It was one of those brilliant memos in 2001 from then Director-General of the Bureau for Public Enterprises (BPE), Mallam Nasir el-Rufai, to which President Olusegun Obasanjo was instantly sold. However, he didn’t like the fact that el-Rufai would suggest that only Mr. Tajudeen Fola Adeola could midwife a reform of the pension scheme in Nigeria. Aside the fact that Obasanjo doesn’t enjoy being dictated to, he also was/is not a friend of Adeola, a feeling that I understand is mutual, even though both of them hail from Abeokuta.

Notwithstanding, preliminary checks by the former president revealed that el-Rufai and Adeola were not particularly close so he concluded that the recommendation must have been based on some objective criteria. Vice President Atiku Abubakar, as chair of the National Council on Privatisation, would later explain to the president how an actuarial consultant’s report on the N43 billion underfunded pension liabilities in NITEL had exposed the looming danger about pensions in Nigeria and the necessity for a comprehensive reform. What eventually tilted the scale was that Adeola, who was at that period still at his duty post in Guaranty Trust Bank (GTB) as founding managing director, told intermediaries who sounded him out on the offer that he was not interested in working for Obasanjo under any circumstance.

However, following the intervention of several people, particularly then Habib Bank MD, Mr. Akin Kekere-Ekun, and the Vice President himself, Adeola accepted to take up the assignment. A broad-based steering committee on Pension Reforms in Public Enterprises was then established with him as chairman and Mrs. Aisha Dahiru-Umar as Secretary while el-Rufai served as coordinator. The committee included representatives of the Nigerian Labour Congress (NLC) and other stakeholders.
The focus of this committee was specific to pension in public enterprises but Obasanjo felt that the entire pension scheme in Nigeria needed a similar overhaul. This was what led to the establishment of a National Taskforce Team on Pension Reforms that retained Adeola as chairman. He agreed to take the assignment on two conditions: One, he would work with his personal money without taking anything from government, and throughout the life of the two committees, he stuck by that rule. And it must have cost him a lot because the second committee travelled to several South American countries like Mexico, Chile, Argentina, etc., where they spent considerable time studying their pension systems and he foot his own bills.

Two, Adeola demanded for a brilliant lawyer, preferably someone young, as his secretary. That was how el-Rufai assigned to the committee Mrs. Chinelo Anohu-Amazu (the current acting Director General of PenCom) whom he had invited home from the UK to join the telecoms team of BPE. She holds a Master’s degree in Telecommunication and Information Technology Law from the London School of Economics. Other respected actuarial, accounting and legal professionals like Mr. M.K. Ahmed, Dr. Musa Ibrahim and Mr. Timi Austin-Peters were also brought in.

At the end, the Adeola committee came up with the reports (and draft legislation) that led to the enactment of the Pension Reform Act 2004 which established the Contributory Pension Scheme (CPS) and PenCom as the regulator. It also eventually led to the licensing of 24 Pension Fund Administrators, 4 Pension Fund Custodians (PFCs) and 7 Closed Pension Fund Administrators (CPFAs) with the private sector effectively mobilized for what has become a robust pension scheme in the country.

How the duo of Obasanjo and Adeola worked together in the early days to achieve the pension reform remains a testimony to the character of the two Egba men but it was also no surprise that the story would end the way it did. Although Obasanjo would later reluctantly appoint Adeola PenCom chairman and also requested for his nominee for the post of Director General (Adeola nominated Mr. M. K. Ahmed who had served diligently in his committee), the mutual resentment towards each other continued.

With rumours in 2006 that Adeola was seeking to contest the Ogun Central Senatorial District ticket on the platform of the Peoples Democratic Party (PDP) then also being sought by Obasanjo’s first daughter, he was unceremoniously sacked from PenCom and Transcorp Plc of which he was pioneer CEO. And Dr. Iyabo Obasanjo-Bello, at that period the Ogun State Commissioner for Health, would then rub it in: “Here is somebody that has never contributed anything to his community,” she began. “Fola Adeola has never contributed in any charitable way to Abeokuta and its environs. He has his beautiful house and beautiful wife in Lagos, now he thinks he could come here and try to buy our people’s votes. He thinks he can intimidate me but I can tell you, we are going to fight it out. He is going to have me to deal with.”

