Contributory pension in Nigeria is nearing 10 million registered contributors, with assets under management by Pension Fund Administrators (PFAs) standing at N15.5 trillion as of February 2023.
This is coming 17 years after the enactment of the Pension Reform Act 2004 that instituted the Contributory Pension Scheme (CPS) that aims to ensure that Nigerian workers in public and private sectors save in order to have a successful retirement.
The National Pension Commission’s (PenCom) latest unaudited report on pension funds industry portfolio for the period ended 28 February 2023, shows that Retirement Savings Accounts (RSA) membership stood at 9,919,281, while assets under management by PFAs was N15,449,896.60.
With the number of employed persons in Nigeria standing at about 60,000 according to Trading Economics, the country probably may have only achieved scratched the surface with 10,000 enrolees with a lot of people still uncaptured in the informal sector.
Muda Yusuf, chief executive officer, Center for Promotion of Private Enterprise (CPPE) said the potential for growth of pension in Nigeria is huge given the population and number of people working in the formal and informal sector space.
He noted that Nigeria’s pension assets to GDP standing at 7.6 percent in 2022 is low when you consider that South Africa is 45.8 percent, Namibia 103 percent, Kenya 12.9 percent; Uganda 12.4 percent and Ghana 6.3 percent.
According to him, much can be achieved if customers continue to get the best of service, build confidence in the scheme, stating that meeting customer expectations is critical to the success of the industry.
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Yusuf speaking on how to deepen penetration further in the scheme, noted that PFAs must be online real-time, minimise bureaucracy, deliver service as promised, provide quality client’s record and give good disposition to solving customer’s problems.
Meanwhile, data from PenCom shows that pension contributions remitted to individual RSAs in fourth quarter 2022 stood at N237.24 billion and out of this the public sector accounted for N129.06 billion or 54.40 percent, while the private sector contributed N108.18 billion or 45.60 percent.
The cumulative pension contributions from inception to the end of the fourth quarter of 2022 amounted to N8.47 trillion, which is an increase from N8.23 trillion as at the end of third quarter 2022.
The aggregate pension contributions of the public sector increased from N4.27 trillion in the third quarter of 2022 to N4.40 trillion as at the end of the fourth quarter.
The ranking of PFAs by cumulative pension contributions received from the inception of the CPS to the end of the fourth quarter of 2022 indicated that the top five ranked PFAs received 69.91 percent of the total contributions, the top ten received 89.72 percent and the bottom 10 received 10.28 percent.
Edwin Igbiti, president, the Chartered Insurance Institute of Nigeria (CIIN) believes that Nigeria was still far below its expectation in penetration for both insurance and pension sectors.
According to him, if a country like Namibia that is not up to Lagos in terms of size could dwarf Nigeria in pension penetration, then there is still much work to be done.
Igbiti said what has not helped the sector to grow the confidence of customers is the lack of discipline among the operators and parties. He challenged employers who deduct pension of employees and don’t remit, describing them as ‘criminals’. How do you imagine that an employer will deduct a staff pension and will not remit it, he queried.
Aisha Dahir-Umar, director-general of PenCom commending the growth of the pension scheme in the fourth quarter of 2022 said the laudable performance in the growth of the AUM points to the fact that the pension industry will continue to deliver value and benefit to its stakeholders and the nation’s economy.
“During the reporting period, the commission stepped up its efforts to ensure sustainable investment by pension funds in alternative asset classes and structured infrastructure projects that meet the strict requirements of the Pension Fund Investments Regulation.”
“We continued our efforts to ensure further diversification of investments in pension fund portfolio assets. While rising inflation continues to challenge the Nigerian economy, it should be noted that efforts are being made to ensure average annual pension fund returns for RSA and legacy funds exceed headline inflation.”
Dahir-Umar said the significant achievement in the Nigerian pension industry would not have been possible without the right people, strategy, culture and governance structure to support delivering consistent and sustainable value to all stakeholders.
“We reiterate our unwavering commitment to meeting the needs of our stakeholders, providing best practice in pension regulation and supervision in Nigeria, Dahir-Umar said.
