Connect with us

Economy

FG, States Fail to Fund Workers’ Retirement Accounts

Published

on

civil-servants
  • FG, States Fail to Fund Workers’ Retirement Accounts

Many workers who are retiring under the Contributory Pension Scheme are either unable to get their pensions or earning ridiculously low stipends because the government has been inconsistent with the remittance of its deductions into their Retirement Savings Accounts, NIKE POPOOLA writes

Four years after the Pension Reform Act was amended and employers mandated to raise their contributions into the Retirement Savings Accounts of workers under the Contributory Pension Scheme, the Federal Government has yet to effect the change.

Since the Pension Reform Act was amended in 2014, compliance with regard to remittances of pension contributions from the public sector at both the federal and state levels have been patchy at best.

Findings revealed that direct employees of ministries, who are not under the parastals but being paid by the National Pension Commission with the funds released by the Central Bank of Nigeria, were the most affected.

Latest PenCom figures revealed that only 10 out of the 26 states that had enacted their pension reform laws had commenced remittance of funds into the RSAs of their employees.

While only a few of them have been consistent with remittances, some states have outstanding remittances dating back to two years.

Figures from the commission, however, showed that private sector remittances had been more consistent than that of the public sector.

The PRA was enacted and signed into law in 2004 to provide a contributory scheme for the payment of retirement benefits of employees in both the public and private sectors.

The Act mandated employees to open the RSAs in their names with Pension Fund Administrators of their choice and notify their employers.

In mid-2014, Section 4(1) of the PRA increased the pension contribution from a minimum of 15 per cent to a minimum of 18 per cent of the employees’ monthly emolument.

The Accountant General of the Federation was mandated under Section 12(3) of the Act to effect the deductions of the pension contributions based on the 18 per cent rate and remit same to the RSAs of the Federal Government’s employees.

While many employers in the private sector have complied, the Federal Government has failed to implement its own law.

The low pensions paid under the CPS is a reason why many groups have been agitating for a significant upward increase in pensions, or a total pull-out from the scheme.

Industry experts have said that the default by the Federal Government in implementing the 18 per cent minimum contribution has denied the workers the extra interest that should have been added to their RSAs from the investment of pension funds over the years.

The Chairman, NTA Association of Contributory Pensioners, Alhaji Gbadebo Olatokunbo, observed that the PRA 2014 sought to take care of some of the shortcomings in the 2004 version of the law.

He noted that the PRA 2014 enriched the powers and privileges of PenCom in the affairs of pensioners under the CPS, but expressed worry that the commission was not proactive in solving the plight of the pensioners.

Speaking on the issue of short-changing pensioners in the payment of entitlements, Olatokunbo said, “While some ministries, agencies and departments had discovered wrong presentations to PenCom and acknowledged the mistakes and made corrections themselves, which were later represented, PenCom refused to act on such corrections, while the contributory pensioners continue to lament the wrong entitlement payments.”

The Executive Director, Centre for Pension Right Advocacy, Ivor Takor, stated that the Federal Government had not been adequately funding accrued rights of its employees, who were in service before the commencement of the CPS, thereby causing such workers not to be paid their retirement benefits when they retired from service.

“The government has also not commenced the implementation of the increase in the rates of contribution by employers and employees as provided for in the Pension Reform Act, 2014. This increase took effect from 2014 and meant to enhance the balances in the employees’ Retirement Savings Accounts,” he said.

Takor expressed concern that under the post-reform era, federal public servants were almost back to the pre-pension reform era, where under the Defined Benefit Scheme (Pay-As-You-Go), retired federal public servants were not sure when their retirement benefits would be paid.

“Federal public servants who retired as far back as October 2015 were not paid their retirement benefits under the Contributory Pension Scheme until early 2017. The same for the next of kin of deceased federal public servants within the period. To date, federal public servants who retired in January 2017 are yet to be paid their benefits,” he added.

According to Takor, private sector employees, who are under the same scheme being regulated and supervised by PenCom, using the same Pension Fund Administrators and Custodians, are not facing the same challenge like the federal public servants.

While noting that federal public service retirees and retirees from the states, with a few exceptions, are languishing in abject poverty, he added that the government lacked the political will to do the right thing.