As it would turn out, Adeola did not seek the PDP senatorial ticket for which he lost two jobs in one day but the efforts of his team remain the reason PenCom has become one of the successful stories of the economic reforms under the current democratic dispensation. It is therefore to his credit and that of Obasanjo and el-Rufai that an agency that started with practically nothing in 2004 today boasts of a N4 trillion pension funds just a decade after coming on board. Not only that, the reform has been so successful that African countries like Ghana, Tanzania, Malawi and others now copy it as their model.

I have recounted the foregoing story essentially for those who may have wondered why the trio of Obasanjo, Adeola and el-Rufai featured so prominently at the tenth year anniversary of PenCom three weeks ago. But it is also to the credit of President Goodluck Jonathan that he has a sense of history by inviting and specially recognizing them at the occasion, regardless of whatever political differences he might have with at least the duo of Obasanjo and el-Rufai.

It is even all the more remarkable that the president only recently signed into law the Pension Reform 2014 Act to consolidate the gains of the sector and address some of the observed lapses in the implementation of the previous Act. The expectation is that the new legislation will help to enhance the protection of pension funds and assets and strengthen the regulatory and enforcement capacity of PenCom. It is also expected that the Pension funds will become a catalyst for the development of our country, especially in the area of critical infrastructure. But first, let us examine the compelling features of the Pension Reform Act 2014.

Unlike the repealed legislation which stipulated a minimum of five staff, a private firm with up to three employees is now subject to the scheme while an employee who retires before the age of 50 can also now withdraw 25 per cent of entitlements four months after retirement rather than wait for six months as it obtained in the past. This will delight Edo State Governor, Comrade Adams Oshiomhole, a former NLC President who out of concern for the plight of pensioners had thrown his weight behind the CPS but has nonetheless consistently expressed misgivings about this particular issue.

By increasing contribution from employers and employees, it also means that there would be more money to the funds to the advantage of the workers in future. But given how public and private pension funds have been mismanaged in our country in recent years with many pensioners sent to their early graves as a result, it is commendable that the new law prescribes stiffer penalties and sanctions to pension defaulters and employers who fail to remit the deducted monies of employees. However, the most important aspect of the legislation perhaps remains the provisions enabling investment of pension funds in financial instruments in the real sector, especially for infrastructure and real estate.

Against the background that the proportion of pension assets to Gross Domestic Product (GDP) has become one of the indices of a country’s prosperity, the success of PenCom holds much promise for Nigeria. But in a country where opportunities are most often missed, there is nothing on ground to suggest that we also cannot mess things up in that sector. That then means that critical institutions like the Infrastructure Concession Regulatory Commission (ICRC) would need to up their game if the country is to take advantage of such enormous investible funds that would attract low interest rates to revamp our dilapidated infrastructure. If the private sector is also to tap into the resources to advance our economy, regulatory bodies like the Securities and Exchange Commission (SEC) would have to collaborate more with PenCom.

However promising things may be, there are still issues that are left pending. For instance, there was controversy over the appointment of the Director General of PenCom because the old law prescribes for such office holder to have a minimum of 20 years experience in pension matters. Although the new law has slashed it to 15 years experience, it is a needless provision while the brouhaha over the appointment of Anohu-Amazu is also pointless. Based on academic qualification, industry experience and institutional memory, there is perhaps nobody more qualified to head PenCom, at this most critical period than Anohu-Amazu.

