The lack of savings culture among Nigerians and the current economic downturn occasioned by COVID-19 pandemic have frustrated the effective take off and full implementation of the country’s micro pension scheme.
As at the end of May 2020, only about N24 million has been generated from the informal sector scheme, a year and six months after it was launched by President Muhammadu Buhari in the wake of his second-term bid.
Micro pension, an offshoot of the Contributory Pension Scheme (CPS) now swelling with over N10.8 trillion in assets under management with over 9 million registered contributors, is expected to galvanise the informal sector players and provide them with effective plan for retirement.
Unfortunately, programmes initiated by the National Pension Commission to kick start the process of mass enrolment have been affected by COVID-19 pandemic, which did not only affect players’ drive but also affected the small and medium scale businesses that were targeted for enrolment.
Analysts at Stanbic IBTC Pensions Managers had said a statement on their website in the wake of the pandemic that coronavirus had hit investment globally, and would hurt the country’s over N10 trillion pension funds, especially in the stock market.
“The coronavirus pandemic that has hit investment globally would hurt the country’s N10.22 trillion pension funds, especially in the stock market. Although only 5 percent of funds which amount to about N511 billion are invested in the capital market, the fund would have tumbled if PenCom had not limited investment of pension managers in the stock market.”
According to the Pension Fund Administrators (PFAs), the Micro Pension Scheme enables organisations with less than three employees, self-employed individuals and other workers in the informal sector to contribute voluntarily towards retirement.
A closer interaction with operators, particularly the PFAs, who are the natural sellers of the product, reveals an insignificant impact as the potential consumers were said to be bugged down with survival and meeting basic needs.
According to many, the slow growth of the economy, growing unemployment, poor access to funding for business, declining standard of living among households, high inflation are bottlenecks that have not enhanced appetite for savings.
“You know micro pension is voluntary, so people want to first of all meet basic needs; even the formal sector that is compulsory, how many employers are complying,” one of the operators asked.
President Buhari at the launch of the micro pension scheme on March 28, 2019, said the scheme targets the significant majority of Nigeria’s working population who incidentally operate in the informal sector.
With an estimated 80 million people working in the informal sector of the economy, the Micro Pension Plan would take care of participants from various informal sector workers – including market women, members of the National Union of Road Transport Workers, and members of textile, garment and tailoring associations, among others, the president had said.
According to Aisha Dahir-Umar, acting director-general of PenCom, the micro pension plan is expected to significantly expand pension coverage to greater number of Nigerians and further generate additional long-term funds for Nigeria’s economic development.
She said, “The Commission would collaborate with relevant stakeholders to sensitise and enlighten the target participants and members of the public on the features and benefits of the micro pension plan, but unfortunately these could not be sustained following social and economic disruption caused by COVID-19.”
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