The Nigerian government’s ambition of urging informal sector workers to save for retirement when they could barely earn enough to survive today, amid growing poverty and rising cost of living, is delivering a predictable outcome. The government hopes to enroll 8 million people in five years but in three years it has only managed to register 77,689, less than one per cent of the projected figure.
Launched in 2019, Nigeria’s micro-pension scheme set out to extend the reach of pension to the self-employed and employees of organisations with a minimum staff strength of three, in a bid to provide cover for 30 per cent of the national workforce by 2024. A key goal of the effort is to boost the country’s financial inclusion.
Nigeria’s inflation accelerated from 12.3 per cent to 16.8 per cent between the April of that year and April 2022, living cost pressures eating away at the disposable income of most low-income households and weakening the capacity to save.
“The cost of living is high in the sense that no matter how much you have, by the time you go to the market,” you will hardly have anything left, said an official of Veritas Glanvills Pension, a Lagos-based pension fund administrator (PFA), who requested anonymity.
“They are not making much to feed themselves and equally save. Whatever people are making now, it goes to food, it goes to taking care of immediate needs. There is little or none left to save,” the official said.
That 19 PFAs registered only 2,166 enrollees in the last quarter of last year lends credence to the likelihood that profound micro-pension penetration in Nigeria is going to be a long haul. Only few adults pay into a pension in Nigeria, meaning a majority may rely on children and relatives for support at retirement or old age.
Building up rainy day savings by way of pension contribution is essential to fighting old-age poverty in Nigeria, where two out of every five people live in extreme poverty, according to figures from World Poverty Clock, an online tool that tracks real-time penury data.
That is particularly fitting for the informal sector which, despite accounting for four of every five jobs in Africa’s most populous nation and for half of its GDP, is underserved by the pension products.
But factors ranging from apathy, poor awareness and service dissatisfaction to low disposable income are standing in the way of participation.
“I like anything that has to do with savings. I like the micro-pension plan,” said Harry Isikima-Dick, who runs a barbing salon and sells electrical accessories in Ogba, Lagos. “But the problem is how I am sure the pension company will last till I am 50 years.”
Mr Isikima-Dick told PREMIUM TIMES he was hearing about micro-pension for the first time and would be happy to find a reliable PFA who can sign him up. He said he had no retirement savings plan.
Noimot Tiamiyu-Yusuf, who sells fairly used lingerie in Lagos, also told PREMIUM TIMES she’s not aware of micro-pension. She was skeptical about saving through micro-pension because of an ugly past experience that saw an informal thrift (ajo) collector run away with her savings.
“They (PFAs) may not run away with the pension of employed people. But what about our (artisans and unemployed people) own contribution?” She said she might consider micro-pension in future. She too had no alternative retirement saving plans.
Of the 11 products tracked in a survey by Enhancing Financial Innovation and Access (EFInA), an advocacy group championing financial inclusion in Nigeria, pension had the highest dissatisfaction rate after insurance among adult users of financial services.
The Veritas Glanvills staff sees Nigerian’s poor savings culture as a factor not enabling micro-pension to flower, and a lack of trust in the system, partly stemming from past experiences of people losing to similar organisations like microfinance, is forcing some informal workers to seek safety nets in other things but inclusive finance.
“Micro-pension is voluntary… But for the other pension, contributory pension, you know that one the money is deducted from your salary. So you have no control over that one. So that’s why that one is better,” the official said.
Modalities for signing up
The voluntary pension scheme enables people aged 18 and over with regular income to make small but frequent contributions to PFAs and comes with more flexible terms including the liberty to contribute, daily, weekly, monthly or at any convenient time in as much as contributions are made in any given year.
That is unlike compulsory pension plans, often marked by minimum contributions, high fees and sometimes imposes financial penalties for missed payments.
According to the Central Bank of Nigeria’s National Financial Inclusion Strategy, contributors enjoy the benefit of making contingent withdrawals ahead of retirement and can access up to 40 per cent of their money at any point if they had contributed for a minimum of three months.
