Around 2013/2014, Nigeria’s pension fund asset was about N4.21 trillion. There was so much talk about the country being so dumb to let such amount sit idle. Analysts talked so much about the potential impact of investing so much money. Private Equity (PE) firms wanted it. The government also wanted it.
While the PEs could only talk, the government either resisted the pressure or lacked the balls to dip their hands into the pension asset at the time.
But powerful interests continued to encircle it, and analysts continued to denounce having so many funds sitting idle while the country grappled with myriads of the infrastructural deficit.
So, many knew it was only a matter of time before someone had the guts to lay hands on the retirement savings of Nigerians. That came in December 2019, when the National Economic Council announced that it would be borrowing from the pension asset. The reactions that trailed it were not unexpected. A part of those reactions included a poll by a civic organisation, BudgIT where people literally shouted at the government to stay away from their retirement savings.
But of course, that would not be, as the council met again last week and decided that the plan to borrow N2 trillion from the pension asset had been perfected. According to Kaduna State Governor, Mallam Nasir El Rufai, who announced this to newsmen, the money would be invested in the construction and maintenance of road infrastructure, rail, and power.
El Rufai further argued that there is no cause for alarm in the borrowing of the pension fund as a significant portion of the fund belongs to workers in their 30s, who wouldn’t be needing the money in the next decade or two. He cited such sovereign nations that had used its pension assets to bolster its infrastructure to include South Africa and Russia, saying Nigeria could do the same.
These seem like a fair argument but the challenge this government faces, like the ones before it, is that the people do not trust it. For a government that has demonstrated its ingenuity in the mismanagement of resources and continues to borrow and borrow, many do not seem to understand how it would be able to manage this differently and payback promptly. The fear that the borrowed fund will be pilfered, turned into just another cookie jar, is not also unfounded as the government is neither reputed for its accountability.
Meanwhile, those who argue that whatever the government decides to do with the borrowed fund would be better than letting it sit idle should be reminded that trillions of naira of the pension asset are already in government debt, as part of investments into government securities. This approach has been considered the safest as opposed to direct deduction from the fund.
More so, Governor El Rufai should be reminded that the demographics he referenced have made only a little contribution to the pension asset. A huge percentage of young Nigerians in their early 30s have not had their first job, post-graduation, at least in the formal sector where pension contribution is mandatory. So, those who argue that the pension fund belongs to young people should have a rethink.
Another sad part is that there is no guarantee that the government will not come for more of the pension fund once it is able to lay hands on this successfully. That would automatically trigger a tale of how Nigeria’s pension asset was ballooning and running smoothly until the government decided to borrow from it. No Nigerian deserves such a story in his old age.
The truth that this government has refused to admit, is that it has a worsening revenue crisis.
Now, Nigeria’s revenue crisis is worsened by growing recurrent expenditure, debt service of 70% of revenue and growing revenue shortfalls. And with debt up to its throat within a short period, tinkering with the citizens’ retirement savings won’t offer much relief either. Instead, it could resolve this crisis by a conscious effort to shrink the size of the government to reduce its staggering overheads, while letting in more participation of the government.
One will wonder if this move replaces the controversial plan to borrow $29.9 billion which the government is seeking approval from the senate. If it is not, then Nigerians should brace up for a heavily debt-laden and unpalatable future.
However, one would also argue that if the government has decided that the pension fund should be invested outside the safe havens of bonds and treasury bills, it should do well to extend a portion of the fund to Venture Capital firms to invest in Nigeria’s bourgeoning technology space.
[READ ALSO: Pension asset increases to N9.33 trillion – PenCom)
The technology ecosystem in Nigeria attracted approximately $663.24 million, and about N239 billion-naira investment in 2019. The analysis shows that more than 80% of this capital is foreign. This means that the country is building a generation of enterprises that could dominate the economy in the next decade on foreign capital. The government can use this opportunity to tap into the industry by creating an investment vehicle using a portion of the pension fund (they could start with N500 billion naira), allowing VCs in Nigeria to invest in several viable technology start-ups across Africa. Imagine the impact that could have.
Beyond initiatives such as this, borrowing money from the pension fund equals to treating it as just another cookie jar. Nigerians don’t deserve that.
Jonah Nwokpoku is a financial journalist and the publisher of an online newspaper, Nigeria Today News.