The federal government of Nigeria has no case to justify its move to borrow N2 trillion from the pension funds. We believe it is immoral and irresponsible, even though the law allows the government to borrow 20 percent of the pension funds. It is a retrograde and unorthodox way to run a modern economy.
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A woeful past record on project execution and inefficient use of debt is enough reason to disagree. Another, and even more worrying reason, is that the plan to borrow from the pension fund comes after previous investments opportunities: Treasury bills and other government securities have been made unattractive.
The current administration has shunned repeated calls for bold reforms in key sectors of the economy to stimulate and encourage private investment. Instead, the apex bank churns out unorthodox policies which limit investment options of pension fund administrators. Rather than ease doing business in Nigeria, businesses are being stifled.
Government’s plan to borrow N2trn from pension funds is immoral and irresponsible
So, rather than make laws to attract the long term private capital needed to build the roads, rails and runways the country sorely needs the Buhari-led government in its wisdom has opted for a smash and grab tactic – smash the available choices for preserving or growing capital in the economy and hide under the law to grab pension funds, to nationalise private capital.
This clearly paints a government that is allergic to private capital and such should not be allowed to come near the hard-earned savings of Nigerians irrespective of whatever the Pension Reform Act provides. A rabid distaste for privatisation does not justify unbridled nationalisation. It is like a drunken husband forcefully taking the savings of his wife.
A government that has succeeded in impoverishing millions due to its inability to stimulate the economy and create jobs has no justification to use the little savings its citizens are managing to set aside for an uncertain future. An uncertainty that the same government is fostering and fuelling due to its languid and aloof attitude to the economy.
While it’s true that South Africa, Saudi Arabia and Chile use their pension to build infrastructure but it’s a decision based on the return on investment not by compulsion. Argentina twisted the rules in order to nationalise $30 billion of private pensions in 2008. Yet, ten years later, it needed a record $57 billion IMF-bail out; it defaulted on the loan last year.
A government with an excessive thirst for debt and an unjustified belief that only it can fix the woes of Nigeria has no right to a kobo, much less two trillion of hard-earned private capital.
All the debt Nigeria has incurred under this government (always to build infrastructure) has raised our debt profile. Yet the infrastructure gap remains, the economy remains sluggish. It has poured N1.7 trillion into a black hole of the power sector yet Nigerians go to bed and wake up in darkness.
If the government truly wants to declare a state of emergency in the power sector (transport, security, education and health also need a similar declaration) it has the executive powers and a pliant Senate and House of Assembly to execute directives and pass laws that are investment-friendly.
In our opinion, the federal is short of ideas on how to bridge the country’s infrastructure gap despite models for attracting local and foreign capital such as NLNG which declared in January that it has paid over $7 billion in taxes and issued more than $15 billion in dividends to the government since it started operations.
According to a report by PwC, Nigeria holds at least $300 billion or as much as $900 billion worth of dead capital in residential real estate and agricultural land alone. Between $230 billion and $750 billion is locked in the high-value real estate market segment, while between $60 billion and $170 billion is trapped in the middle market. This is amid a plethora government-owned asset that can be sold, rented, concessioned or securitised.
Breathing life into dead capital through structural reforms will convert most of the capital in the informal economy which is currently valued at 65 percent of GDP into the formal economy. By creating trust in the system, increased participation will bring about capital conversion in this economic class through fiscal receipts into the formal economy. It would also increase capital for infrastructure in the sector and increase economic activity.
