The Guardian
Email YouTube Facebook Instagram Twitter WhatsApp

‘Nigeria’s pension penetration below 6%’



With Nigeria’s average pension penetration between 2011 and 2018, standing at less than six per cent, falling behind its global peers, the country must ensure effective implementation of the new Micro-Pension Scheme.
The development, according to FSDH Merchant Bank Limited, is important because society is often measured by how it cares for its senior citizens, particularly when they are no longer in active service, as well as the lives of other citizens.
The pension penetration is calculated as the ratio of the pension assets to the Gross Domestic Product (GDP), which for Nigeria, increased from 3.85 per cent in 2011 to 6.69 per cent in 2018, and with an average estimated at 5.2 per cent between 2011 and 2017.
This, however, has been considered low, especially when compared with the United States at 78.5 per cent; Chile, 63.6 per cent; United Kingdom, 96.5 per cent; South Africa, 48.3 per cent; and Kenya, 13.3 per cent.
The Head of Research at FSDH Merchant Bank, Ayodele Akinwunmi, in a report by the lender, noted that micro-pension will help to achieve the pension industry’s strategic objective of covering 30 per cent of the working population in Nigeria under the Contributory Pension Scheme (CPS) by the end of 2024.
Speaking on the latest pension industry report released by the National Pension Commission (PenCom), he said pension assets in Nigeria grew from N8.64 trillion in December 2018, to N9.33 trillion as in the second quarter of 2019, representing a growth of 7.96 per cent.
“The traditional ‘Pay as You Go’ pension programme, mainly for workers in government and private establishments, does not capture the larger populace.
“The micro-pension scheme takes into account the peculiarity of the nature of business for the self-employed and non-salaried workers (farmers, artisans, vendors, domestic help and workers in MSMEs), hence contributions may be made daily, weekly, monthly or as may be convenient provided that contributions are made in any given year. 
“Although Pension Fund Administrators (PFAs) have started enrolling workers in the informal sector into the scheme, our preliminary investigations show that there are operational issues that are slowing the process of starting the micro-pension.  
“PenCom requires that contributors provide their National Identity Management Commission (NIMC) registration details as a valid means of identification and many of the target contributors have not enrolled under the NIMC scheme and are therefore not allowed to begin contributions under the pension scheme,” he said.
The financial expert pointed out that the retail nature of the business means that efficient technology and a unique identification number for each contributor must be in place to enable the scheme to run in a cost-effective manner.  
“The success of the micro-pension scheme in Nigeria will require collaborative efforts and coordinated actions by the regulator and operators within the industry. There is a need for sensitisation and educational campaigns to show the benefits of the scheme to the target audience, which would increase the adoption rate.
“Both the regulators and the operators should engage various trade unions and leaders of associations such as market women and artisans with a view to secure their cooperation.
“It is important to note that different marketing strategies are required to ensure the success of this scheme. It is hoped that the take-off of this scheme will increase national savings and make long-term capital available in the capital market for companies and governments to embark on business expansion and infrastructure development,” he added.

Receive News Alerts on Whatsapp: +2348136370421

No comments yet