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Southeast governors & contributory pension scheme: Unfortunate & disappointing!

In addition to the unwillingness of our state governors to support the autonomy of their state judiciaries and assemblies, their disappointing implementation of the Contributory Pension Scheme (CPS) further questions their leadership and governance capabilities. In a recent report by the National Pension Commission (Pencom), only very few states like Lagos and Kaduna can be said to be dutifully implementing the scheme based on the 8 key steps of setting up an effective CPS. Of the six geo-political regions, the North East and South East can be described as the worst. With a focus on the five South East states, it seems that only Anambra is somewhat interested in the scheme.

A better understanding of the sad performance of Southeast governors will be clearer through a comparison with Kaduna and Lagos states. Even with huge areas of Accrued Pension Rights, Kaduna can be said to be faithfully implementing the scheme. First, in addition to amending the CPS Law in 2016 and 2020, a Pension Bureau has been created and its employees registered with PFAs. Second, while it reduced the employer’s rate of contribution from 13% to 8%, it has consistently remitted its contributions and retained the existing 7% employee contribution. Third, an actuarial validation has been conducted and a Retirement Benefits Bond Redemption Fund Account opened with the Central Bank of Nigeria. Fourth, the Accrued Pension Rights are consistently funded with 5% of the total monthly wage bill and the Group Life Insurance has been replaced with a Sinking Fund domiciled with the CBN with funds being set aside for settlement of death benefits.

Just as in Kaduna, so it is in Lagos. After enacting the CPS Law in 2007 and amending it in 2019, a Pension Bureau has been established, its employees registered with PFAs and 10% employer and 8% employee contributions consistently remitted. In addition, it has a valid Group Insurance Policy and an Actuarial Valuation has been conducted. Employees Accrued Pension Rights are been funded and a Retirement Benefits Bond Redemption Fund Account with two PFA has been opened.

Sadly, using the commendable performances of Kaduna and Lagos states as models of comparison, the South East states are regrettably complete opposites (except Anambra with insignificant good performance). In the remaining four South East states, nothing has been done after enacting the CPS Law in 2017 in Abia and Ebonyi, 2014 in Enugu and 2008 in Imo. While the employees have not been registered with PFAs, no Pension Bureau has been established and no remittance is being made. Neither has a single Actuarial Valuation been conducted nor remittances commenced. In the same vein, a Retirement Benefits Bond Redemption Fund Account is yet to be opened and no Group Life Insurance Policy has been instituted in any of the four states of Enugu, Abia, Imo and Ebonyi states.

Sadly, using the commendable performances of Kaduna and Lagos states as models of comparison, the South East states are regrettably complete opposites

 

Only Anambra state seems to be partially interested in implementing the scheme. After enacting the CPS Law in 2013 and amending some sections in 2014, its employees have been registered with PFAs. However, while it has 10% employer and 5% employee pension contributions, the employer contribution has not been remitted since January 2018 and that of employee since September 2020 for state government employees. For Local Government employees, the contributions have not been remitted since September 2018. Even though a Retirement Benefits Fund Account with PFAs for Local Government employees in line with the State law has been opened, that for State Government employees is yet to be opened. In addition, it has neither conducted an Actuarial Valuation nor instituted a Group Life Insurance Policy and a Pension Bureau.

With such poor performance of Southeast states, the question is why it should be so. As they are neither the states with the highest number of workers nor the ones with the least federal allocations and internal generated revenue, the only possible explanation is poor leadership and governance of the states. For instance, while Enugu state governor has not shown any serious commitment in implementing the CPS scheme for workers of the state, a pension bill for former governors, deputies and other senior politicians that can only be described as imprudent and wasteful is being pursued.

On reviewing the woeful performance and unwillingness of Southeast governors to implement the CPS, a senior friend well informed in pension issues is of the view that the governors are evidently ignorant of the good benefits of effective implementation of the CPS. If they are aware of the immense benefits of CPS, they (the governors) will be the chief advocates of its vigorous implementation, he concluded. This I completely agree!

From different pension studies including a 2016 PWC report, some of the benefits of implementing the CPS include- i. increase in the funds for capital projects, which can be generated with the CPS provision for states to float infrastructure bonds. ii. Likely reduction in wage bill of states that will result from elimination of ghost workers through CPS. iii. As pension funds are managed by professionals, it means that effective implementation of CPS can significantly help in reducing the retirement burdens of states. iv. With the proper regulation and monitoring of Pension Fund Administrators and Pension Fund Custodians by Pencom, the security of contributed pension funds is significantly guaranteed. v. States and Local governments can even generate additional revenue through their Pension bureaux under the CPS with the N40 administrative fee per employee RSA every month.

As our state governors are significantly failing to implement the CPS even with its inherent benefits, the increasing concern that they might not properly use the new powers they are asking for through restructuring gains more validity.

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