For me the real issue is not even about her nomination as DG but rather that the National Assembly did not amend the Act in such a manner as to make the occupier an Executive Chairman like that of other regulatory bodies: CBN, NERC, NCC, etc. That is the only way to insulate the office from partisan politics which is the global best practice. And it is the same reason that informed having executive chairman head such institutions like EFCC, INEC, etc. Incidentally, I understand that is what was in the original draft legislation before the National Assembly in their wisdom decided to change it. Yet with the way things are today, PenCom has a DG and a board chairman who, in the current circumstance, happens to be Alhaji Adamu Muazu, the national chairman of the ruling Peoples Democratic Party (PDP)!

Beyond the legislation, there are other issues to contend with in the CPS. For instance, there remains the perennial challenge with regards to the fraud-ridden government workers’ nominal rolls as well as that of remittances. The ratio between the contribution by government and its employees for the public sector is also a contentious issue aside the ambiguity with respect to what the retirement age actually is. In the public sector it is age 60 or 35 years whichever comes first while in the private sector it varies between 55 and 60 years. These and many other issues would have to be sorted out though the greater challenge is how to guarantee the security of a huge sum of money that our politicians are already aware is there and would try to grab at all costs.

Knowing Nigeria and the environment under which we operate, the growing pension funds will continue to attract a lot of attention and I am aware there is already pressure from certain quarters on how to deploy some of the funds, especially in the area of infrastructure. As much as I agree that such investment is necessary, I will add a word of caution here. Pension schemes all over the world are always careful about infrastructure investments not only because the term is too broad but also because of its illiquidity and lower return. There are, however, investments in the sector that also bring high yields. For instance, imagine if we had deployed some of the funds to build the Lagos-Ibadan expressway which as at 2008 was only going to cost N85 billion under a Build Operate and Transfer (BOT). I am sure it would have been a solid investment that would have added value to our lives with good returns to the pension funds. The danger to such investment, however, is that given Nigeria’s geo-politics, there could be pressure to finance many of such roads in areas that might not be as commercially viable with the same funds. And then the trouble would begin.

Since the new law also encourages investment in real sector which is good, Nigerians must also know that it comes with its own danger. For instance, the real estate market in Abuja is grossly overvalued and at some point, like all bubbles, it has to burst because it is driven essentially by rent. When it does, for a fund whose watchwords are safety and security, what then happens? Similar arguments and caution may be advanced for investing part of the pension funds in equities listed on the Nigerian Stock Exchange. PenCom must therefore not only remain independent of political interference, it must be proactive in its regulation of the administration of the funds to balance growth against safety and security at all times.
Another issue is the fact that given the critical stakeholders involved in the CPS (workers in the private sector and those in the federal, states and local governments for the public sector), PenCom cannot be run like the Nigeria National Petroleum Corporation (NNPC) that has for all practical purposes become a slush fund for the federal government. By virtue of the pension contributions, it is a federation project so the federal government can simply not do as it wishes with the funds. I understand, for instance, that Lagos remains the most compliant of the law and a model state for PenCom with regards to the administration of the scheme. That then means that the federal government has to take such important stakeholders along in any decision on the deployment of the pension funds for developmental purposes.

I am raising some of these concerns because the pension funds cannot continue to accumulate without making it to work for our country. In any case, I am not sure that political leaders in Nigeria and their friends in the private sector have the discipline to allow any “idle funds” to stay there for long. At some point very soon, something will give on the N4 trillion. It is therefore important that there be a serious engagement on all its ramifications, especially by those who are knowledgeable on such matters.

With Anohu-Amazu at the helm, once confirmed in substantive capacity by the Senate, I have no doubt that PenCom is in safe hands. However, like most things Nigeria, as much as the pension funds hold much promise for our country, it can also end up as another disaster, depending on the disposition of the political leadership. If we get it right, the fund could be a catalyst for enhancing the welfare of our people and repositioning our economy. But if we play politics with it, then we are doomed. And the consequences will be most devastating because what we are dealing with here is not some cheap oil money but the sweat of the Nigerian workers.

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