He said, “The irony of the whole issue is that more than 50 per cent of the pension funds generated under the Contributor Pension Scheme are invested in the Federal Government securities and the money is mostly used by the government for recurrent expenditure.

“It is used for the payment of salaries of active staff and other overhead costs. The question then is why is part of that money not being used to fund the Retirement Redemption Bond Account from where the accrued rights of those who contributed to it are redeemed?”

The Acting Director-General, National Pension Commission, Aisha Dahir-Umar, in a memorandum submitted by the commission to the Senate Committee on Establishment and Public Service at the public hearing on pension, said that it was important to address the issue of delay in the payment of pensions to retirees under the CPS.

She attributed the major cause to inadequate funding of the pension accounts by the Federal Government.

The commission sought the implementation of its recommendations presented to the committee on how to address the lingering hardships faced by Nigerian pensioners.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

Continue Reading
Comments

Economy

African Economy Set for Steady Growth: 4% Projected for 2025

Published

on

Nigerian Breweries - Investors King

Experts are forecasting a robust growth trajectory of 4% for the continent in 2025.

This optimistic projection was highlighted during the ongoing Afreximbank annual meetings, incorporating the Africaribbean Trade and Investment Forum, held recently in Nassau, The Bahamas.

Yemi Kale, Group Chief Economist and Managing Director of Research and International Cooperation at Afreximbank, presented the 2024 African Trade Report and Economic Outlook, saying the African Continental Free Trade Area (AfCFTA) is significant in driving economic integration and growth.

The projected growth rate of 4% for 2025 reflects a steady recovery path for Africa, building on the expected 3.5% growth anticipated for 2024.

This positive outlook comes at a crucial time when African economies are navigating challenges posed by global economic dynamics, including inflationary pressures and supply chain disruptions.

Kale underscored the resilience of intra-African trade, which expanded by 3.2% in 2023 despite a 6.3% overall contraction in Africa’s trade volumes.

This resilience is a testament to the AfCFTA’s potential to bolster regional trade ties and reduce dependency on external markets.

The Afreximbank report also delved into macroeconomic environments, trade patterns, and sovereign debt sustainability dynamics, providing policymakers and business leaders with actionable insights to navigate complexities in global markets effectively.

Nomusa Dube-Ncube, Premier of Kwazulu-Natal, highlighted Africa’s modest share of global GDP and manufacturing output, emphasizing the untapped potential within intra-African trade.

She noted that while Africa currently accounts for only 3% of world trade, intra-regional trade is steadily increasing, indicating a growing economic ecosystem within the continent.

Pamela Coke-Hamilton, Executive Director of the International Trade Centre (ITC), echoed the sentiment, advocating for enhanced trade between Africa and the Caribbean.

The ITC projects trade in goods and services between these regions to reach $1 billion by 2028, underscoring the mutually beneficial opportunities for economic expansion.

Continue Reading

Economy

Nigeria Sees 95% Surge in Food Imports Despite Emergency on Food Production

Published

on

Zambian economy

Nigeria’s food import bill has surged to a five-year high in the first quarter of 2024, despite the federal government declaring a state of emergency on food production.

Data from the National Bureau of Statistics (NBS) reveals a 95.28 percent increase in food imports to N920.54 billion from January to March, compared to N471.39 billion in the same period last year.

This alarming rise comes amid soaring food inflation, which hit a record 40.5 percent in April, reflecting a 15.92 percent year-on-year increase.

The sharp inflation has left many Nigerians struggling to afford a balanced diet, exacerbating the food security crisis in Africa’s most populous nation.

In March, President Bola Ahmed Tinubu emphasized the government’s commitment to self-sufficiency in food production, stating that Nigeria would not rely on imports to stabilize prices.

“We will not allow the importation of food but rather turn the lack in the country into abundance,” Tinubu declared. However, the latest import figures suggest that this goal remains elusive.

The NBS Foreign Trade Statistics report highlights that the value of food imports via maritime, air, and land routes surged 29.4 percent from N711.4 billion in the fourth quarter of 2023.

Major agricultural goods imported included durum wheat from Canada and Lithuania, valued at N130.26 billion and N98.63 billion, respectively. Frozen blue whitings from the Netherlands accounted for N16.67 billion.

