Despite notable strides in pension reforms and double-digit average growth in five years, Nigeria’s pensions lag behind in penetration.
The nation’s total pensions assets has grown significantly, hitting over N10.2 trillion as at December 31, 2019 with 64.5% recorded growth generated from managed assets linked to investment returns, TheConscience reports.
However, Nigeria’s pensions continue to lag behind some emerging markets in terms of pension penetration, with a pension AuM to GDP ratio of 6.8%.
This is according to the Agusto & Co. Pension Industry Report.
The Industry’s AuM to GDP ratio falls below those of Kenya and South Africa with 13.2% and over 120% respectively but compares well with Ghana’s 5%, TheConscience gathers.
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According to the Report, the weak pension penetration has been due in part to the previous exclusion of Nigeria’s informal sector (which accounts for an estimated 65% of GDP) and the low compliance rate of eligible organisations.
Nonetheless, increased efforts by the Commission in Nigeria to ensure compliance and drive enrolee participation is remarkable. Most notable, according to the Agusto & Co Pensions report, is the micro pension scheme (MPS) which allows previously excluded self-employed persons and organisations with less than three persons to participate in the contributory pension scheme under more flexible rules, this online newspaper gathers.
The Report maintains that the structure of the scheme for informal sector operators is weak; given that compliance is optional and prior lessons from the National Health Insurance Scheme indicate voluntary compliance is unlikely to yield significant levels of enrolment.
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The Report says The Nigerian Pension Industry has evolved over the years from one with predominantly public sector participants running a defined benefit scheme to a robust and mandatory defined contribution system for all government and private-sector employees in the country.
