Stakeholders in the pension sector reviewed the sector’s performance over the weekend, 17 years after its reform and since the introduction of the Contributory Pension Scheme (CPS) in Nigeria. Although there has been remarkable growth and achievement in the industry, the operators noted that Nigeria still lags behind many other countries in pension penetration, with a current penetration rate of 11%.
The stakeholders spoke at the Pension Operators Association of Nigeria (PenOpthird )’s annual PenOp-National Assembly retreat in Lagos.
According to them, there is a need for strong political will, particularly among state governments, determination for self-regulation among sector operators, capacity building, technological advancement, and assurance of a better future for Nigerian workers who contribute to the pension fund, as well as predictable policies on the government’s side in place of policy somersaults.
Mr. Wale Odutola, President of PenOp and Managing Director of ARM Pension Managers, stated that in the past 17 years, Nigeria’s pension industry has come a long way from when the Pension Reform Act was first passed in 2004.
According to him, the industry has progressed from a largely unfunded pension system to one that is fully funded, professionally managed by primarily the private sector, and that the CPS in Nigeria has adopted international best practices, is technologically driven and has grown steadily over time.
Despite this, he claims that the sector lags behind its counterparts in other countries in many areas.
“One area to consider is the level of pension penetration. Nigeria currently has a pension penetration rate of around 11% of its labor force. This pales in comparison to 19% in South Africa, 20% in Kenya, and 77% in the United Kingdom.”
“As a result, it goes without saying that the industry must increase its penetration, particularly in the informal sector.
“Another area that could be improved is the ratio of pension assets to GDP. The ratio of pension assets to GDP in Nigeria is just over 7%, whereas it is typically above 100% in developed markets,” he added.
In addition, former PenCom DG Alhaji Muhammad Ahmad stated that the sector’s micro pension segment market needs to be tapped in order to bring every Nigerian, both formal and informal, into pension coverage.
He also stated that various state governments must make a decision to fully participate in the scheme, which provides a more secure future for their workforce.
According to him, pension operators have a lot of work to do in this area, with a large portion of their time spent on conviction and building trust.
He also urged operators to direct their financial inclusion efforts toward the informal sector in order to fully saturate the market.