There has been growing concerns by the stakeholders in the Nigerian pension industry over the sluggish rate of enrollment from the informal sector into the country’s Micro Pension Plan (MPP), and are considering viable models in Rwanda and Kenya among others. It is believed that the Nigerian model is less compelling since it does not offer co-contributions, free healthcare, or insurance like other nations’ micro pension schemes. Industry groups, such as the National Pension Commission (PenCom) and the Pension Fund Administrators (PFA), have paused the awareness campaign in order to reevaluate the plan and determine how to make it more compelling to enrollees.
PenCom reports that as of the end of March 2023, the MPP has engaged 93,225 individuals from the informal sector. In October 2018, the Rwandan government launched EjoHeza, a (MPP) product in a select number of regions, aimed at the informal sector. Within two weeks, more than 30,000 residents had enrolled, contributing more than Rwf 20 million to long-term savings. To encourage voluntary engagement and retention, EjoHeza offers appealing financial incentives, such as matching co-contributions and free term insurance coverage for the first three years.
Establishing measures to entice individuals to the informal sector.
Speaking on the sidelines of a one-day workshop held by the Commission for journalists in Lagos, Abdulqadir Dahiru, Director of the Corporate Communications Department at PenCom, stated that the Commission would reassess the product in acknowledgement of the poor performance of MPP enrollment. As per his assertion, the incorporation of co-contribution within the Rwanda and Kenya frameworks rendered their programmes particularly appealing to workers in the informal sector. However, he voiced his concerns regarding the potential additional financial strain the co-contribution, among other incentives, would bring to the Nigerian government.
He revealed that the Joint PenCom/PenOp Committee would diligently work at developing realistic strategies for advancing the MPP implementation. PenCom head Dauda Ahmed said that measures are being taken to formally establish incentives that will entice more individuals in the informal sector to start embracing this idea, which would aid individuals in the informal sector develop financial structure for their retirement. Ahmed stated that PenCom was working towards implementing minimum health insurance as an incentive for qualified MPP participants.
Lack of awareness poses obstacles to the implementation of the plan.
Ahmed said the commission is engaging with labour unions, trade associations, and various groups to facilitate the adoption of the proposed plan. He highlighted the obstacles to the execution of the plan, encompassing factors such as inadequate awareness, skepticism towards the system, dearth of suitable incentives, and inadequate understanding of financial matters. By the conclusion of the 2022 financial year, ARM Pension Managers Limited, Stanbic IBTC Pensions Managers Limited, and Pension Alliance Limited emerged as the leading pension fund administrators (PFA) in terms of enrollment within the MPP framework, surpassing their counterparts.
ARM topped the list with 22,580 members (25.25%) and Stanbic IBTC ranked second with 14,962 members (16.75%) out of a total of 89,327 registered enrollees (contributors). According to PenCom, PAL and Tangerine APT emerged in third and fourth place, with 7,148 and 7,011 participants, respectively. Fulfilling his pledge made during his re-election campaign, President Muhammadu Buhari implemented the programme in March of 2019.
MPP was formed to promote retirement savings in the informal sector
It was anticipated that within five years, the number of people with a Retirement Savings Account (RSA) under the Contributory Pension Scheme (CPS) would increase from then 8.5 million to 20 million. Four years later, in March of 2023, the MPP had just 93,225 RSA holders, while the RSA had marginally risen to 10 million contributors. The MPP was formed under Section 2(3) of the Pension Reform Act 2014 to promote retirement savings among workers in the informal sector, who make up a sizable proportion of the labour force in the nation.