A Review of the Nigerian Energy Industry

Severance: Why PHCN workers’ demand is untenable – Govt

Victor Ahiuma-Young

30 August 2012, Sweetcrude, LAGOS – FORMER Minister of Power, Professor Barth Nnaji, and government spokesperson in the negotiation with workers of Power Holding Company of Nigeria, PHCN, Dr. Timiebi Koripamo-Agary, have faulted demand by workers that 25 percent be used in computation of their severance benefits and pensions, saying it is not feasible.

Nnaji and Koripamo-Agary, who spoke at an interactive meeting with journalists in Lagos, said government would require a total of N443 billion representing an additional N299 billion from the N144 billion budgeted to offset the severance and pensions of workers in the power sector.

The ex-minister, who argued that the amount was outrageous, wondered where government would raise such amount to pay severance benefits and pensions of workers in only one sector of the economy.

He contended that the unions were demanding for the payment of workers’ gratuity up to June 30 2012, using their defunct scheme under their underfunded Superannuation Fund, stressing that this would amount to a breach of the provisions of the Pension Reform Act 2004.

According to him, “The Joint Senate Committee on Establishment and Public Service and States and Local Governments Public Hearing of 22nd May 2012 had directed that the serving employees of PHCN should open Retirement Savings
Accounts, RSAs with the Pension Fund Administrators, PFAs of their choice and further directed the Management to ensure urgent compliance and implementation of this directive.

“The Pensions Reform Act, 2004, Section 1 (1) states that the Act was “established for any employment in the Federal Republic of Nigeria, a Contributory Pension Scheme for payment of retirement benefits of employees to whom the scheme applies under the Act”.

Section 8 (1) & (2) of PRA 2004 provides for 2 specific exemptions, to wit:
“Any employee who at the time of the commencement of this Act is entitled to retirement benefit under any pension scheme existing before the commencement of this Act but has 3 or less years to retire” and “The categories of persons mentioned in section 291 of the Constitution of the Federal Republic of Nigeria 1999 which includes a Judicial Officer appointed to the Supreme Court or Court of Appeal; Any Judicial Officers other than those specified under Section 291 (1) of the Constitution of the Federal Republic of Nigeria, 1999.

Section 11 of the Pensions Reform Act, 2004 requires “every Employee to maintain a Retirement Savings Account in his name with any Pension Administrator of his choice” Section 101 of the Pensions Reform Act, 2004 states that, “if any other enactment or law relating to pensions is inconsistent with this Act, this act shall prevail”.

“The 1999 Constitution of the Federal Republic of Nigeria, Section 291 (4), recognises the application of the provisions of any other law that provides for pensions, gratuities and other retirement benefits for persons in the Public Service of the Federation or State. This makes the provisions of the Pensions Reform Act, 2004 unquestionable, as it is in line with the provisions of the 1999 Constitution and it is immutable at this time.”

He added that judging from the above, “Government has been fair in the negotiation process in general and in its final offer in particular. The Unions must ensure that their members’ interest are paramount and accept Government’s magnanimous offer.

“There is urgent need to enforce compliance of the provisions of the PRA 2004 by staff of PHCN. It is therefore imperative that the workers open their RSAs, as all pension and gratuity payments have to be paid into this account.

It is also very urgent that the mandatory 7.5% minimum employer and employee deduction of contributions in line with the PRA 2004 are effected by the different employers of the Workers.”

25 percent not deducted
Corroborating this, Koripamo-Agary who is a former Permanent Secretary, Ministry of Labour, contended that the claim by the unions that 25 percent was being deducted from their salaries towards the payment of their pensions and gratuities was untrue, noting that no deduction was effected from the workers’ salaries.

According to her, “the 25 percent is a mere provision by the management of PHCN towards funding the Superannuation fund with no physical deduction reflected in the pay slip of any employee of the company.”

She appealed to the unions to allow the workers make the decision that would affect their lives in the long run, arguing that workers should be allowed to ask their employers questions regarding the computation of their benefits.

Dr. Agary appealed to the unions to allow workers open their Retirement Savings Account, RSA, noting that “this does not stop further negotiations as there is always flexibility in social dialogue.”

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