Pension Scandal In Nigeria: Its Impact On Public Fund Management

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Pension Scandal In Nigeria: Its Impact On Public Fund Management


Abstract


This project “pension scandal in Nigeria, its impact public fund management”. A case study of Nigeria pension commission. The objective of this study was generally set towards ascertaining the impact of pension scandals in public fund management. The research reviewed the literature works done by others authors in the process of this study. Data were collected through primary and secondary sources. Questionnaire, oral interview as well as journals respectively. However the following was discovered during the course of this study, that the new pension scheme is contributory; it de-emphasizes on lump-sum payment of gratuities, removes pension administration from the public sector and place it squarely in the hands of financial institutions. The conclusion is that the success of pension reforms largely depends on the sincerity, collaboration and commitment of all stakeholders like, government institutions who manage and administer contributions, individuals who pay and employers who recommends that a comprehensive accounting standard for retirement benefits must be put in place to adequately project pension funds.


Chapter One


Introduction

1.1 Background of the Study

Employee benefits are elements of remuneration given in addition to the various forms of cash pay. Pension is one indispensable form of employees’ solid benefits which has positive impact on employee discipline, loyalty and willingness to remain in the service of an employer, commitment to the attainment of job goals and concern for the survival of the organization.

An occupational pension scheme is an arrangement under which an employer provides pension for employees when they retire or gives deferred benefits to members who leave. It is a system designed to provide the employees of an organization with a means of securing on retirement a standard of living reasonably consistent with that which they enjoyed while in service.

Pension and related issues have received significant attention in many countries over the past decades. There are new changes in the way pension assets are managed and benefits are distributed to beneficiaries due to the difficulties associated with the pension schemes previously in existence.

Robolino (2009) notes that many countries have opted for different forms of contributory pension schemes, in which employees and their employers are expected to pay certain percentages of their monthly earnings to a Retirement Savings Account (RSA) from which they would be drawing their pension benefits after retirement. Pension reflects money withheld during the period of employment and returned with interest to an employee after cessation of work, that is, at retirement.

A retirement scheme is a way of providing an employee with either a lump sum of money when leaving the service of an employer or providing a pension to the employee. It provides benefits which can be regarded as compensation to an employee for the services rendered to the organization.

Over the years the management of pension scheme in Nigeria has been inundated by multiple and diverse problems such as inadequate funding, inadequate subventions and grants, poor documentation and filing in pension offices, direct release of pension funds to underwriters, accumulated arrears of pensioners, inability to determine appropriate investment portfolios, lack of accountability, corruption and embezzlement of funds. Others include cumbersome clearance procedures, incompetence and inexperience of pension staff added to poor human relations, lack of etiquette and simple courtesy.

This situation often affects employee loyalty and commitment to an organization negatively. There have been several reviews of pension schemes by the government which have also caused implementation problems. This paper examines the features, prospects and challenges of the new pension system in Nigeria as an important aspect of retirement planning almost a decade after its commencement.


1.2 Statement of Problem

Major problem of the pension fund administration in Nigeria was the non-payment or delay in the payment of pension and gratuity by the federal and state government for instance; the pension backlog was put at about N2.56 trillion as at December 2005. In-fact, pension fund administration became a thorny issue with millions of retried Nigerian worker living in object poverty and they were often neglected and not properly catered forafter retirement. The development of a viable and workable pension scheme in Nigeria has always been clamored not only by pensioners, but also by notable stakeholders and the general populace. This is the reason why the Government of Nigeria decided to adopt the structure of the Chilean-Styled Pension Scheme as a way of dealing with the challenges posed by the previously adopted defined benefit scheme.

According to Y. Demola (2008), this decision of the Federal Government of Nigeria has changed the funding structure of the pension scheme in the country from the usual Pay-As-You-Go (PAYG) to the Contributory Pension Scheme (CPS).The CPS came in force through the enactment of the Pension Reform Act (PRA) of 2004, which again was revised by the PRA, 2014 (Onyeonoru, Matthew & David, 2013; Adeniji, Akinnusi, Falola & Ohunakin, 2017). G. Mesike and A. Ibiwoye (2012) avers that the design of the CPS is such that the associated risk/burden of retirement financing was shifted from entirely that of the Government to that majorly of individuals. Experts believe that the CPS is presumably better than the old pension scheme, except for the incidence of fraud and mismanagement. No doubt, various models and pension scams have evolved over the years given the changes evident in pensions and their attendant schemes (The Pension Regulators, 2015). In fact, the argument has been that an insight into the pension affairs of some Ministries, Departments, and Agencies (MDAs) clearly indicates the evidence of the pension fraud that has negatively affected the success of the CPS. The perpetrators of such pension frauds are partly the management, upon whom such funds have been entrusted. Their motivation for indulging in a pension scam may not be different from the same motivation identified with the other forms of frauds. K. Tasker (2012) observes that pension fraudsters feel that they have a need which is either a real financial need or a perceived need, such as a desire for material goods. While fraud and/or pension scams continue with a varying and alarming magnitude, it is believed that, if uncontrolled, their effect on the overall success of the CPS will be detrimental. It is on the basis of the said that this study attempts to address the issues of pension fraud and how the strategic management of pension funds and possible fraud reduction could guarantee a viable and formidable scheme in the country. Employee benefits are elements of remuneration given in addition to the various forms of cash pay.

