Police exit from CPS will spell doom for Nigeria’s economy, stakeholders warn
By Emma Ogbuehi
It was a near unanimous position of industry stakeholders on Tuesday that the Nigeria Police Force (NPF) should not exit the country’s Contributory Pension Scheme (CPS) because exit will harm Nigeria’s struggling economy.
They made their position known on Tuesday at the public hearing on a Bill for an Act to Establish Police Pension Board, which held at the National Assembly complex in Abuja.
Senator Binos Yaroe, who sponsored the bill, said retired Commissioners of Police take home a paltry sum of N70,000 while Assistant Superintendents of Police collect between N40,000 to N50,000 as pension.
He frowned that while as the Military, Department of State Services (DSS), Defence Intelligence Agency (DIA) and National Intelligence Agency (NIA), were exempted from the CPS, the NPF, which is the lead security agency in section 214 of the Constitution, was left under CPS regulated by PenCom.
This, according to him, places retired police officers on wrong post-service footing in spite of their crucial role.
“Towards the end of the 9th Assembly, the bill was passed but not signed because we started the process late. That’s why we started the process again early March.”
The Chairman, Senate Committee on Establishment and Public Service, Senator Cyril Fasuyi, said the idea of the bill was to establish a board to oversee Police pension.
Fasuyi said the committee intended to create an enabling environment for retired police officers and the public hearing provides more information and an opportunity to various stakeholders.
Speaking in the same vein, the Inspector-General of Police, Kayode Egbetokun, who was represented by the Deputy Inspector General (DIG) of Police, Bala Chiroma, said the NPF wanted the Police Pension Board established for improved welfare for retired police officers.
However, the Pension Fund Operators Association of Nigeria (PenOp), disagreed.
The group expressed concern over the exit proposal, arguing that the alternative which is a return to the Defined Benefits Scheme (DBS), is unrealistic and unsustainable.
Mr. Oguche Agudah, the Chief Executive Officer of PenOp, said the Contributory Pension Scheme operates on a pre-funded model with both employees and employers contributing a mandatory percentage of the employee’s salary.
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Agudah said that usually, a minimum of eight per cent from the employee and 10 per cent from the employer, totaling a minimum contribution rate of 18 per cent, is gathered. He said that either party had the latitude to contribute a higher percentage, which allows pension funds to accumulate and be invested for future payouts.
Agudah said that the National Pension Commission (PenCom), as at September 2024, had a total pension assets, under the CPS, that had exceeded ₦20 trillion (approximately $12 billion).
He further elucidated that PenCom had ensured that the funds were not solely reliant on government budgets, thus reducing vulnerability to fiscal constraints.
Agudah said that the transitioning back to the DBS will not solve the concerns of NPF.
“It will rather create deeper financial and operational challenges for the country,” he said.
He further said that the CPS had proven to be a transparent, sustainable and resilient system for managing pensions, benefiting both retirees and the broader economy.
Agudah said 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.
Agudah said that pension funds under the CPS are currently invested in bonds, infrastructure and other critical sectors that contribute to the country’s economic growth.
He said that unwinding the investments to accommodate a DBS for the police would erode the value of assets and destabilise the financial system.
Agudah said that the CPS currently holds over N21 trillion in assets, and remains a critical component of the country’s economic infrastructure, insisting that retaining the police within the CPS would ensure long-term sustainability, equity and economic stability.
Agudah also said exiting the police from the CPS will set a dangerous precedent that will not augur well for the country.
“If the police exit the CPS, other public sector groups may demand similar transitions, fragmenting the pension system and undermining reform efforts.
“And our key aim and our key goal is to ensure that all pensioners are paid on time, all pensioners have a living pension, and everybody gets their pension on time.
PenCom urges police to remain with CPS
Speaking in the same vein, Ms. Omolola Oloworaran, Acting Director-General of National Pension Commission (PenCom), urged the Nigeria Police Force (NPF) to remain with the Contributory Pension Scheme (CPS).
Oloworaran, who was represented by the Commissioner of Administration, Dr. Farouk Aminu, also reiterated PenCom’s commitment to Police welfare. She said that pension must be affordable, sustainable and adequate.
“PenCom has consistently proposed practical solutions, including increasing pension contribution rates, offering additional retirement benefits, and implementing periodic pension reviews under the existing CPS framework.
“These measures are designed to enhance the financial well-being of retired police personnel without compromising fiscal discipline or administrative efficiency. Notably, the establishment of an Augmentation Fund and the enhancement of the Retiree Resettlement Scheme demonstrate PenCom’s commitment to addressing the unique needs of the police.
“The welfare of Nigeria Police personnel is paramount, the proposed bill is a step in the wrong direction. The CPS offers a balanced approach to achieving pension adequacy, affordability, and sustainability,” Oloworaran said.
