By Rosemary Iwunze
There are indications that Nigerian workers would carry the burden of old age poverty for a long time as pension plan aimed at addressing the situation lags hugely behind target.
The plan had envisaged that by 2022 about 40 percentage coverage of the employed population would have been achieved.
However, Financial Vanguard findings has revealed that the pension coverage has recorded sluggish growth year-on-year for some years now with the latest data showing average of just about 16 percent as at end 2022.
Analysts also said the growth rate would remain subdued in the medium term due to inherent bottlenecks in the system.
They also noted that when measured against the wider population the coverage is less than 5 percent, worsening the national old age poverty index.
This comes as the population growth rate outpaces economic growth rate where the population growth rate is recorded at 2.41 percent in 2023 while the gross domestic product, GDP, is at 2.31 percent for first quarter 2023.
The stunted growth in pension coverage is also coming at the backdrop of huge emphasis on financial inclusion by the various financial system regulatory authorities.
Industry experts are of the opinion that while financial inclusion aims to ensure that all individuals, especially the underserved and marginalised populations, have access to affordable and appropriate financial services, the low pension penetration in the country could serve as setback in achieving full financial inclusion.
This situation, according to them will worsen poverty level in the country with old age poverty becoming more rampant.
The Financial inclusion working papers had envisaged that an average Nigerian must have one form of pension scheme or the order; formal or informal, but where the reverse is the case, more Nigerians are being excluded from the financial safety net.
Findings
Financial Vanguard findings from the pension data show that in 2022, while the number of employed persons in the country stood at 60.5 million, only 9.86 million or 16.3 per cent of such workers had pension savings.
The report also shows that in 2021, total number of employed workers was 58.2 million, however, only 9.59 million or 16.5 per cent of the workers had pension savings.
In 2020, total number of employed workers was 56.2 million, only 9.27 million or 16.5 per cent of the workers had pension savings.
In 2019, total number of employed workers was 56.9 million, only 8.95 million or 15.7 per cent of the workers had pension savings.
Commenting on the development, analysts argue that stakeholders in the financial sector should concentrate more efforts in activating plans and strategies capable of helping in deepening the pension fund industry considering the crucial roles of pension in achieving bigger band for financial inclusion in the country.
Analysts’ comments
Speaking on the development, Head of Financial Inclusion department of the Central Bank of Nigeria, CBN, Mr. Paul Oluikpe, said that recruitment of more Nigerians especially those in the informal sector into the pension basket represents a sure way of including more Nigerians into the financial systems in view of the multiplier effects of the scheme.
Oluikpe stated: “An average Nigerian must have one form of pension scheme or the order; formal or informal. Micropension has been helping us to include more Nigerians in the financial safety net. The penetration level of pension in Nigeria as opposed to the 40 per cent projection by 2022 is an indication of the huge potentials in the sector and this must be harnessed.”
According to Oluikpe, pension fund operators must be more creative in the area of product designs as to introduce products which holds multiple benefits as to serve as an anchor in attracting more into embracing the scheme.
He said the era of one size fits all in consumer engagement is gone thus making room for operators to be more ingenious in their product designs.
“We have to sufficiently target specific segment of the society with varying needs meaning that operators must remain innovative and creative with service and products. We need to rethink our old ways”, he insisted.
Also speaking, Mr. Dauda Ahmed of the micro pension department of the National Pension Commission, PenCom, said that efforts are been made to institutionalising some incentives which will help in attracting more of the informal sector to embrace the micro pension project which sole aim is to ensure that those in the informal sector have pension arrangements which will cater for their old age as opposed to the current situation where the elderly do not have any form of retirement scheme except for those who retire from the formal sector.
To encourage new entrants, he said operators must device means of overcoming the issues of low level of awareness, poor remittances and the absence of innovation in product and service designs.
Also commenting, Chief Executive Officer of Pension Operators Association of Nigeria, PenOp, Mr. Oguche Agudah, said that the best way to appreciate the relevance of the pension scheme is to wonder what will happen in the next 20 to 30 years to those who do not have any form of retirement programme.
Agudah said: “Those working who do not have any form of pension or savings to fall back on; who would meet their needs when they retire? Will they rely on their children or government or still be working? We in the pension industry must work to get many workers as possible on a pension scheme.”
Source: Vanguard
