In a decisive move to address longstanding pension arrears, the Federal Government has announced plans to issue a N758 billion bond aimed at settling outstanding liabilities under the old defined benefit pension scheme. This initiative, approved during the Federal Executive Council (FEC) meeting on Tuesday, underscores the administration’s commitment to the welfare of its retirees.
A Commitment to Pensioners
Minister of Finance and Coordinating Minister of the Economy, Wale Edun, conveyed the government’s resolve to honor its obligations to pensioners. “This liability built up to a point where it was not going to be easy to pay them down on an ongoing basis,” Edun stated. “To clean up that important area and to give people their right, which is payment of the pension liabilities as and when due, the government has put in place approval for the Debt Management Office to raise N758 billion to pay down all these liabilities, which will of course be a tremendous relief to the beneficiaries.”
The defined benefit system, which predates the contributory pension scheme introduced in 2004 and updated in 2014, has accumulated significant liabilities over time. Edun explained that individuals under this scheme require adjustments to their pensions with each wage increase, typically occurring every five years, leading to substantial accrued liabilities.
Addressing the Backlog
The government’s plan to issue the bond is a strategic move to clear these accumulated debts. By raising funds through the Debt Management Office, the administration aims to provide immediate relief to pensioners who have been awaiting their rightful payments. This approach not only addresses the current backlog but also sets a precedent for proactive financial management concerning pension obligations.
A Broader Financial Strategy
In addition to the bond issuance, the FEC approved a €30 million long-term concessional financing agreement with the French Development Agency. This funding is designated to support student accommodation projects across the country, in partnership with Family Homes Limited. Edun highlighted the significance of this initiative, stating, “We all know what an important intervention that is for the educational sector and for students, given the shortage.”
Furthermore, the council greenlit the National Single Window Project, aimed at enhancing economic competitiveness and streamlining export processes. The project encompasses the implementation of advanced technology solutions, with certain aspects expected to be completed within 12 months and full implementation, including software solutions, anticipated within 24 months.
A History of Pension Challenges
The issue of unpaid pension arrears has been a persistent challenge for the Nigerian government. In November 2024, the Federal Government released about 25% of the N88 billion budgeted for pension arrears, following protests by retirees in Abuja. At that time, Edun assured pensioners of the government’s commitment to settling the remaining arrears by the end of the year, acknowledging the backlog that had accumulated under the old system. He emphasized the need for a sustainable solution, indicating plans to raise funds through the capital market to clear the backlog entirely.
Looking Ahead
The issuance of the N758 billion bond represents a significant step toward fulfilling the government’s obligations to its retirees. By addressing the pension backlog, the administration not only alleviates the financial hardships faced by former public servants but also reinforces its dedication to fiscal responsibility and social welfare.
As the government moves forward with these initiatives, the focus remains on implementing sustainable solutions that prevent the recurrence of such backlogs. The collaboration with international partners and the adoption of technological advancements signal a forward-thinking approach to governance and economic management.