Pension is one indispensable form of employees’ solid benefits which has positive impact on employee discipline, loyalty and willingness to remain in the service of an employer, commitment to the attainment of job goals and concern for the survival of the organization. An occupational pension scheme is an arrangement under which an employer provides pension for employees when they retire or gives deferred benefits to members who leave. It is a system designed to provide the employees of an organization with a means of securing on retirement a standard of living reasonably consistent with that which they enjoyed while in service. Pension and related issues have received significant attention in many countries over the past decades. There are new changes in the way pension assets are managed and benefits are distributed to beneficiaries due to the difficulties associated with the pension schemes previously in existence. Robolino (2006) notes that many countries have opted for different forms of contributory pension schemes, in which employees and their employers are expected to pay certain percentages of their monthly earnings to a Retirement Savings Account (RSA) from which they would be drawing their pension benefits after retirement. Pension reflects money withheld during the period of employment and returned with interest to an employee after cessation of work, that is, at retirement. A retirement scheme is a way of providing an employee with either a lump sum of money when leaving the service of an employer or providing a pension to the employee. It provides benefits which can be regarded as compensation to an employee for the services rendered to the organization. Over the years the management of pension scheme in Nigeria has been inundated by multiple and diverse problems such as inadequate funding, inadequate subventions and grants, poor documentation and filing in pension offices, direct release of pension funds to underwriters, accumulated arrears of pensioners, inability to determine appropriate investment portfolios, lack of accountability, corruption and embezzlement of funds. Others include cumbersome clearance procedures, incompetence and inexperience of pension staff added to poor human relations, lack of etiquette and simple courtesy. This situation often affects employee loyalty and commitment to an organization negatively.

There have been several reviews of pension schemes by the government which have also caused implementation problems. This paper examines the features, prospects and challenges of the new pension system in Nigeria as an important aspect of retirement planning almost a decade after its commencement. Sadly, retirees went through tough times and rigorous processes before they were eventually paid their pensions, gratuity and other retirement benefits. At one time the money to pay their benefits is not available and at another time, the pension fund administrators were not there to meet the retiree’s needs.Basically, the old scheme has been beset with a lot of challenges and problems. Besides the information, other problems were; demographic challenges and finding of outstanding pensions and gratuities, merging of service for the purpose of computing retirement benefits. These problems coupled with the administrative bottlenecks, bureaucracies, corrupt tendencies and inefficiencies of the civil service and the economic downturn have resulted in erratic and the nonpayment of terminal benefits as at when due ((Okpaise O. 2009: Ezeala, 2007 Abade, 2004). Other problems were; gross abuse of pensioners and pension fund benefits which were politically motivated in some cases.


1.3 Objective of the Study

This research work is generally set towards ascertaining the impact of pension scandal in public fund and management .furthermore, the study is;

  1. To examine on how to detect and control pension scandal in Nigerian pension system.
  2. To find out if there is any fraud in Nigeria pension system.
  3. To examine if there is any effect of pension scandal in Nigerian pension system.
  4. To recommend solutions that may help in checking pension scandal in Nigerian pension system.
  5. To identify the problem the country face as a result of Nigerian pension scandal.

1.4 Research Questions

The following question are the research questions

  1. Whether pension scandals, can be detected and controlled in Nigeria?
  2. Is there any fraud in Nigeria pension system?
  3. Is there any effect of pension scandals in Nigeria pension system?
  4. Is there any solution to pension scandals in Nigeria?
  5. Has the pension scandal in the country helped to impede problems towards economic failure?

1.5 Research Hypotheses

  1. H0: pension scandal cannot be control in Nigerian pension system
    H1: pension scandal can be control in Nigerian pension system
  2. H02: pension scandal in the country has not helped to impede problems towards economic failure
    H2: pension scandal in the country has helped to impede problems towards economic failure

1.6 Significance of the Study

This study is intended to highlight the indispensable impact of pension scandal in Nigerian pension system.

