In a rare show of harmony with the private sector, Nigerian President Muhammadu Buhari has declined to assent to a controversial Housing Fund Bill that mandatorily dips hands into the pockets of private companies as a means of providing additional sources of financing for housing development in Africa’s most populous nation.
In a letter to the National Assembly, President Buhari said he declined assent to the Bill because the various levies imposed on Nigerians will not only be “disruptive and punitive” to industries and other sectors of the Nigerian economy but will also have a negative impact on Nigerian workers.
Although the President declined assent to the Bill on March 19, it was received at the office of the President of the Senate on March 28, 2019.
Nigerian workers, pension fund administrators, commercial and mortgage banks, cement makers, insurance companies and the private sector in general would be heaving a sigh of relief after Buhari rejected the controversial Bill.
“The Bill was always going to be dead on arrival because there was no way regulators from the Central Bank or PENCOM would approve for banks and PFAs and insurance companies to contribute 10 percent of their profit before tax to a welfarist scheme that lacked transparency,” a Lagos-based pension fund manager told BusinessDay.
“Buhari has done the right thing to ignore the Bill,” the person who did not want to be named, as he isn’t authorised to speak on behalf of his company, said.
The broader implications of passing the Bill, which required companies to contribute 10 percent of their Profit Before Tax while workers committed 2.5 percent of monthly income to the housing fund, also means that the Nigerian economy, still licking its wounds from a contraction in 2016, may have dodged a bullet, private sector players told BusinessDay in previous interviews on the subject.
The Bill quietly made it through the National Assembly in 2018 and was only forwarded to the Presidency this year, according to an exclusive report by Business Day.
The news caught many private sector players unaware even as lobby groups were thrown into confusion.
Since the report, the private sector has organised series of protests to ensure the Bill is stopped in its tracks. Those efforts have now proved successful with President Buhari declining to give his nod, much to the relief of many.
“We are pleased to inform you that the President upheld our protest by declining assent to the Bill as advised,” said Timothy Olawale, director-general, Nigeria Employers’ Consultative Association (NECA), an umbrella organisation of employers in the Organised Private Sector.
“The Bill has been returned to the National Assembly for amendment of the contentious provisions,” Olawale said in a note to NECA members, Tuesday.
The Nigerian Economic Summit Group (NESG) also partook in protests against the Bill. Laoye Jaiyeoba, CEO of the private sector think-tank, said last month that members were engaging with the Presidency to avert approval of the Bill.
The so-called National Housing Fund (Establishment) Bill, 2018 was secretly passed by the Senate on November 6, 2018, following its passage by the House of Representatives on July 17, 2018.
Widespread condemnations trailed the provisions of the Bill, which some private companies and workers widely regarded as an unjust extortion.
The failings of the former National Housing Fund and the track record of similar funds managed by government cast a cloud over how efficiently the new Fund will be managed and the chances that it achieves the primary objective for which it was created. The huge burden it threatened to put on Nigerians and companies was a tough pill to swallow.
According to Sections 4, 5, and 6 of the Bill, some of the levies imposed on Nigerians include 2.5 percent monthly deduction from workers’ salaries and 2.5 percent of the ex-factory price before transportation cost of each manufactured or imported 50kg bag of cement or equivalent in bulk.
The Bill, however, provided that the cement levy may extend to other products not stated in the document, as the Bill provides that the President, by an executive order, could add, delete, amend or substitute consumer goods, services or products and approve rates for the levy as and when he thinks fit in the circumstance.
Industry players, who were worried that the provisions of the Bill regarding the 10 percent of PBT contributions from PFAs and banks and insurance companies overrule carefully-crafted regulatory guidelines that guarantee the safety of depositors’ funds sitting in the banks and pension funds, were critical of the Bill and warned it would have dire consequences on the economy and investor confidence.
Buhari shared similar sentiments. “The provision of Section 6(5) of the Bill in relation to Pension Reform Act and real estate investments thereunder may undermine the administration of the pension industry by the National Pension Commission and adversely affect the safeguards that protect the pension industry against unreasonable investments risks,” he said in the letter titled ‘Presidential decision to decline assent to the National Housing Fund, 2018’.
LOLADE AKINMURELE, Lagos & OWEDE AGBAJILEKE, Abuja
