The move by the Nigerian Police Force (NPF) to pull out of the Contributory Pension Scheme (CPS) could cause damage of up to N5 trillion to the country’s pension assets and destabilise the Nigerian financial system.
According to the Director-General, National Pension Commission (PenCom), Ms. Omolola Oloworaran, the NPF has over N3.5 trillion in the CPS.
She warned that should the police withdraw from the scheme, its N3.5 trillion fund will attract another N1.5 trillion opportunity cost, and thus jostle the CPS wallet which stood at N22 trillion as at last September.
Oloworaran emphasised the need for the police to remain in the scheme for them to not lose the funds.
She said: “Based on our last estimate, it was going to cost N3.5 trillion if the police exit the scheme. And I told my team that it is not even the real cost because they have not looked at the opportunity cost, which is going to be close to N1.5trillion.
“If you add the opportunity cost to the actual cost, it will run into about N5 trillion. So, again, why do you want to exit a scheme and go into something that you are not sure of?
“Yes, there have been a lot of agitations for the police to exit the CPS, but most of them are ordinary Nigerians who just want better benefits. And while I say it’s the right cause to agitate for better benefits, I would also say that the way to get better benefits is not to exit the scheme.
“There is a need for engagement within the scheme and we would continue to engage across every level until we are able to get people to trust the CPS and know that whatever they are agitating for can be worked out within the CPS.”
She continued: “What we said to them is that the CPS offers security of funds and safety. The scheme is also sustainable because the contributions are coming in from the employees and employers. This is what has continued over 20 years.
“However, the police want better benefits. So, we all need to work together on how this can happen and incorporate it under the CPS. The Nigerian police work very hard in protecting citizens and I believe they deserve better benefits. So, we hope that together with the government, we can get more benefits.’’
“But exiting is not the way forward. It is not good for them because they don’t want the fund to be mismanaged. Even if they trust the people around them today, they don’t know who is coming to manage it in years to come that might just make the fund disappear.
“This cannot happen under the CPS. In addition, we have had a lot of issues in terms of funding when it comes to certain critical priorities. I am not even sure that the government can take care of such funding outside the scheme,” the DG noted.
Earlier, the Pension Fund Operators Association of Nigeria (PenOp) has expressed concerns over the NPF proposals to transition from the CPS to the Defined Benefits Scheme (DBS).
The Chief Executive Officer of PenOp, Mr. Oguche Agudah, voiced the concern during a public hearing on a bill for an act to establish a police pension board, warning that it would erode the value of assets and destabilize the financial system.
Agudah said that the transitioning to the DBS would not solve the police’s concerns, but “will, rather, create deeper financial and operational challenges for the country.”
He noted that reverting to the DBS model, which relies on government budgetary allocations, would lead to fiscal unsustainability and delayed payments for pensioners.
“Moving the police out of the CPS will require a staggering N3.5 trillion annually to fund pensions for approximately 400,000 personnel, in a budget already burdened by deficits. This is simply unsustainable.
“It will also divert resources from other critical needs, including minimum wage adjustments and public services,” he said.
The Nigerian Senate is currently considering a bill to establish a board to oversee Police pension, as they plan to exit the CPS managed by PenCom.
The NPF is following a precedent set by the Military, Department of State Service (DSS), Defence Intelligence Agency (DIA), and National Intelligence Agency (NIA) who had pulled out of CPS.
The Police clamours for higher benefits which the CPS has failed to deliver.
During a recent public hearing on the bill, Sen. Binos Yaroe, who sponsored the bill, said that retired Commissioners of Police take N70,000 while Assistant Superintendents of Police collect about N40,000 to N50,000 as pension, these, he said, not commensurate to their years and rank in the force.
