Why the Presidency should save PenCom from politics

Why the Presidency should save PenCom from politics

Amaeshi is a Policy Analyst and Professor of Business and Sustainable Development at the University of Edinburgh Business School, United Kingdom. He tweets @kenamaeshi

 

The Nigerian constitution reposes a lot of powers on the Office of the President. For the most part, the incumbent rightly exercises these powers powerfully and seamlessly. At other times, the office encounters challenges, confrontations, and contestations in exercising these rights. The latter scenario usually attracts divergent views as to the propriety or otherwise of presidential powers, as enshrined in the constitution.

 

The recent tussle between the senate and the presidency with regards to the confirmation of Mr Magu, as the Chairman of the Economic and Financial Crimes Commission (EFCC), is a clear example. The views for and against have been very interesting, with presidential aides contending that there is actually no need for the senate’s confirmation. The stalemate is still on.

 

There are also other instances, such as the recent removal of the former Director General – Ms Chinelo Anohu-Amazu – and the entire management of the National Pension Commission (PenCom), where the rights of the presidency to execute such orders are being contested.

 

There are strong views that the presidency does not have the right to sack the Director General and dissolve the management of PenCom at will, outside the requirements of the 2014 Pension Reform Act. There are also contrary views that the presidency has the right to do so. This is still up for debate.

 

However, assuming the presidency has this right, is it right for it to use the right as used in this case? Are the circumstances and timing right? Could the exercise of this right have any negative consequences on the budding pension industry? To address these questions, one needs to firmly locate them within the institutional context of the industry.

 

The Nigerian pension industry is still undergoing a transformation started in 2004. Although a 13 year period seems like a long time, it is nothing in the grand scheme of institutional transformations. Institutional change can be a painfully slow and a gradual process. In addition to the gradual nature of institutional change, the industry has its fair share of challenges.

 

Amongst others, the industry, as a whole, still suffers from some trust issues. There have been historic instances of stolen pension funds (e.g. the recent N24bn police pension scam), non-timely payment of pensions, et cetera. In short, pensions in Nigeria have been historically and contemporarily convoluted and complex. Notwithstanding, PenCom is gradually rebuilding trust, safeguarding funds, and repositioning the industry. That the fund has grown up to N6.5trn – the first in the history of Nigeria – is a testament to the positive work of PenCom.

 

The pension industry is unarguably crucial to the long term goals of Nigeria. It is an inevitable social system, which can help address some of the challenges facing the country today. Poverty in retirement is a scourge. Many people will do all they can to avoid it. Some of the corruption practices in the country are, arguably, genuine attempts to avoid retirement challenges and minimise uncertainties.

 

One can, therefore, see how an efficient and trustworthy pension system can directly contribute to the fight against corruption. It will be unwise to intentionally and or inadvertently work against the pension industry.

 

The industry should not, also, be seen as one that is easily susceptible to the pressures of politics and politicians. This will spell doom for it. It is always dangerous to mix regulation of certain critical industries with partisan politics. That is why most central banks and other financial regulators tend to be independent.

 

Pension funds are long term commitments and require strong degree of governance stability to function. Interference from politics will do it no good. It would rather scare possible investors and demoralise current and or potential contributors to the pension scheme. This is not what the industry needs now as it tries to gain more coverage across the country.

 

From the foregoing, it is obvious that the industry is still very fragile and needs to be handled with care. One way to do this, is to strengthen its governance institutions and protect it from the onslaught of politics and politicians. This is exactly what the 2014 Pension Reform Act intends and seeks to achieve in principle; hence the requirements and procedures for regime change at the Commission, which have inadvertently put the presidency in an awkward situation.

 

Undoubtedly, the exercise of rights can sometimes be discretionary and dependent on such factors as timing, circumstances, outcomes, and implications. In other words, rights need to be reasonably exercised, weighing the options and contexts. This means that not every right is eventually exercised.

 

It is within this context that the reasonability of the recent change in regime at PenCom could be assessed. Even if the presidency has the right to fire and hire the management of PenCom, has this right been reasonably exercised in this case? Would the country and the industry be significantly disadvantaged, if the former Director General and her management team served out their respective terms? Was there any compelling industry-related reason to oust them? Where they accused of any impropriety and or breach of office? Were due processes followed? These are some questions begging for answers.

 

There is also a timing issue to the regime change. The current government has up to 2019 – i.e. 2 more years left. There is a possibility of the government returning to power, and equally a possibility to the contrary. The Director General of PenCom is a tenured position of 5 years at a time renewable not more than 2 terms. By implication, if the new management starts in 2017, the regime stands the risk of being changed two years down the line, even before it fully settles down to work. This is not the type of certainty the industry currently needs. It is equally a dangerous precedence.

 

Beyond time and from an institution building perspective, what is the guarantee that the entire Pension Reform Act would be respected if the presidency persists in exercising the right to hire and fire the Director General of PenCom and dissolve the management of the Commission, against the dictates of the 2014 Pension Reform Act? This could be another source of concern and uncertainty.

 

As already stated, the exercise of right needs to be contextualised and rationalised. In the case of PenCom, one question before the presidency is: even if the presidency has the right to oust the Director General and management of PenCom, is that right, right enough given the circumstances, timing, and possible negative consequences on institution building?

 

Given where PenCom is at the moment – it has been without a substantive Director General for almost 6 months – and the possible negative consequences of the contested regime change, the presidency may wish to reconsider its position here for the greater good of the industry and Nigerians.

 

 

Reversing the decision in the current instance is a less perilous track to follow. It is also an honourable act, which will, at least, correct a perceived anomaly and avoid setting a dangerous precedence.

 

This won’t be the first time such strategic reversals will happen in Nigeria. It will not only contribute to trust building, it will also affirm the government’s commitment to good governance and responsible leadership.

 

The government needs to be seen walking the talk. This is very important.

Kenneth Amaeshi

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