This project will equally to be of immense help to other establishments and organisation both in public and private sector. The dive need to establish a visible of control as a means of controlling Nigerian pension system should not be over-emphasised.

This research work will be useful to the management of Nigerian pension scheme which they are to use the findings of this research to equip the audit department. This department being the watch – dog of the scheme should be given more power to operate.

Government agencies can install adequate internal control measures to avert the incessant scandals and fraud rampant in financial houses, ministries and parastals today.


1.7 Scope and Limitation of the Study

This research work is restricted Nigeria life and pension commission Akaraka house New Haven Enugu, Enugu.

a) Availability of Research Material:

The research material available to the researcher is insufficient, thereby limiting the study

b) Time:

The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

c) Organizational Privacy:

Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities


1.8 Operational Definition of Terms

Pension

A pension is a fund into which a sum of money is added during an employee’s employment years, and from which payments are drawn to support the person’s retirement from work in the form of periodic payments

Public Fund

Public fund refers to the funds of every political division of a state wherein taxes are levied for public purposes.

Financial Mismanagement

Financial mismanagement is management that, deliberately or not, is handled in a way that can be characterized as “wrong, bad, careless, inefficient or incompetent” and that will reflect negatively upon the financial standing of a business or individual


1.9 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows

  • Chapter one is concern with the introduction, which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study.
  • Chapter two highlight the theoretical framework on which the study its based, thus the review of related literature.
  • Chapter three deals on the research design and methodology adopted in the study.
  • Chapter four concentrate on the data collection and analysis and presentation of finding.
  • Chapter five gives summary, conclusion, and recommendations made of the study.

Chapter Five


Summary Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was on assessing pension scandal in Nigeria and its impact on public fund management.

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of pension scandal in Nigeria.


5.2 Summary

After the review of various literature and analysis of data generated for the purpose of inference, the study arrived at certain fundamental findings on the effects of the implementation of pension scandal in Nigeria, and suggestions were made that, some levels of success have being made, but there are certain lapses present in the system that hinders the effective implementation of the scheme. such as non-compliance by organizations termed as employers of labor in the remittance of monthly pension contribution, delay in the submission of retirees‘ files, withholding of pension funds by some authorities, and failure to give the PFT a free latitude to operate.


5.3 Conclusion

The study of the anatomy of pension scandal in Nigeria x-rays the concept of pension and pension fraud/scam and analyzes the various fraud schemes perpetrated against the pension scheme in Nigeria. The efforts were devoted to finding probable reasons for such fraudulent schemes and the manners in which pension fraud could be curtailed through the effective management of pension funds. By adopting the survey design, the data obtained were accordingly subjected to analysis and the results were very revealing. From the analyzed data and the reviewed literature, it was observed that the existing pension schemes in Nigeria may not have proven to be successful due tothe rampant and alarming cases of pension fraud that have remained non-grasped to date. The outcome of this study has thus contributed to knowledge by proving that fraud has consistently remained a bottleneck to efficiency in the management of pension funds in Nigeria. Most importantly, it was observed that, despite the much canvassed efforts of several Nigerian Governments in reforming the pension schemes and their subsequent revisions in the country, the provisions of the current PRA may not have significantly reduced the intent/motive for fraud in the management/administration of pensions in Nigeria. Sadly, public officials engaged by the Federal Government to fight pension fraud in the process have grossly involved themselves in various pension scams involving billions of naira. The situation is consequent upon the fact that the anti-fraud measures/provisions stipulated in Nigeria’s PRA are not strong enough to reduce an increasing and incessant level of pension fraud in the country.


5.4 Recommendations

The following recommendations have been put forth:

Additional provisions and subsequent revisions must urgently be added and made, respectively, to the existing PRA. Such provisions and/or revisions must specifically be tailored for the purpose of reducing to a significant extent the opportunities and drivers of pension frauds by instituting severe punitive measures for culprits. The provisions should also be able to reduce to a significant extent the intent for committing pension fraud, while simultaneously inculcating moral ethics among public servants in Nigeria.

Administrators (PF.Admins) and Custodians (PF.Custods) tasked with the management of pension funds are thus encouraged to be rational investors in their investment decisions concerning PFAs by investing in different portfolios that are worthwhile to invest in, as an adequate diversification of PFAs into profitable investment opportunities will minimize the risk of PFAs exposure to fraud.

Since the current anti-fraud measures have not successfully reduced pension fraud to a significant extent, it is thus suggested that PENCOM should again recommend the National Assembly to pass into law the implementation of additional anti-fraud punitive measures, such as life imprisonment, outright killing, the permanent denial/refusal of the right to any political position and permanent banishing from oversea vacations and travelling, as these will bring about fraud reduction and will also serve as a deterrent against potential pension fraudsters.


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