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PENSION REFORM ACT IN NIGERIA (A CASE STUDY OF NIGERIAN PETROLEUM DEVELOPMENT COMPANY LIMITED)

CHAPTER ONE

1.0  INTRODUCTION

Over the years government has been grappling with the administration of bloated workforce and the attendant workers welfare. Various methods had been applied and all seemed to have failed. The 1979 Pension Act of the Federal Republic of Nigeria puts the retirement age of workers at either the attainment of 60 years of age or 35 years in service, which ever is earlier. The Act also spelt out the criteria for qualification of gratuity and pension on a voluntary retirement from service at attainment of minimum of ten years for gratuity only and attainment of twenty years in service for both gratuity and pension. However, a volunteer could only draw his/her pension on attainment of 45 years of age. That is, if he/she retired at an earlier date than the 45 anniversary of his birthday.

By this Act, a worker who worked for 35 years or attained 60 years of age had to compulsory retire from the service. No longer had the enactment of this Act than workers started to change their employments records relating to age and date of entry into the service. This caused a lot of concern and another problem to the Government. Consequently, the Military Administration under Buhari in 1984 embarked on a massive purge in the civil service with a view to rejuvenating the system. This purge coupled with that of the 1975 reforms saw the government carrying a large number of pensioners.

The attendant criticism and outcry of the masses forced the government to look again into the policy of retirement and pension. It was discovered that people do not want to leave the civil until they served at least ten years when they would be qualified for payment of gratuity and twenty years for pension. Realizing this, the government under the Administration of Babaginda in 1990 reduced the qualifying years of gratuity and pension from 10 and 20 years respectively to 5 and 10 years.

The purpose of this policy was to motivate those young people who would want to seek alternative career outside the civil service to go out while they are still energetic and useful. People retired as a result of this reform further broadened the number of retirees in system. The unemployment and other harsh economic factor made so many people to ignore the five years terminal point for gratuity but dragged on until ten years to qualify for both gratuity and pension.

Consequently, the policy did not achieve its objective instead resulted in grossed inefficiency and indiscipline in the whole system. At this time ii became increasingly difficult for the government to pay both the servicing and the retired workers, hence there was backlog of debts owed to both categories of workers. The situation became very bad during the administration of Late Sani Abacha. The government then seemed to have forgotten every thing about the payment of workers salaries/pensions. Hardship and suffering prevailed and pervaded the entire socio-economic life of the people. There was outcry every nook and cranny of the society. Sophisticated and heinous crimes were reported every where. Of course this had not daunted the government to listen to the people.

1.2 STATEMENT OF THE PROBLEM

No sooner the Pension Reforms Act 2004 was signed into law by the President than the entire NPDC work force experienced general apprehension and low morale. Staff were generally seen in small groups discussing their fates in line with the new law. In fact in the first six months of the Act more than eight percent of the staff population put in letters of resignation. The in house Labour Unions were pressurized by staff to take action. Despite constant reassurance by the Management that the Act would not affect staff negatively, the apathy and apprehension persisted. The feeling was that hitherto, when pension and gratuity had been administered by NNPC authorities there had been no administrative failure and payment of pension and gratuity were promptly made. Jettisoning the administration and pension staff pension to government appointed administrators would result in the general failure experienced presently by other government Ministries and other agencies.

Another point critically viewed by the generality of staff was the purported N5,000,000.000.00 deposit required by a firm to qualify as an administrator. This became a cause for concern as the present NNPC Pension Trust has more than N500,000,000,000.00 both in assets and investments. Is it rational to use N5,000,000,000.008 as a collateral for over N500 billion?.

These and many other questions were the issues at stake.

1.3 OBJECTIVES OF THE STUDY

Pension administration and payment are critical issues of concern to both the employers and the employees. The representatives of the Labour Union and Employer Association hold pension matters tenaciously to their hearts. It is an issue that must be made known at the time of employment to enable the worker make up his mind and plans for future. It affects the commitment of employees in an organization.

In view of these, the objective of this work are:

i. to discover the effect of the New Pension Act on staff morale in

NPDC;

ii. to see whether the New Pension Act would increase efficiency and productivity in the system;

iii. to discover the effect of the Act on corruption in Government establishments which were hitherto operated non-contributory and self administration of their Pension fund.