Wheat imports alone constituted N519.75 billion of the total food import bill. The average cost of wheat imports, a significant driver of the food import value, increased by 33 percent compared to the previous quarter’s value of N391.01 billion.

The rising importation of wheat reflects its popularity among Nigerian consumers amid skyrocketing prices of close substitutes like garri and rice.

Overall, Nigeria’s total imports for Q1 2024 amounted to N12.64 trillion, representing a 39.65 percent increase from N9.05 trillion in Q4 2023 and a 95.53 percent rise from N6.47 trillion in Q1 2023. Food imports accounted for 7.3 percent of total imports during the period under review.

The bulk of Nigeria’s imports came from Asia, China, Europe, America, and Africa. Mineral fuels topped the import category with N4.44 trillion, representing 35.09 percent of total imports.

Machinery and transport equipment followed with N3.17 trillion, contributing 25.08 percent, and chemicals and related products at N1.79 trillion, making up 14.13 percent of total imports.

Despite the federal government’s initiatives to boost local food production and reduce dependency on imports, the latest data underscores the persistent challenges facing Nigeria’s agricultural sector.

Continue Reading

Economy

Ethiopia Boosts Spending by 21%, Eyes IMF Program for Economic Relief

Published

on

Northern Ethiopia - Investors King

Ethiopia has announced a 21% increase in its 2025 budget, marking the first budget since defaulting on a Eurobond payment and committing to economic reform discussions with the International Monetary Fund (IMF).

The nation’s Finance Minister, Ahmed Shide, revealed the new budget details to lawmakers on Tuesday, outlining plans to spend 971.2 billion birr ($16.9 billion) in the fiscal year starting July 2024.

The increased budget reflects Ethiopia’s commitment to addressing its economic challenges head-on. Despite the heightened expenditure, the fiscal deficit is projected to remain stable at 2.1% of gross domestic product (GDP), unchanged from the current fiscal year.

Financing the Deficit

Minister Shide outlined a plan to cover the 358.5 billion-birr deficit through a combination of local and foreign borrowing.

The domestic borrowing component will be managed via government treasury bills and medium-term bonds. Shide emphasized that until substantial external donor support is secured, Ethiopia will continue to rely heavily on its domestic markets to finance budget deficits.

“While the government has secured some external financing from the World Bank and the European Union, negotiating an IMF program will be crucial to alleviate pressure on local banks and secure overall debt relief,” said Giulia Filocca, a senior analyst at Standard & Poor’s for sovereign and international public finance ratings.

IMF Program and Economic Reforms

An agreement with the IMF is seen as a pivotal step for Ethiopia. The nation failed to remit a $33 million coupon payment for its $1 billion bond in December 2023, leading to agreements with some creditors, including the Paris Club, to suspend debt repayments.

In exchange, Ethiopia is expected to reach a staff-level agreement with the IMF, which will likely include economic reforms such as devaluing the birr currency.

“Our expectation is that an IMF program will be signed this year, but the timeline remains unclear due to ongoing political developments and challenges over foreign-exchange reforms,” added Filocca.

Budget Highlights

The new budget includes 451.3 billion birr for recurrent spending, 283.2 billion birr for capital expenditure, and 236.7 billion birr allocated for regional subsidies.

The government projects income of 612.7 billion birr, with tax revenue expected to contribute 502 billion birr and non-tax income 61.6 billion birr. Sector budget support is anticipated to bring in 7.3 billion birr, with aid and grants expected to add 41.8 billion birr.

Economic Outlook

Ethiopia’s economy is forecasted to expand by 8.4% in the coming fiscal year, up from an expected 7.9% growth rate in the current period. The budget increase is designed to support this growth trajectory by enhancing public investment and stimulating economic activity.

“Our partnership with the IMF and other international financial institutions will be key to ensuring Ethiopia’s economic resilience and sustainable growth,” Minister Shide concluded. “We are committed to implementing the necessary reforms to secure a brighter economic future for our country.”

As Ethiopia navigates its economic challenges, the government’s proactive approach to increasing spending and engaging with the IMF reflects a strategic effort to restore fiscal stability and drive long-term economic development.

Continue Reading
Advertisement




Advertisement
Advertisement
Advertisement

Trending