NSSF, City Hall in talks over Sh1bn debt

• The provident fund has classified the debt as a doubtful investment that it may not recover, but acting managing trustee Tom Odongo said it was engaged in ‘‘high level consultations’’ with the council with a view to settling the matter.
• Between 1975 and 1985, the Fund invested Sh296.6 million in City Council of Nairobi stocks eyeing interest returns from the papers, but City Hall defaulted on its obligations forcing NSSF to head to court in 1995.
• The court ordered City Hall to pay the entire debt in full and awarded NSSF an annual interest of 12 per cent on the outstanding sum until the balance was cleared.
• The debt currently stands at Sh1.1 billion because the Fund has been withholding and deducting rates owed to the City Council totalling Sh952 million.

The National Social Security Fund (NSSF) is in talks with the City Council of Nairobi on how to redeem municipal stocks worth Sh1.1 billion that were bought from the local authority.

The provident fund has classified the debt as a doubtful investment that it may not recover, but acting managing trustee Tom Odongo said it was engaged in ‘‘high level consultations’’ with the council with a view to settling the matter.

Between 1975 and 1985, the Fund invested Sh296.6 million in City Council of Nairobi stocks eyeing interest returns from the papers, but City Hall defaulted on its obligations forcing NSSF to head to court in 1995.

The court ordered City Hall to pay the entire debt in full and awarded NSSF an annual interest of 12 per cent on the outstanding sum until the balance was cleared.

Alternatively, City Hall was given the option of offering the Fund a plot worth the outstanding balance.

“Once agreement is reached on the basis of determining interest accrued, any outstanding balance will be settled at once,” Mr Odongo said.

The Business Daily reported exclusively on Monday that workers were on the verge of losing the money after NSSF classified the bonds as bad debts.

The two parties are currently locked in a dispute as to whether the interest rate should be applied on a simple or compound basis.

NSSF moved to court to compel City Hall to cash the municipal papers; together with interest earned. The High Court had in 1995 directed the local authority to pay the Fund the principal sum plus accrued interest, which amounted to Sh2.1 billion.

The debt currently stands at Sh1.1 billion because the Fund has been withholding and deducting rates owed to the City Council totalling Sh952 million.

The Auditor-General had raised the red flag on the use of the debt to offset rates payable to City Hall, saying the Fund had not been issued with receipts to show the payments.

“CCN will soon issue official receipts to NSSF for the Sh952 million offset,” Mr Odongo said in a statement to Business Daily.