Pension scam in Nigeria: Role of regulator

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By IVOR TAKOR

IN recent month’s reports of pension scam carried banner headlines in the country’s news Media, both print and electronics resulting to probes on pension administration by special committees of both the Senate and House of Representatives. Some of the well-published scams are those of the Office of Head of Service of the Federation, Police pension and PHCN.

The Pension Department of the Office of the Head of the Civil Service of the Federation fraud was so mind bugging that according to the Pension Task Force under leadership of Alhaji Abdulrasheed Maina the sum N12 billion was found in the personal account of a former director of the Pension Department and another N4 billion was allegedly found in the personal account of a deputy director of the same department.

In respect of the Police pension scam, six civil servants have been charged to court following their alleged complicity in the illegal diversion of N32.8 billion from the Nigerian Police pension fund between January 2009 and June 2011. The Task Force under the leadership of Maina claimed to have recovered over N159 billion in properties and cash from pension fraudsters.

Also the report of the investigation into the alleged mismanagement of pension fund by a Senate Committee revealed that from 2005 to 2011 government officials in charge of pension funds in the country stole N237.9 billion pension funds, through a syndicated and institutionalised corruption, fraud and embezzlement in the management of pension funds in the country.

The most recent is the controversy surrounding Power Holding Company of Nigeria (PHCN) staff pension fund. It is yet to be made public if indeed there has been embezzlement of PHCN pension fund and the amount involved. However, what is now public is the allegation that a PHCN pension fund (2,204,814.18 pound sterling) had been uncovered in a United Kingdom bank.

It is believed that the money is PHCN pension which had been lodged in the UK bank account for close to 21years, meant for payment of pension of expatriate workers of the defunct utility board, the company which metamorphosed to PHCN. It has also been revealed that the last expatriate pensioner of the utility board is late.

The question therefore is why has it become very easy for government officials to embezzle pension fund in such magnitude. The truth is that the pre 2004 pension reform pension administration in the public service lacked transparency and accountability. Transparency is the quality of being clear, honest and open.

As a principle, transparency implies that managers and trustees have a duty to act visibly, predictably and understandably. It means that there is clarity, accuracy, and lack of confusion in the processes and ultimate results of actions taken on behalf of the people by those to whom such responsibilities have been given.

It also connotes openness to scrutiny that reassures on the observance of due process. Sufficient information must be available so that other agencies and the general public can assess whether the relevant procedures are followed, consonant with the given mandate.

Accountability is the obligation of an individual or organisation to account for its activities, accept responsibility for them, and to disclose the results in a transparent manner. It also includes the responsibility for money or other entrusted property.

Corruption is the opposite of accountability and transparency and manifests in varied negative behaviours identified by Nuhu Ribadu to include “fraud, embezzlement, conflict of interest, extortion and misuse of power, misappropriation of public resources for purely private use, disregard for accountability in the exercise of discretion when entrusted with power, and disregard for rule of law”.

In developed financial and capital markets all intermediaries such as banks, insurance companies and pension funds are well regulated. The role of the regulator is bringing in international best practices into pension administration.  The regulator is backed by regulatory authority, which is the power that the legislator gives it to enforce statutes, to develop regulations that have the force of law, and to assist the public in ensuring that regulated entities comply with laws and regulations.

One of the reasons for embarking on pension reform in Nigeria in 2004 was that pension administration especially in the public sector had been largely weak, inefficient, less transparent and cumbersome. There was also lack of regulation.

Until the enactment of the Pension Reform Act 2004, with Section 14 of the Act establishing the National Pension Commission and Section 15 empowering the Commission to regulate, supervise and ensure the effective administration of pension matters in Nigeria, pension administration in the country was not regulated. Public servants administered pension the way and manner they deem fit with little or no accountability, which gave room for fraud.

Section 30 of the Pension Reform Act 2004 established the Civil Service Pension Department; the Military Pension Department; the Police Pension Department; the Customs, Immigration and Prisons Pension Department and the Security Agencies Pension Department and called the departments, Pension Transitional Arrangement Departments.

Apart from the Act providing that the Departments shall on a monthly basis render returns of comprehensive list of pension-able staff, pensioners, deceased pensioners and their next of kin to the National Pension Commission, the Act also provides in Section 30(4) that these departments shall operate under the rules, regulations and directives made by the Commission from time to time.

Section 35(1) provides that the Commission shall regulate and supervise the activities of the Departments to ensure compliance with the Act. However, the National Assembly has amended the Act to remove Military and Security Agencies from the Contributory Pension Scheme. However, What we have not confirmed is if removing them from the Contributory Pension Scheme also legally provides that the pension administration of these sectors of the public service are exempted from regulation.

The above provisions effectively put the Pension Departments, with the exception of the Military and Security Agencies Department under the Commission. Consequently, any other arrangement put in place to run the Pension Transitional Arrangement Departments such as the Pension Task Force under the leadership of Alhaji Abdulrasheed Maina, without the involvement of the Commission will be an act that is wallowing in illegality and those that establish them are promoters of illegality, and should be called to account for such illegality. It is high time the executive and legislative arms of government stop these illegal acts.

The key success factor in the operation of the National Pension Commission is the quality of its human resources: the Commission has a competent staff and members who are not draw exclusively from the existing bureaucracy. The Commission has been able to attract and retain good professionals with expertise in finance, accounting, actuarial sciences, information technology, law and business management etc.

The National Pension Commission through its Inspectorate and Technical divisions has been performing effectively in its regulatory duties in the pension industry. This has been attested to by awards given to it by Thisday Newspaper as the Regulator of the year 2008. In the same year, the Leadership Newspaper also gave it the Regulator of the year award.

Kayode Komolafe in an article titled “Pension: A Matter of Social Protection” in Thisday Newspaper of Wednesday October 29, 2008 rightly captured it that “Ahmad has so far led a team that shows a lot of passion in discharging regulatory, monitoring and oversight functions to make the sector work”.

According to him, “we are talking of what happens to people’s savings towards their retirement”. He stated that pension fund, is not the kind of fund to be put mindlessly at the disposal of speculators and buccaneers whose laissez faire understanding of capitalism is turning every N20 to N40 overnight.

It could never have been better put as he did, when he further stated that if there is one sector where there should be a firm resolve towards regulation, it is the pension industry. According to him the social sensitivity of what is involved deserves no less.

To put an end to the mind bugging fraud taking place in the Pension Transitional Departments, the provisions of the Pension Reform Act 2004 should be obeyed and complied with. The Departments should be placed under the supervision of the National Pension Commission in strict compliance with the law.

Furthermore, while we at the Centre have no intention of revisiting the issue of the removal of Military and Security Agencies from the Contributory Pension Scheme, because we believe that in view of the nature of their duties, the government should fully take responsibility of their retirement benefits, we are however convinced and align with the school of thought that believe and are advocating that the administration of such public funds should be regulated as no financial institution can be self-regulated.

In conclusion therefore, we at the Centre are of the view that the Commission should be allowed to regulate all sectors of the pension industry, no matter the types of benefits they provide to their members, in line with international best practices. It is only this independent regulation that will minimise if not totally put a stop to the fraud that is pervasive in pension administration of the Pension Transitional Arrangements Departments.

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