She said that implementing PenCom’s recommendations was a more viable path to meeting the needs of police personnel while safeguarding the broader national interest. Oloworaran said that the Senate should prioritise those solutions and uphold the principles of Nigeria’s pension reform.
The National Chairman of Nigeria Union of Pensioners Contributory Pension Scheme Sector (NUPCPS), Mr. Sylva Nwaiwu, said the CPS was good for the nation, adding that pension increments should always be encouraged.
Alhaji Sani Mustapha, the Executive Director of the Contributory Pension and Happy Retirement Advocacy (COPEHRA), said that CPS had proven to be resilient, transparent and sustainable,
He added that it was also effectively addressing the shortcomings of the previous pension system. He said that keeping the NPF within the CPS aligns with best practices in pension management, ensuring their financial security while also supporting Nigeria’s broader economic development.
Mustapha said that the transition to a Defined Benefit Scheme (DBS) would introduce significant risks, including fiscal unsustainability, delayed payments and potential economic setbacks. He said that it was imperative to uphold the principles of equity, transparency and sustainability by maintaining the NPF’s inclusion in the CPS.
“My recommendation is to maintain the current system to safeguard the future of our police personnel and promote a robust economic environment in Nigeria. Any challenge that the Police may have in the administration of their pensions under the CPS should be discussed and resolved by PenCom and other relevant Government agencies,” Mustapha said.
The director said that there were many benefits in retaining police in the CPS. He listed the benefits to include regulation and oversight, security and timeliness, economic independence, transparency and accountability, and alignment with global trends.
“The risks of establishing a separate pension board for DBS includes fiscal burden, lack of autonomy, economic instability and precedent setting,” Mustapha said.
The Senate, had on July 4, 2024, passed for a second reading a bill that seeks to remove police retirees from the Contributory Pension Scheme (CPS).
Promoters of the bill, which seeks, among other things, to replace the Nigeria Police Force Pensions Limited (NPF Pensions), the pension fund administrator (PFA) charged with the exclusive administration of police pensions, with the Nigeria Police Pensions Board, aver that it will correct the inequality in the pension benefits paid to police retirees vis-à-vis their counterparts in other security agencies.
Leading the debate, the sponsor of the bill, Senator Binos Yaroe, who represents Adamawa-South in the Red Chamber, lamented the poor pension of retired police officers.
“The inclusion and continuous stay of the NPF in the PenCom has placed them on the wrong end of the post-service emolument life, even though the Nigeria Police is saddled with the responsibility of not only protecting the lives and property of the citizenry but detecting crimes,” Yaroe said.
Numerous public hearings have been organized by both chambers of the National Assembly on the issue of exemption. For instance, on February 22, 2022, the House of Representatives Committee on Pensions held a public hearing on two bills for the amendment of the Pension Reform Act 2014, with the first bill sponsored by Hon. Francis Ejiroghene Waive, seeking “to amend the Pension Reform Act 2014 to provide for the exemption of the Nigeria Police Force from the Contributory Pension Scheme and for related matters.”
But industry stakeholders aver that the low pension is neither the making of National Pension Commission (PenCom) nor NPF Pensions Limited. The pension is paltry because historically, police salaries remain embarrassingly measly. Therefore, the solution lies outside the exemption paradigm.
At a three-day investigative hearing by the House of Representatives Committee on Pensions in March 2020, measures were articulated by NPF Pensions Limited, which if taken, will holistically address the plight of police retirees and mitigate the constant clamour for exit.
The first is a presidential approval of special gratuity for police retirees at the rate of 300 per cent of their last annual gross pay so that the balances in their Retirement Savings Account (RSAs) will be channeled towards their monthly pension payments.
This will be in accordance with Section 4 (4) of the Pension Reform Act which provides that an employer, notwithstanding the provisions of the Act, may agree on the payment of additional benefits to the employee upon retirement.
The second is treatment of retired police officers from the rank of AIG and above as public officers who should retire with their full benefits, as it is the case with permanent secretaries.
Besides, the major challenge faced by pension managers is the backlog of accrued rights owed by the Federal Government.
Pension is made up of the accrued rights, which is the service rendered by policemen to the Federal Government from the time they enrolled in the CPS in 2004 and only payable when the officer serves notice of retirement, and the contributions from both the employee and employer.
But because the accrued rights are huge, the illiquid Federal Government opted to pay in instalments every year.
But the snag is that unless that is received, the PFAs cannot pay the portion that is with them because the account has to be consolidated.
Right now, the accrued rights have not been paid in over 15 months, which means that no policeman that retired in almost two years has been paid pension. The government may find a way of paying the accrued rights of retired officers separately to mitigate the delay.
These issues, the stakeholders agree, should be addressed administratively by the government and the National Assembly is in a pole position to facilitate the process rather than legislating for the exit of the police from the CPS, a move that will destroy not only the thriving NPF Pensions Limited but also dismantle the entire contributory pension infrastructure and take Nigeria back to the impracticable Defined Benefits Scheme era.
