Nigeria: Nothing Wrong in States Borrowing From Pension Funds – Fayemi

The Ekiti State governor explained that the funds would be used for the creation of revenue-generating infrastructure projects

Governor Kayode Fayemi of Ekiti State on Sunday said there is nothing wrong in borrowing N17 trillion, partly from the pension funds, to enable the government provide infrastructure across states.

He explained that the funds would be used for the creation of revenue-generating infrastructure projects.

Mr Fayemi who spoke in his capacity as the chairman of the Nigeria Governors Forum (NGF), said this when he appeared on a Channels Television programme, Politics Sunday.

“There is nothing wrong and we are not going to be apologetic that we want to borrow to fund infrastructure. We are not borrowing for consumption and the various projects that are going to be allowed to access these funds are going to be determined by the committee that we set up at the National Economic Council NEC,” he said.

The NGF chairman was reacting to a statement by the forum that it proposed to borrow about N17 trillion from two sources intended for infrastructural developments.

The 36 state governors had agreed last week to borrow N2 trillion at nine per cent interest from the growing funds under the Contributory Pension Scheme, as well as accessing N15 trillion for national infrastructure funding through InfraCredit at a lower interest rate of five percent.

However, reacting to the development, members of the Nigeria Union of Pensioners (NUP) and other groups have kicked against the plan of the state governors to borrow from the pension fund, stating that they have no authority over the money.

The Socio-Economic Rights and Accountability Project (SERAP) also in an open letter on Sunday urged the President, Muhammadu Buhari to use his “good office and leadership position to urgently instruct the Director-General and Board of the National Pension Commission [NPC] to use their statutory powers to stop the 36 state governors from borrowing and/or withdrawing N17 trillion from the pension funds purportedly for infrastructural development.”

But Mr Fayemi on Sunday, while insisting the governors could access the funds, said there is an urgent need for the country to increase infrastructural developments, by sourcing alternative means beyond the budget.

He also said it was insufficient for the economy of the country to construct 120 kilometres of road from Lagos to Ibadan for about 10 years, compared to another African country like Egypt that constructed 4,800 kilometres of road in five years.

Speaking further, the governor said Nigeria is no longer as rich as it used to be.

“In the 2021 budget appropriation act, the ministry that has the highest allocation is the Ministry of Works and Housing with about over N400 billion, which is equivalent to less than $1 billion today.

“Between 2014 and 2019, Egypt for instance, constructed about 4,800 kilometres of road and spent in the middle of about $10 billion and the bulk of that came from the private sector.

“As we (governors) said, the way to go is to look at options that would enable us to undertake infrastructure development by accessing funding from the private sector. One such private sector funding is the pension fund which is sitting in various pension finance administrators and this money is already being borrowed by other elements.”

Asked by the anchor about critics who have expressed concerns over the governors borrowing, especially about fiscal responsibility and accountability, he described such fears as “misplaced” noting that it is not something that should be bothered about.

“There is also no doubt that there is a basis for a cost of governance reduction, that is not in doubt. But if you want a government that you have elected into office to provide amenities that are in need by the citizens, you certainly do not expect these governors to use private funds or personal funds to do these things.

“We are going to look for creative ways to ensure that they meet the demands of the populace. And what are those ways; multilateral findings, if you have a good relationship with the World Bank, Africa Development Bank, Islamic Development Bank, in terms of developing financing and another private sector borrowing

“In itself, it does not distract from fulfilling the conditions of the Fiscal Responsibility act, because the Debt Management Office will not even allow some states that are distressed to access private or external borrowing if they have gone beyond the threshold given to them as states.

“So that fear is misplaced and it is not something that we should bother ourselves with. The bottom line is that Nigeria is not the rich country we make it out to be, either at the federal level or the state level, we do not have enough resources to run the country. We are also challenged in fulfilling the promises made to the people

“Not because states don’t want to do it, not the federal government, but the resources are not necessarily there. That is why we have to look for means of making the resources available. Many of the projects that we are talking about are projects that would refer to as revenue-generating infrastructure

“Roads that could be tolled, telecom projects, infrastructure manpower, water projects. So these are things that are necessary for infrastructure for us to improve our development indices, so borrowing isn’t necessarily a bad thing in that effect.”