NSITF potentials for effective social security delivery, economic growth in Nigeria

Preamble The Bola Tinubu-led government has growth in Small, Medium and Large Enterprises (SMLE) as one of its key agendas. This requires that all aspects of workers’ welfare be prioritized, since motivated workers are likely to be more productive and drive higher economic growth. Therefore, emphasis on growth opportunities in SMLE(s), by the present government, […]

Preamble

The Bola Tinubu-led government has growth in Small, Medium and Large Enterprises (SMLE) as one of its key agendas. This requires that all aspects of workers’ welfare be prioritized, since motivated workers are likely to be more productive and drive higher economic growth. Therefore, emphasis on growth opportunities in SMLE(s), by the present government, is a step in the right direction towards the overall growth of the Nigerian economy, and central to its economic agenda.

One of the agencies through which government discharges its social responsibilities to Nigerians is the Nigeria Social Insurance Trust Fund (NSITF). The agency is currently charged with the responsibility of social security protection of workers against occupational hazards in a limited social security program currently being administered. However, only a nominal fraction of employed Nigerian workers are covered by the scheme, particularly in view of the spate of accidents involving building collapses, construction, factory and road accidents, which account for the high rate of work-related hazards.

The bad publicity of the staggering number of injuries and deaths of foreign workers in the course of constructing the stadia for the Qatar 2022 FIFA World Cup illustrates and underscores the crucial role of a social security scheme like the NSITF in compensating employees who suffer work-related mishaps. Nigerians working in high-risk foreign or local businesses must be protected under the NSITF Employee Compensation Scheme. From the foregoing, it is apparent that one cannot overstate the need to reposition the NSITF.

Background:

The NSITF was established in 1961, then known as the National Provident Fund (NPF). It was established with a mandate to cater for non-pensionable employees, including those working in the Federal Government’s employ as casuals. Initially, it was a Savings Scheme based on defined contributions. It was a bipartite contribution of four naira (N4.00) each from both employer and employee. The realized total sum of N8 was then, remitted to the National Provident Fund monthly. At retirement, a lump payment comprising the entire credit months, is made to the beneficiary with accrued interest.

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Over time, inflationary trends made such payments paltry as it was not revised to reflect its current inflation-adjusted equivalent. In addition, problems associated with poor record keeping and non-digitization of same, resulted in a review of the scheme by the Gen. Ibrahim Babangida-led military junta. Accordingly, in 1994, the government, in collaboration with the International Labour Organization (ILO), and on its advice, reviewed the scheme’s organizational structure, contribution rates and modus operandi to transform it from a Provident Fund to a Trust Fund providing limited social insurance benefits to employees in the private sector, based on the defined benefit concept.

That scheme lasted for a period of ten years from 1994 to 2004 when the Pension Reforms of the former President Olusegun Obasanjo regime was introduced. The Pension Reform Act, 2004 (PRA) mandated NSITF to transfer all pension assets in its custody to a Pension Fund Administrator (PFA) and focus on providing other social security services which were mostly undefined. The reform sought to separate pensions from other social security benefits in conformity with the ILO Convention 102 of 1952: Social Security [Minimum Standard] (herein after called “the Convention”) with nine (9) prongs of social security.

Pursuant to the Person Reform Act, 2004, NSITF established a Pension Fund Administrator (PFA) and successfully transferred pension assets it held prior to the PRA 2004 in excess of N64bn to cover established liabilities of less than N55bn. From 2004, NSITF focused on realizing the mandate to provide other non-pension Social Security services culminating in the enactment of the Employees Compensation Act 2010 (Work Injury Scheme), which has its objectives as:

Efficient system to adequately compensate employees or their dependants for work-related accidents; Rehabilitation of employees with work-related disabilities.

Establishment and maintenance of a solvent Compensation Fund for employees and employers.

An efficient appeal procedure.

Combining of efforts and resources by relevant stakeholders to prevent workplace injuries, and enforcement of occupational safety and health standards.

