As Nigeria’s Contributory Pension Scheme (CPS) marks its 20th year, the scheme is set for significant growth, with industry experts noting that increased compliance by state governments and expanded coverage in the informal sector will be key drivers. Enhanced participation across these areas promises to extend pension coverage to more Nigerians, boosting financial security for retirees and strengthening the nation’s pension system.
According to Oguche Agudah, CEO of the Pension Fund Operators Association of Nigeria (PenOp), the CPS has made substantial strides since its inception in 2004, amassing over N20 trillion in assets as of 2024. Moving into its third decade, Agudah emphasized the need for ongoing reforms, state involvement, and a focus on innovative solutions to ensure the scheme remains robust, transparent, and beneficial to all stakeholders.
“From the pension struggles of the pre-CPS era to the modern, well-regulated, and diversified system we have today, the CPS has provided financial security to millions of Nigerians and contributed significantly to the nation’s economy,” Agudah remarked.
Challenges and Opportunities
Despite the successes of the CPS, Agudah acknowledged ongoing challenges, such as issues related to accrued rights, non-compliance, and inflation. He noted that there remains substantial room for growth in participation and asset management, particularly by encouraging more states to fully transition to the CPS. Such a move, he suggested, would ensure that retirees benefit from timely pension payments.
Expanding the Micro Pension Scheme to include Nigeria’s sizable informal sector is another area for growth. The informal sector makes up a significant portion of the workforce, and increasing awareness and participation here is essential for the scheme’s long-term sustainability.
Impressive Growth in Pension Assets
Recent data indicates a steady rise in Nigeria’s pension assets, which reached N21.14 trillion at the end of August 2024, up from N20.79 trillion in July, reflecting a N345.65 billion increase. The number of registered contributors, known as Retirement Savings Account (RSA) holders, also grew, reaching 10,457,073 by the end of August 2024, up from 10,419,520 in July.
In the second quarter of 2024, total contributions to individual RSA accounts amounted to N377 billion, with the public sector contributing N217 billion and the private sector N160.83 billion. This data, compiled by analysts at PenOp, underscores the increasing participation in the CPS from both the public and private sectors.
PenCom’s Drive to Boost Compliance and Participation
Ms. Omolola Oloworararan, the Acting Director General of the National Pension Commission (PenCom), outlined the commission’s strategy to engage states yet to adopt the CPS or Contributory Defined Benefits Scheme (CDBS). She stressed the need for flexibility in allowing states to adapt contributory pension arrangements that best suit their unique contexts.
In a bid to encourage compliance, Oloworararan revealed that PenCom would launch a Recognition and Award System by December 2025 to incentivize states to implement pension reforms.
“One of the significant benefits of adopting the CPS is access to accumulated pension funds for infrastructural development through the issuance of state bonds,” she highlighted.
Lagos, Niger, Osun, Ekiti, and Delta are among the states that have successfully issued bonds subscribed to by pension funds, a move that underscores the potential for states to leverage CPS assets for development.
Varying Levels of State Compliance
According to PenCom’s recent data, as of June 30, 2024, eight states—including Lagos, Kaduna, Ondo, FCT, Ekiti, Jigawa, Osun, and Edo—had fully complied with the CPS, while Delta was substantially implementing the scheme.
In contrast, Anambra, Kebbi, Rivers, Benue, and Kano were only partially implementing the CPS/CDBS, while Niger and Ogun extended their transitional periods. States like Bayelsa, Taraba, Ebonyi, Oyo, Kogi, Imo, Nasarawa, Bauchi, Abia, Sokoto, and Enugu were reportedly remitting employer and employee contributions, while Adamawa, Katsina, Zamfara, and Gombe had yet to implement the CPS.
What Lies Ahead for CPS Growth?
As the CPS heads into its third decade, PenCom and industry stakeholders continue to push for reforms that will expand the scheme’s coverage and secure a sustainable retirement for millions of Nigerians. Increased state compliance, heightened participation from the informal sector, and innovative approaches to asset management are expected to be central pillars of the scheme’s growth strategy.
With an upward trend in pension assets and increased contributor participation, Nigeria’s pension industry is on a path to becoming one of the largest pools of investable funds in Africa. This growth, however, depends on overcoming existing challenges and ensuring that the CPS is accessible to workers across both the formal and informal sectors.
Source: BusinessDay.
