall economic situation and its impact on the average Nigerian, the MPC was of the view that any tightening of policy stance is, for now, inappropriate as it will result in further contraction of aggregate demand, thereby leading to a decline in output – which is necessary to sustain the supply chain for growth recoveryFor the option of holding previous policy stance, the MPC believed holding may indicate that the monetary authorities are insensitive to prevailing weak economic conditions. Also noteworthy is the fact that this move to cut rates have been carried out by many other central banks across the globe, includingAustraliaMalaysia, and the U.S. Federal Reserve. 

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The Impact Of The Decision 

The expected outcome of the decision of the CBN is to ensure that the economy reverses from the recession quickly. As such, the decision is geared towards stimulating growth and swift recovery. The cut, being the lowest in four years, rests on the optimism that it will possibly avert a recession. It, however, has its limitations. A clear challenge is the impact the rate cut will have on inflation which has been way above the target range of 6% to 9% for five years. There is also the issue of increasing pressure on the naira.  

The rising question is whether the rate cut will do enough to prevent a recession. This is an important question, taking into account the volatility in the crude market – a sector that accounts for about 90% of exports and more than half of government revenue, the fall in private sector credit of 61% from just a year earlier, as well as all of the same challenges that spurred the making of the decision in the first place.  

We are on the brink of a recession. Whilst policies like these could offer a buffer, the prolonged existence of the pandemic on the economy is one nail in the coffin that can only be halted by the provision of a vaccine. It is only when life reverts to normalcy that we can begin to undo the damage thus far.  

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Business News

Why households that engage in subsistence agriculture are poor – Yemi Kale

“We established the poverty line at N137,430 and any individual or family that spends below this on food in a year will be classified below the poverty line.”

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Rauf Aregbesola annual colloquium

Subsistence agriculture alone may never be able to sustain any household in Nigeria. This is according to Nigeria’s Statistician-General and CEO of the National Bureau of Statistics (NBS), Dr Yemi Kale, who spoke during the Rauf Aregbesola annual colloquium earlier today. The event had the theme Government Unusual: Innovative Economic Solutions to Unlock Mass Prosperity.

Using insights from the 2019 National Living Standards Survey, Dr Kale explained that households that are solely engaged in subsistence agriculture appear to have the highest levels of poverty. This set of families are followed by households with more than twenty members.

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“This doesn’t mean agriculture is a bad thing. It simply means the way we do agriculture in Nigeria has to be improved so that it does not become synonymous with poverty or we have to find other sources of income for farmers to supplement their standard of living,” he said.

Speaking further, Dr Kale explained that the living standards survey, which was conducted in collaboration with the World Bank, started in late 2018 and ended in 2019. The survey utilized data from all states in Nigeria except Borno whose data was not considered credible enough given the security situation in the state. Kale said:

“We established the poverty line at N137,430 and any individual or family that spends below this on food in a year will be classified below the poverty line.”

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Given this yardstick, the survey established that at least 22.9 million Nigerians are living in poverty, with the bulk of this number coming from the rural areas and states with low indices on education, social welfare initiatives, employment, and income equality.

Formalising the informal sector

The informal sector comprises people who earn enough to keep above the poverty line on a daily basis, but not enough to sustain them in the event of a lockdown, as was seen recently in some states during the April COVID-19 lockdown. This is a problem that can only be solved if the informal sector becomes formalised, Kale said. In other words, formalizing this sector will help more daily wage earners stay above the poverty line. He made reference to the recent lockdown which incapacitated lots of daily wage earners in states such as Lagos.

Nigeria’s poor versus other African countries

Making a comparison, Yale also noted that Nigeria’s poor are poorer than their counterparts in South Africa despite the fact that the nominal size of Nigeria’s economy is much larger.

He attributed this to findings which showed that Nigerians spend three times more on foods and consumables than all other items put together, as against countries like South Africa and Egypt where less is spent on food items.

“Nigerian remains Africa’s largest economy, but per capita income is rather low for a country of this size, and the level of poverty presents a major development challenge” he noted.

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Reducing unemployment – the fastest way out

According to Kale, the fastest way out of poverty is to reduce unemployment, as people will naturally have more to spend on their needs when they are employed. To support his point, Kalu cited five Nigerian states with the least poor people in comparison to the other states Lagos, Delta, Ogun, Osun, and Oyo. Each of these states has fewer unemployment levels compared to the states with higher poverty rates such as Sokoto, Taraba, Jigawa, Ebonyi, and Adamawa states.

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Other indicators which show similar trends across the states are education, and ease of doing business. The poverty rates are almost always higher where education is poor.

Increasing local production

Also making a presentation during the colloquium, Dr Joe Abah called for a review of the 1978 land use act which he said is limiting in its provisions. He also stressed that Nigeria needs to improve access to capital, raw materials, lands, and technological innovations so that production capacity can increase significantly.

“All of the richer countries simply produce more, and they produce more things that people want to buy and want to consume. It could be products or services. the higher your production capacity, the richer you are. if you cannot produce, you cannot develop your education or your health sector.”

According to Abah, the cost of governance cannot be reduced without adopting some of the suggestions of the Oronsaye report, and restructuring the system for productivity. He said that “there is also a need to link budget and funding to productivity so that public sectors begin to understand that the more funding they require, the more they are expected to produce as well.”

He also suggested that states should start focusing on their competitive advantage and use same to improve general productivity in their state.

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Other panelists at the colloquium include Mallam Nasir El-Rufai, Governor, Kaduna State, Sen. Abubakar Bagudu, Governor, Kebbi State, Mrs. Hajara Adeola, CEO, Lotus Capital Limited, Mr. Bismarck Rewane, CEO, Financial Derivatives Limited, Dr. Joe Abah, Country Director, DAI, Dr. Yemi Cardoso, Chairman, Citibank Nigeria, with Boason Omofaye as the moderator.

You may watch the colloquium by clicking here.

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