The NSITF at 10
By Dare Okikiola
FOR close watchers of the Nigerian Social Insurance Trust Fund (NSITF), I am sure they will agree with me that since it began operation in 1994 it has come a long way. It is still on its journey to become a social security outfit. Critics had thought it would fail the way the National Provident Fund (NPF) its predecessor did not live up to expectation.
Currently, under the leadership of Alhaji Ahmed Rufai Mohammed, the NSITF has within the 10 years of its operation set up a successful and radical social security programme for the country specifically targeted at those working in the private sector of the Nigerian economy. Apart from able leadership which has placed the Fund on a sound pedestal, a remarkable area in which it has recorded tremendous success with the 10 years of its operation is its ability to totally ignore those obstacles, hinderances and criticisms that trailed the defunct NPF.
One of the major criticisms of the defunct NPF was the meagre benefits paid to claimants. Unlike the NPF, which was merely a savings scheme that provided for lump sum payments of what was contributed plus a fixed interest as benefits, the NSITF scheme pays grants and monthly pensions as benefits. There are seven types of benefits which members of the scheme are entitled to apply for subject to satisfying the qualifying conditions. The benefits are: Invalidity Pension, Invalidity Grant, Retirement Pension, Retirement Grant, Survivors Pension, Survivors Grant and Funeral Grant. Benefit claims are paid by the NSITF through its branch offices nation-wide. It is important to emphasise that payment of benefits is considered top priority by the management. In fact, all the branch offices are under strict instructions to ensure that claims are processed and paid within two weeks of receipt, and in the event of a detected fault in a claim, to advise the claimant within the same, if not a shorter period.
Furthermore, efforts have been intensified to ensure that contributors to the scheme get real value and enhanced benefits at the end of their active service in paid employment. In striving to achieve this and in line with the dictates of the law that established the Fund, the NSITF Management commenced the payment of 80 per cent of the National Minimum Wage in November 2002. The implication is that the minimum pension payable to a beneficiary is N4,400.00 every month. This is in addition to the lump sum of N105,600.00 which is also paid as a grant. This increment has been a source of great relief to qualified claimants as evidenced in their testimonies nationwide.
In the area of growth and benefits payments, the total amount of benefits paid to claimants during the period 1962 to 1993 was N118.08 million whilst the sum of N662.18 million was paid from 1994 to March 2004. This showed a substantial appreciation of N544.10 million or 460.79 per cent over the figures of the NPF era. The total number of claimants paid was 454,541 during the period 1962 to 1993 whilst 61,762 claimants were paid from 1994 to March 2004. Though the number of claimants paid from 1994 to March 2004 appears fewer, the average claim paid rose significantly from N259.77 in the NPF era to N10,721.50 under the NSITF Scheme. As part of the improved service delivery, the processing of applications and payment of benefit claims through banks is completed within two weeks.
Prior to the promulgation of the NSITF Act, the provisions of the Trustee Investments Act regulated the investment policy of the defunct NPF. The investment portfolio was then dominated by financial securities that have extremely low yield. Over 80 per cent of the investments were in the Federal Republic of Nigeria stocks, which generated abysmally low returns in the average of six per cent per annum. Also, the returns from investments in fixed interest loan stocks were equally low and lacked the desired secondary market. Under the NSITF, investment restriction was relaxed and the Funds investment horizon widened.
The NSITF is an institutional investor and a major player in the capital and money markets of the economy. In order to properly regulate its investment operations, the Management has put in place guidelines and criteria for all minimum risk exposure. This has propelled the Fund to play a crucial and very active role in the Nigerian money and capital markets and has contributed immensely in the development of the nation's financial system and the overall economy.
A sound investment policy is considered necessary for the Fund to be able to build a viable investment portfolio capable of generating enough income to offset operating expenditure and pay robust benefits. The basic principles that guide investment in the Fund include safety, liquidity, yield, diversity and socio-economic utility. Paramount amongst these parameters is safety, that is, the certainty of recovering the funds invested and the associated returns. The Fund's investments in the Capital Market are spread widely in the following sectors: conglomerate, banking, food beverage and tobacco, building materials, petroleum marketing, automobile and tyre, breweries, chemicals and paints, agriculture and agro-allied, textile, etc.
It would equally interest NSITF critics to know that the cost of the investment portfolio of the Fund as at 31st March 2004 stood at N32.11 billion while the market value was N33.62 billion. Also, a total of N1.342 billion was realised as investment income between 1962 and June 1994, whilst a total of N8.056 billion was realised between July 1994 and March 2004. This represents a significant increase of N6.714 billion of 500.30 per cent when compared with the pre-NSITF era. As part of NSITF achievement, its management has since focussed on the transformation of the Fund into an effective and efficient customer-service organisation. To achieve this, a greater emphasis has been placed on enhancing the speed of its product delivery, providing greater value and excellent services to its stakeholders and claimants. This was achieved by expanding the frontiers of compliance coverage to the organised private sector and striving for higher returns on its performing investment portfolio.
It is interesting to know that compliance remains the centre of the Fund's operation of not just aggressively mobilising new members to join the scheme but ensuring that existing members and their employers effectively meet their financial obligations that are essential for the operations of the Fund. In the area of employer registration, during the period, 1962 - June 1994 (NPF era) a total of 20,410 employers were registered into the scheme whilst a total of 20,449 employers were registered into the NSITF scheme from July 1994 - March 2004. Analysis showed that registered employers grew by 100.19 per cent from July 1994-March 2004. A total of 2,839,153 employees were registered from 1962-June 1994 (the NPF era) whilst a total of 1,412,217 employees were registered from July 1994-March 2004. Employee registration increased by 49.74 per cent from July 1994-March 2004.
The total contributions collected from 1962-June 1994 was N923,329,329.53. Contribution collected increased tremendously to N33,887,468,144.62 from July 1994-March 2004, notwithstanding the harsh socio-economic environment that was prevalent in the country during the period under review. Contribution collected from July 1994-March 2004 witnessed an appreciable growth rate of 3,670.05 per cent. Nonetheless, the challenge of providing a comprehensive social security to Nigerians is still immense. The Fund should be structured to meet these challenges especially in the light of Pension Reforms being debated at the present.
Okikiola lives in Lagos.
