Nigeria’s Contributory Pensions Scheme (CPS) has continued to record increasing registration of new participants, but major concerns remain small nature of firms as well as compliance issues.
The rise in participation driven by expanding workforce, according to industry players will continue to grow as more employees become aware of the importance of securing their financial futures through pension enrolment.
Oguche Agudah, chief executive officer, Pension Fund Operators Association of Nigeria (PenOp) said the expanding Nigerian workforce has broadly driven the growth in the number of contributors.
According to him, with a 14.87 percent cumulative growth rate and a compounded annual growth rate of 2.81 percent, the data suggests that the pension sector is expanding steadily.
Quoting data from the National Pension Commission(PenCom), he said that retirement Savings Account (RSA) registration rose to 10,457,073 at the end of August 2024 from 9, 103,653 in the same period in 2020.
Agudah said however that challenges remain. Many formal sector companies are small or medium-sized enterprises (SMEs), and some do not consistently comply with pension regulations, leading to slower growth in RSA registrations.”
Agudah said while the CPS has been implemented at the federal level, many states in Nigeria have been slow to adopt and fully implement the CPS.
“Some states are yet to sign into law as part of the pension reform act, while others have signed but have not fully commenced remitting contributions into their workers’ RSAs. This directly affects the number of new RSAs being opened for state government workers, he said.
Read also: Pension growth hinges on informal sector, states’ compliance
Chika Onwunali of Premium Debate said CPS is growing but not at the speed expected because of many systemic issues the nation, particularly in the economy that should impact every sector.
According to him, new jobs are not being created in line with growth in population, while also there has been so many lost jobs from closure of some companies.
He also said that the positive trend in enrolment is tempered by ongoing challenges related to the size of firms and compliance with regulatory standards. Many smaller businesses struggle to meet include their employees’ in the pension plan, while mid- sized organizations make deductions without remitting.
Though the level of employment is rising, but with more companies recognising the need to attract and retain talent, the expansion of pension eligibility will improve with increasing security for workers.
“This shift not only highlights the evolving landscape of employment but also underscores the importance of retirement planning in securing financial futures. With more companies recognizing the need to attract and retain talent, the expansion of pension eligibility is reshaping the way employees approach their long-term savings and financial security, the expert said.
The total Assets Under Management (AUM) of the pension industry rose to N21.1grew August 2024, a 15.08 percent increase from N18.36 trillion at the end of December 2023.
The increase according to industry players were to due increased contribution as firms increase salaries to cope with cost of living crises and investment performance due to the high yield environment, which has positively impacted investment returns across various asset classes, particularly in equities and private equity.
Pension Fund Administrators (PFAs) are increasingly diversifying their portfolios, seeking out alternative investment options such as real estate and private equity to ensure sustainable returns for pensioners.
The National Bureau of Statistics (NBS) in its Nigeria Labour Force Survey (NLFS) report hows that about three-quarters of working-age Nigerians were employed – 73.6 percent in Q4 2022 and 76.7 percent in Q1 2023.
This shows that most people were engaged in some type of jobs for at least one hour in a week, for pay or profit, while about one-third (36.4 percent in Q4 2022 and 33.2 percent in Q1 2023) of employed persons worked less than 40 hours per week in both quarters.
This was most common among women, individuals with lower levels of education, young people, and those living in rural areas.
Underemployment rate, which is a share of employed people working less than 40 hours per week and declaring themselves willing and available to work more was 13.7 percent in Q4 2022 and 12.2 percent in Q1 2023.
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