Atiku: Tinubu govt’s plan to use N20 trillion pension fund for infrastructure “illegal”

The federal government’s plan to deploy N20 trillion of pension funds belonging to Nigerians has caused outrage, with former Vice President Atiku Abubakar warning against the “illegality.”

Finance minister Wale Edun disclosed the government’s plan after Tuesday’s federal executive council meeting, attended by President Bola Tinubu.

The minister said while the government will seek foreign investment, it first would tap into domestic financial resources, particularly pension and life insurance funds, for national growth.

It is part of the government’s efforts to bridge Nigeria’s estimated 20 million housing deficits and to provide housing and mortgage loans at 12% interest, with 25-year repayment plans, he said.

“And the fact is that even before we start looking to foreign investors, we start looking to foreign funding, there is available in Nigeria, long term funds to fund infrastructure projects, and it’s within the pension, the life insurance and investment fund industry generally,” he was quoted by The Cable as saying.

“There is upwards of N20 trillion available, and much of it is in short-term funding that doesn’t need to be. Pension money is long-term.

“People save over their lifetime for their pension. And so, in conversation, in consultation, collaboration and cooperation with the private sector, we are now able to announce and with the full knowledge and support of all parties, that there will be an initiative to fund growth through investment in infrastructure, including housing, provision of mortgages, long term mortgages, 25-year mortgages at relatively low interest rates.

“Initially, of course, the government will stand back and provide some support, particularly in this era of high interest rates but eventually as interest rates come down, there should be less role for the government through providing, for example, guarantees and so forth.

“So, we can look forward to these huge funds being leveraged with the expertise, the ability, the capacity of the private sector, partnering with the government to drive economic growth.

“On the supply side, construction of houses will be funded. On the demand side, mortgages will be made available so that those constructing houses have an outlet and Nigerians who are saving so much by way of pension funds, have the added bonus of access to affordable mortgages.

“That really is the long and short of this initiative and you also as much as anybody else can understand and see what it means in the construction industry to do for the country.”

Against the law

The plan to utilize the entire N20 trillion pension money for infrastructure appears in violation of Nigeria’s pension law, which bars investing more than 5% pension funds directly in infrastructure.

Pension fund administrators invested only N130 billion in infrastructure by September 2023, a small percentage of the total.

The Tinubu government is not the first to come up with the idea to deploy pension funds beyond allowed limits to infrastructure. A similar plan by the Buhari administration in 2020 to “borrow” N2 trillion out of N10 trillion pension funds for infrastructure caused outrage.

No Shortcut

Former vice president Abubakar said any such plan would break the law.

“The Minister has indicated that although “the initiative is expected to attract foreign investment interest over time”, domestic savings are his ‘immediate focus’ for now,” he wrote on X, formerly Twitter.

“He provided no useful details, such as the percentage of the funds to be mopped up from the Pension Funds, for example. Even at that, this move must be halted immediately!  It is a misguided initiative that could lead to disastrous consequences on the lives of Nigeria’s hardworking men and women who toiled and saved and who now survive on their pensions having retired from service.

“It is another attempt to perpetrate illegality by the Federal Government. The government must be cautioned to act strictly within the provisions of the Pension Reform Act of 2014 (PRA 2014), along with the revised Regulation on Investment of Pension Assets issued by the National Pension Commission (PenCom). In particular, the Federal Government must not act contrary to the provisions of the extant Regulation on investment limits to wit: Pension Funds can invest no more than 5% of total pension funds’ assets in infrastructure investments. I note that as of December 2023, total pension funds assets were approximately N18 Trillion, of which 75% of these are investments in FGN Securities.

“There is NO free Pension Funds that is more than 5% of the total value of the nation’s pension fund for Mr. Edun to fiddle with.

“There are no easy ways for Mr. Edun to address the challenges of funding infrastructure development in Nigeria. He can’t cut corners. He must introduce the necessary reforms to restore investor confidence in the Nigerian economy and to leverage private resources, skills, and technology.”