Workers and retirees kick in as FG plans naira 620 billion loan from pension funds

The federal government plans to secure a loan of $ 1.5 billion (620 billion naira) from pension funds to support its plan to invest 7.73 billion naira in transport infrastructure over the next five years. coming years.

Specifically, the government is seeking to secure the facility to finance transport sector projects between 2021 and 2025, with the expectation that the over 13 billion naira pension fund will grow at an average rate of 15% per annum over the course of the period.

These were included in the federal government’s “National Development Plan 2021-2025: Volume I”, which was recently launched.

The federal government also revealed in the NDP document that infrastructure spending of 7.73 billion naira will come from the capital market, the portfolio of the Presidential Infrastructure Development Fund, pension funds, among others.

The government, however, said the proposed N620 billion facility would be based on the willingness of pension fund administrators to invest in the transport sector.

The NDP document said in part: “An additional $ 1.5 billion (620 billion naira) could come from pension funds, assuming that Nigeria’s pension fund assets are valued at over $ 31.3 billion. in 2019 increase at an average rate of 15% per year over five years, and pension fund administrators choose to invest in infrastructure funds and infrastructure bonds up to the thresholds allowed to them. ”

The national development plan describes transport as vital to the economy, noting that it underpins development, improves quality of life and enables effective governance.

As such, the government has stated in the plan that it will modernize the current transport infrastructure into a well-integrated, economically efficient, socially equitable and environmentally sustainable multimodal and intermodal transport system.

The NPD further read in part: “To achieve the stated objectives in the transport sector, the estimated public investment is 7.73 billion naira from 2021 to 2025. Allocations will be allocated to priority projects in the sector as well as ” projects essential to MDA operations relevant to each level of government.

“In addition, the transport sector plan and the infrastructure master plan have identified some available financing options. In addition to the sources of expenditure of the public sector investment budget, the following options are available to the government: The capital market increases the sum of 100 billion naira on an annual basis through the Sukuk sovereign bonds. This will be equivalent to a sum of 500 billion naira which will be available for financing critical road projects. The portfolio of the Presidential Infrastructure Development Fund (managed by the Nigeria Sovereign Investment Authority): The sum of $ 321 million was made available to this fund from the proceeds of the last tranche of the “Abacha loot” recovered. The proceeds of the fund will be used to finance the execution of the Lagos-Ibadan highway, the Abuja – Kaduna – Kano highway and the 2nd bridge over the Niger.

“The Central Bank of Nigeria is in the process of setting up an infrastructure company in collaboration with NSIA and some private funding sources. InfraCo is expected to generate a total capital portfolio of around $ 40 billion. Over the next five years, InfraCo is expected to generate up to at least 55% of its total projected portfolio (or $ 22.5 billion).

According to the document, with more than 200 million people living in an area of ​​more than 900,000 square kilometers, the country’s transport sector currently contributes an average of 3% of the gross domestic product.

The sector’s contribution to GDP is expected to increase to 5% over the next five to ten years.

As such, the government has said it will incentivize the private sector to attract alternative sources of finance to the sector.

However, senior officials and retirees opposed the federal government’s plan to borrow $ 1.5 billion (620 billion naira) from pension funds.

The workers, under the aegis of the Association of Senior Officials of Nigeria, called on the government not to consider the idea, calling the proposal insensitive.

ASCSN President Tommy Okon said, “Some retirees are even complaining about late payments and you talk about borrowing from the pension fund. No sane union would agree to this. Anyway, it is still in the area of ​​the proposal because we have not received such a proposal but I think they should not make such a proposal because no union would accept this.

The union also berated the FG for its borrowing frenzy, noting it had put the nation under pressure.

Okon said, “I also think a very sane government would know that you can’t keep doing things the same way and expect a different outcome. They borrowed, putting Nigeria under pressure.

In addition, retirees under the auspices of the Nigerian Retirees Union stressed that the government should be careful about borrowing from pension funds.

Reacting to the plan, NUP information officer Mr. Bunmi Ogunkolade noted that retirees could be stranded if the government does not repay the loan.

Ogunkolade said: “From the NUP we call for caution on the borrowing plan because what happens today may not happen tomorrow. This money does not belong to the government, it belongs to the workers who will retire tomorrow. The pension fund does not even belong to the workers; it becomes a pension after workers can retire. So the people in service today who are contributing hope to one day retire and collect the money.

“Our fear is that they are retiring now and that the money is not there, having been spent on road construction or electricity; so, what would be the fate of these retirees? Thus, we call for caution on the part of the government. They should please think twice. The total contribution, according to the Pensions Commission, exceeds 13 billion naira and the government wants to borrow 1.5 billion dollars. We express our strong reservations with regard to such borrowings.

However, analysts believe that since the pension law allows ATPs to invest in federal government bonds, workers and pension unions may not have a legal basis to prevent the government or administration of funds from. pension to go ahead with the proposal.

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