NSITF and the commercialization programme of the Babangida regime

The Privatization and Commercialization Act No. 25 of 1988 provides the legal framework under which NSITF, formerly National Provident Fund (NPF), was transformed from being a department under the Ministry of Labour to a partly commercialized corporate institution with legally defined powers, board and management structure. The Nigeria Social Insurance Trust Fund Act No. 73 of 1993 was enacted to give full effect to recommendations of the Technical Committee on Privatization and Commercialization (TCPC) as regards NSITF. The report of the TCPC titled ‘Framework for Commercialization’ (hereinafter referred to as the REPORT), in summary, captures how NSTIF was to be managed and operated thereafter.

Paragraph 18 on page 11 of the REPORT highlighted and addressed certain issues common to commercialized enterprises, such as; Redefining the role, and procedure for the appointment and removal of the supervising ministry, Board of Directors, and management staff, (see page 15, paragraph 25 of the Report); Determination of conditions of service of staff, (see page 16, paragraph 28 of the Report); Tariffs, Budgeting and Budgetary Control, Financial Autonomy and Accountability.

Further, paragraphs 19 on page 12 of the report linked interference in the operational decisions by supervising ministers to the failure of the enterprises. Government accepted the recommendation of the TCPC on the issue and redefined the role of the supervisory ministries to remove any interference by ministry officials in the day-to-day management of the enterprises.

The government redefined and limited the roles of the supervising ministries to: –

Constitutional responsibility for sector policy formulation and determination of broad strategic direction.

Interfacing with the National Assembly for Budget and Policy matters.

Performing the role of shareholder of government holding in areas such as appointment of Directors and top management.

The report further addressed the issue of limited and undefined roles of Board of Directors by defining and broadening its roles, (see page 13 paragraph 21 and also page 15 of the REPORT for more).

Recommendations

As the premier Social Security institution in Nigeria, NSITF should have matured into a provider of benefits under the several branches of social security contained in the Convention, rather than being the manager of just one branch, the Employees’ Compensation (work injury) Scheme that it is responsible for today. But this cannot happen if NSITF remains on its current trajectory. Putting NSITF on the path of stability to focus on providing the services it is meant to provide would require taking the following steps:

a)  Amend the Employee’s Compensation Act together with the NSITF Act to separate the custody of Funds from the managers of the Fund akin to what obtains under the Pension Reform Act where funds are accessed under stiff conditions. Mismanagement of funds has been the bane of the NSITF despite repeated changes in management;

b)  Reduction of overhead cost incurred in the running of NSITF, and the prioritization of payment of benefits to qualified beneficiaries and their dependants, which is the raison-d’être of the scheme instead of awarding expenditures that do not add value to the scheme being administered by NSITF”;

c)  Premium should be placed on qualification, experience and suitability in appointing the Board and Executive Management to tackle the issue of mismanagement and the repeated changes of the Executive Management, which now typifies the NSITF and portrays it as an unstable institution that has veered off its mandate;

d) Institute an annual general meeting of all stakeholders at which the Board and Management of the NSITF will render account of their stewardship.

e) Check the unrestrained and endless recruitment of staff, especially at management level. The organization will do better if individuals with capacity and knowledge of global practices are more in the management cadre in order to reduce wastes and operational shortcomings. More entry-level staff are needed to cover the field.

f)  Government should fully bear the cost of administration including the payment of staff salary. This would reduce the penchant for wanton recruitment of staff. Only then can staff welfare be properly addressed in a manner commensurate with available resources.  The tripartite nature of NSIFT (Employers, Employees and Government) justifies this recommendation as every partner ought to bring something to the table.

g) Speedily resolve the lingering issue of pension review of retired staff of NSITF under the defunct defined benefit scheme. Pensioners in this category are few and their number constantly diminishing by the natural process of mortality. It is a dent on the image of NSITF, a provider of Social Security to workers, if its retired staff are shut out of its benefits;

h) Determine the optimum level of staffing required by the Fund and work towards attaining it.

Mr Ibrahim Wakawa is a legal practitioner, a former Board Secretary/Legal Adviser and one-time Executive Director, NSITF.