The Nigerian pension landscape is undergoing a significant transformation with the increasing focus on incorporating the informal sector into the Contributory Pension Scheme (CPS). The National Pension Commission (PenCom) has reported substantial growth in the Micro Pension Plan (MPP), designed specifically for this demographic. Between 2020 and the third quarter of 2024, over 12,000 individuals from the informal sector contributed nearly N1 billion to their retirement savings accounts (RSAs). This underscores the growing awareness and adoption of the MPP, although significant potential remains untapped. The informal sector represents a vast portion of the Nigerian workforce, estimated at over 70 million individuals, highlighting the enormous opportunity for expanding pension coverage.
PenCom’s newly launched Pension Industry Performance Dashboard provides a transparent and accessible view of pension statistics. Data from the dashboard reveals that while over 164,000 individuals have registered for the MPP since its inception, only a fraction, approximately 12,241, have actively funded their accounts. This discrepancy suggests a need for enhanced public awareness campaigns and targeted interventions to encourage consistent contributions. The dashboard also details the upward trajectory of both registration and contribution amounts over the past five years, signaling a positive trend towards greater financial security for informal sector workers. The growth in contributions from N89.13 million in 2020 to nearly N1 billion in the third quarter of 2024 showcases the increasing financial inclusion facilitated by the MPP.
The informal sector, encompassing a diverse range of occupations from self-employed individuals to those working in small businesses, forms the backbone of the Nigerian economy. Recognizing the importance of providing social security for this significant segment, the Pension Reform Act of 2014 paved the way for the inclusion of informal sector workers in the CPS. The MPP, launched in 2019, aims to provide a structured and accessible savings platform tailored to the unique needs and circumstances of informal workers. The MPP allows for flexible contributions, enabling individuals to save according to their income flow and financial capacity.
Despite the progress made, challenges remain in achieving widespread adoption of the MPP. PenCom acknowledges the need for a strategic overhaul of the plan to better resonate with the diverse needs of the informal sector. The current “micro” branding has proven to be a barrier for some higher-earning individuals within the informal sector who do not identify with the term. To address this, PenCom is planning to rebrand and restructure the MPP to create a more inclusive and appealing product. The aim is to tailor the plan to specific occupational groups, offering customized solutions that address their unique financial circumstances.
Technological advancements are also key to expanding the reach of the MPP. Given the vast size of the informal sector, leveraging technology to streamline registration, contribution collection, and information dissemination is crucial. PenCom plans to integrate technology more effectively to make the MPP more accessible and user-friendly, especially for those with limited access to traditional banking services. This could involve mobile-based platforms, agent networks, or collaborations with fintech companies. The goal is to create a seamless and efficient system that caters to the technological preferences of a younger generation of informal workers.
PenCom’s Director-General, Omolola Oloworaran, has emphasized the importance of operator engagement in driving the success of the revamped MPP. While acknowledging the challenges faced by operators in promoting the existing scheme, Oloworaran expressed confidence that the rebranding and technological enhancements will encourage greater participation from pension operators. The aim is to create a collaborative ecosystem where PenCom, operators, and other stakeholders work together to achieve the ambitious target of bringing 20 million Nigerians from the informal sector under the pension umbrella. This will require concerted efforts in public education, targeted outreach, and innovative strategies to build trust and encourage long-term savings behavior within the informal sector.
