Unpacking the illegal exemptions from Nigeria’s pension scheme, By Adamu Rabiu

The penalties for violating the Code of Conduct for Public Officers in Nigeria include disciplinary actions, dismissal, and even criminal prosecution. Public officers found guilty of using their positions to gain undue advantage or privileges are to face legal consequences such as fines, imprisonment, or both. It’s essential for public officials to adhere to ethical standards and avoid any actions that undermine public trust and confidence in governance.

Pension Paradox

In the complex heart of Nigeria’s economic framework stands the Contributory Pension Scheme (CPS), a testament to the country’s commitment to ensuring a secure future for its retiring public and private workforce. However, this well-intentioned journey has been fraught with challenges, issues of compliance and legal interpretation, executive brigandage, and legislative ambush.

Nigeria’s pension system underwent a significant transformation with the enactment of the Pensions Reform Act (PRA) in 2004, which was later replaced with the PRA 2014. Born out of necessity, the CPS was necessitated by the failures and inability to address the myriad of problems bedevilling the earlier unsustainable Defined Benefit Schemes (DBS), which relied heavily on government’s budgetary allocations. Under the CPS, both employers and employees in the public and private sectors are required to contribute a percentage to the retirement benefits of workers, towards creating a more stable, predictable and self-sustaining pension system.

Within the twenty years of its implementation, the CPS has stemmed the growth of the outstanding pension liabilities of the Federal Government, reduced the fiscal costs to government, stimulated domestic savings, generated a pool of long-term funds for developmental projects, and increased private sector investments in Nigeria. According to PenCom, as at the 31^st of March, a N19.7 trillion pool of long-term pension assets had been accumulated by the CPS and invested for the economic development of Nigeria.

In recent years, there have been Racket, Babel and Immigration among certain categories of Federal Government employees exempted from the CPS and allowed to revert to the DBS. Their issues are essentially about the quantum of retirement benefits, which they believed should be enhanced (how crooked and selfish some Nigerians can be!). The prominent categories of such Federal Government employees are the Head of the Civil Service of the Federation (HCSoF) and Federal Permanent Secretaries (Perm Secs).

Full-time Salaries for Life

In 2019, a directive of President Muhammadu Buhari exempted the HCSoFs and Perm Secs from the CPS, allowing them to receive full salaries for life. Thereafter before the blinking of an eye, a directive from the Ministry of Finance, Budget and National Planning directed the domiciliation of the pension entitlements of retired HCSoFs and Perm Secs with the Office of Head of the Civil Service of the Federation, directing the payment of their full salaries as pensions through the Integrated Payroll and Personnel Information System (IPPIS) platform. The IPPIS was actually designed for active workers, not retirees!

The Jaundiced Opinion of a SAN

The exemption of the HCSoF and Perm Secs from the CPS was based on the bilirubin of a legal opinion by the then Attorney General of the Federation. This opinion stated that these officials are not ’employees’ under the Pension Reform Act (PRA) 2014 but are ‘appointees’ of the President with regard to Section 171 of the Federal Republic of Nigeria 1999 Constitution (as amended). Consequently, in April 2019, the President approved their exemption from the CPS, placing them under a “salary for life”.

Questions

1. When did an opinion become the law?

2. Is the IPPIS meant for salaries and allowances for the period of employment or it includes the payment of salaries for life, even after employment?

Manipulating a System

The pallid interpretation of the law is challenged on several grounds, including:

1. Section 171 of the 1999 Constitution, which relates to the appointment of certain public officers by Mr President. It does not address the issue of pensions. Therefore this is unconstitutional!

2. Section 173(1) of the 1999 Constitution, which mandates that all public service pension matters be regulated by an Act of the National Assembly.

3. The HCSoF and Perm Secs are civil servants and remain so even as they are appointed by the President. Section 171 (3) and (6) of the Constitution clearly states so. By exempting them from PRA 2014, leaves them with no law governing their pensions.

4. The Pension Reform Act (PRA) 2014 is the principal extant federal law governing pension matters in Nigeria. Complementary Acts were enacted to regulate the pensions of the military and security agencies. Also, two Acts were enacted to regulate the pensions of judicial officers pursuant to Section 291 of the 1999 Constitution (as amended). And employees who had three years or less to retire as at June 2004 are exempted.

5. Sections 6 and 7 of the PRA 2014 provide that ‘political appointees’, such as the HCSoF and Perm Secs, are covered by the Contributory Pension Scheme (CPS), but shall retire with 100 per cent of their salaries as pensions. Where their Pension Accounts (RSAs) cannot provide this benefit, the Federal Government shall fund the shortfall through the budget.

6. The Supreme Court had decided in the case of SARAKI Vs. FGN (in 2016) LPELR-SC.852/2015 that no circular or other administrative instrument can supersede the Constitution or Statutes enacted by the National Assembly.

7. The Pension Reform Act of 2014 grants PenCom exclusive authority over pension administration in the country.

Indeed, the HCSoFs and Perm Secs, by fluke of luck and finding themselves in privileged positions got exemptions and are eating from the sweat of Nigeria, which constitutes ethical and moral bankruptcy that the bureaucracy is supposed to be against.

Consequences

1. Financial Implications: Exempting these top officials from the CPS and placing them on life salaries poses a significant financial burden, which potentially unsettles the Federal Government’s fiscal policy and financial system stability. The monthly salary of a serving Permanent Secretary is in the range of N898,000, and their entitlements, post-retirement, can exceed N1 million. This arrangement not only strains government finances but also sets a dangerous precedent that will lead to similar demands from other civil servants, which would further exacerbate the fiscal challenges.

In the 2023 budget, the Federal Government allocated N854.81 billion to Pension, Gratuities, and Retirees Benefits. This figure will keep growing.

The yearly budgetary provision for this group of Nigerians is scary, even PenCom will shiver to put that figure in the public domain.

2. Legal and Ethical Concerns: Where is the ethics, separation of powers and the rule of law?

3. Precedent for Other Exemptions: The National Assembly has passed a bill that has exempted its workers from the CPS. An analysis is pertinent there too.

4. Conscience and Posterity: It looks like some Nigerians lack these. It is essential to ensure that pension systems are sustainable and fair to all members of the civil service, in order to maintain trust.

5. Effect on Morale: The exemption shows that there is a privileged class within the civil service.

6: The exemptions threaten the integrity and sustainability of the CPS, thereby undermining the principle of uniformity and inclusiveness that the scheme was designed to uphold.

No Locus Standi

1. This group of individuals have most likely opened up a floodgate for others to follow suit, as they lack the moral right to force others to stay within the CPS, as they themselves lack faith in the policy.

2. The penalties for violating the Code of Conduct for Public Officers in Nigeria include disciplinary actions, dismissal, and even criminal prosecution. Public officers found guilty of using their positions to gain undue advantage or privileges are to face legal consequences such as fines, imprisonment, or both. It’s essential for public officials to adhere to ethical standards and avoid any actions that undermine public trust and confidence in governance.

Part I of the Fifth Schedule of the 1999 Nigerian Constitution. Specifically, Paragraph 18 states: “Any allegation that a public officer has committed a breach of or has not complied with the provisions of this Code shall be made to the Code of Conduct Bureau.”

PenCom, which way do you go now?

Adamu Rabiu-Bakondare writes from Kaduna