1.4 HYPOTHESES OF THE STUDY

In order to achieve the above, the following hypotheses are drawn for this work:

i. the implementation of the New Pension Act would bring untold hardship to NPDC staff

ii. the implementation of the new Pension Act in NPDC would lower staff morale and result in general inefficiency

iii. Staff would engage in malpractices and corruption to provide for future uncertainties of their retirement age

1.5 SIGNIFICANCE OF THIS STUDY

This study, though an academic exercise is carried out with a view to x-raying the effect of the implementation of the New Pension Act on corruption in Government Establishments. Based on the findings, Management of NPDC would be advised on the possible effect on the organizational efficiency that could arise from the implementation of the New Pension Act 2004. The findings of this work would also contribute to the literature in the area of Pension administration in Nigeria.

1.6 THE SCOPE OF THE STUDY

The new Pension Reforms Act 2005 is designed for the entire workforce in Nigeria; both public and private. However, it is impossible for the researcher to carry out an extensive investigation among the generality of workers in the country. Furthermore, the feeling of NPDC staff arising from the promulgation of the new law might not have been the same with those from other organizations that suffered untold hardship in receiving their pensions payment in the past. Consequently, therefore this work would be carried out among the staff of NNPC and its subsidiary companies which NPDC is one. The findings would equally be generalized among the NNPC staff only.

1.7 LIMITATION OF THE STUDY

Specifically, the limitation of this work are as follows:

i. Difficulty in obtaining official documents for examination

ii. Non availability of related documents; for example, related documents in most internet website could not be assessed or downloaded by the readers in countries outside UK and USA

iii. Non cooperative attitude of both respondents and documents owners; for the fear of being quoted.

iv. It is also difficult to generalize the external validity of this work since it is a case study of an organization.

1.8 DEFINITION TERMS

The topic of this work is: “THE EFFECTS OF THE NEW PENSION ACT 2004 ON CORRUPTION [N THE GOVERNMENT ESTABLISHMENT: A CASE STUDY OF NPDC”

Two key words in this topic are “The New Pension Reforms Act 2004” and “Corruption” and are therefore defined as follows:

1.8.1 TILE NEW PENSION ACT 2004

The new pension Act 2004 as the named implied is a new a law on pension passed by the National Assembly and accented to by the President of the Federal Republic of Nigeria in 2004. The law replaces all other pension laws in Nigeria. The law for the first time in the history of the country harmonized the various existing pensions scheme and established i contributory Pension Scheme for both the public and private sectors workers.

1.8.2 CORRUPTION

The word “corruption” is a noun form of the word “corrupt”. According to the Advanced Learner’s Dictionary, 6th edition, pg 261, it is defined as willingness of people to use their power to do dishonest or illegal things in return for money or an advantage. It is further defined as dishonest or immoral behaviour. Furthermore, corruption is illegal or dishonest behaviour especially of the people in authority. The act or effect of making things change from moral to immoral standing or behaviour.

1.9 METHODOLOGY

1.9.1 RESEARCH DESIGN

This section explains the basic methods and procedures that are to be used in gathering and analyzing data for this study. Basically, it deals with the following: Research Population, Instrument of data collection, technique of data presentation and analysis.

1.9.2 RESEARCH POPULATION

The staff of NPDC constitutes the research population for this work. Presently there are 313 staff in NPDC. None of the staff is affected by the exemption provisions of the Ad. Therefore, the researcher would use systematic random sampling technique to select I 00 staff which would form the research population for this work.

There are three categories of staff in NNPC viz: Junior staff, Senior Staff and Management staff Out of the 313 in the system there are thirty two (32) management staff, two hundred and forty three (243) senior staff and thirty eight (38), junior staff. Since 100 is almost 32% of313, 32% would be randomly selected from all the staff categories as follows:

i. Management Staff 32% of 32 10 persons

ii.Senior Staff 32% of 243 = 78 persons

iii Junior Staff 32% of 38 = 12 persons

TOTAL = 100 PERSONS

1.9.3 INSTRUMENTS OF DATA COLLECTION

Questionnaire would be used to obtain information from respondents.

The questionnaire would be in four (4) sections. Section A would seek to obtain personal Information on the respondents while sections B, C and D would contain the research questions in linker five (5) points scale.

1.9.4 TECHNIQUE OF DATA ANALYSIS

The data expected to be generated in this work would be ordinal in scale. This would be presented in percentage. The analysis would be done numerically and in percentages. Chi square would be used to test the strength of relationships of the variables.

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