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Nigerian Government Borrows 72% of Pension Funds

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This is a surprising discovery: the federal government of Nigeria has borrowed 72% of pension funds, and then invested the funds in government securities. With government securities (read treasury bills and bonds) returning dem-go-dey-pose returns, those funds will not even beat inflation. We have a long way to go in Nigeria. This investment can be permanent which means these pensioners may get into a loop where government becomes unable to return the funds. Also, the private-sector capital markets will miss the liquidity which the pension funds could have injected into the markets. Government taking this lot means stocks of private companies will lose.

The total pension assets under the Contributory Pension Scheme rose to N8.49tn as of the end of November 2018 financial period, latest figures obtained from the National Pension Commission on Tuesday revealed.

The pension commission said 72.5 per cent of the fund had been borrowed by the Federal Government and invested in the FGN securities totalling N6.16tn during the period under review.

Meanwhile, as pensioners worry, there is relief for small companies on taxes via the Finance Act, 2019 which the president signed into law.

The new Finance Act exempts Businesses with turnover below 25 million from VAT payments. Companies Income Tax (CIT) — under the new law small companies – companies with less than N25 million in annual turnover are charged Zero CIT. “CIT for Companies with revenues between N25 and N100 million (described in the Act as “medium-sized” companies) has been reduced from 30 per cent to 20 per cent. “Large companies with an annual turnover greater than N100 million will continue to pay the standard 30 per cent CIT.