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Nigerians fall back on pension savings for survival amid unemployment, job losses

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A growing number of Nigerians who have lost their jobs in recent times are falling back on their pension savings for temporary survival.

According to statistics made available by the National Pension Commission (PenCom), in the first quarter (Q1) of 2019, approval was granted for payment of N4.51 billion to 10,733 Retirement Savings Account (RSA) holders under the age of 50 years who were disengaged from work and were unable to secure another job within four months of disengagement.

Another 13,609 RSA holders were granted approval for payment in the last quarter of 2018, taking away N5.14 billion.

This is as unemployment, job losses and difficulties being faced by small to large businesses operating in the country have worsened the social welfare of many Nigerian households.

Unemployment rate in Nigeria increased to 23.10 percent as at the end of third quarter 2018, from 22.70 percent in the second quarter of 2018.

The cumulative number of RSA holders who have so far collected their benefits over temporary loss of job has reached 313,468, according to PenCom. The 313,468 RSA holders were paid a total of N107.93 billion, being 25 percent of the balances of their RSAs as prescribed by the Pension Reform Act 2014.

Section 16(5) of the Pension Reform Act 2014 says that any employee who disengages or is disengaged from employment before the age of 50 years and is unable to secure another employment within four months of such disengagement may make withdrawal from his RSA in accordance with the provision of section 7(2) and 3 of the Act.

“Where a Retirement Savings Account (RSA) holder is temporarily unemployed before the retirement age (i.e. he/she is voluntarily/involuntarily disengaged, downsized, retrenched etc.) and has remained unemployed for a period of at least four (4) months without securing another employment, such an individual may apply for 25 percent of his/her current RSA balance,” one of the PFAs explained in its website.

A further analysis showed that the private sector accounted for 95.38 percent of those who benefitted from these payments, while the public sector accounted for 4.62 percent, underlining the difficulty being faced by businesses in that space. The businesses have been squeezed by high cost of electricity as they run on diesel generators to carry out operations, as well as high interest rates on loans and poor access to finance.

The Manufacturers Association of Nigeria said recently that its members spent over N4 billion yearly to procure Automotive Gas Oil (AGO) to carry out their operations, ascribing this to high cost of production in Nigeria.

While the increasing level of vices partly as a result of youth unemployment has not been contained by government and security forces, creating serious concern among the populace, a future danger is in the offing when people increasingly spend pensions ahead of retirement, according to analysts.

Joshua Ezeala, a pension operator who confirmed the development, said the rise in job losses has serious implication for their business.

“Firstly, it would have impacted on our investible fund when a lot of people are coming to access 25 percent of the funds in their RSA, and secondly, is that the number of enrolment would be affected if unemployment rate is high,” Ezeala said.