The micro pension scheme should be marketed aggressively
The National Pension Commission (PenCom) Director General, Aisha Dahir-Umar recently highlighted some of the issues slowing down the adoption of the Micro Pension Plan (MPP) in the country. Introduced to cater for people in the informal sector of the economy as well as self-employed professionals, it has not attracted the much-needed traction. Although the scheme is voluntary, its mass adoption will be a big boost to the pension reform introduced by the administration of former President Olusegun Obasanjo to improve the quality of life of Nigerians when they retire from active work.
A vast majority of Nigerians operate in the intended areas of coverage for the MPP. Those targeted include petty traders, members of the National Union of Road Transport Workers (NURTW), members of the National Union of Textile, Garment and Tailoring Workers of Nigeria (NUTGTWN), Keke Napep, Okada Riders Associations, Butchers Associations, workers in the movie and performing arts industry, barbers, shoe shiners, car washers, mechanics, and other workers in the automotive industry. Self-employed professionals such as lawyers and accountants are covered by the MPP as well.
According to Dahir-Umar, the MPP has attracted a little over 100,000 contributors since inception. The overall target population is more than the 10 million currently enrolled on the more popular Contributory Pension Scheme (CPS), which is compulsory for employers with a minimum staff strength of eight. The MPP is voluntary and solely funded by the contributor, unlike the CPS which prescribes that employers and employees should contribute. The Pension Reform Act 2014 also allows employers to bear full responsibility for their employees on their own volition.
Dahir-Umar attributed the low adoption of the MPP to challenges within the informal sector related to accessing financial services, building trust, and understanding the pension system. She also said there are currently no appealing incentives associated with the scheme. Dahir-Umar further said the economic situation in the country, as seen in high unemployment, inflation and rising poverty levels, has slowed down the uptake. The good news, though, is that Dahir-Umar also said PenCom is actively exploring the introduction of incentives, such as health insurance coverage for the MPP participants, to address the challenges. The MPP, she said, remains a vital initiative that PenCom is committed to making more accessible and appealing to a broader spectrum of Nigerians.
We, however, recognise that PenCom, as the regulator and policymaker in the Pension Industry, cannot make the MPP succeed all by itself. The Pension Fund Administrators (PFAs) should shoulder the biggest part of the responsibility by marketing the MPP aggressively to the targeted participants. Statistics on the size of Nigeria’s informal sector are quite staggering. According to various estimates, the informal sector contributes to at least 65 per cent of the Gross Domestic Product (GDP) and provides employment for over 90 per cent of the working population. The PFAs have huge numbers of potential subscribers in plain sight but are probably discouraged by the costs and logistics of marketing or the cultural barriers associated with planning for eventualities in Nigeria. These challenges can be addressed through re-orientation strategies.
The successes PenCom has recorded in the last three years — such as the growth of pension assets from N11.35 trillion in August 2020 to N17.29 trillion in August 2023, the addition of one million new contributors enrolled on the CPS, recapitalisation of the shareholders’ fund of PFAs from N1 billion to N5 billion, and the introduction of the transfer system for Retirement Savings Account (RSA) holders — are quite commendable. But the icing on the cake would be for the MPP to succeed. It if does, there are potentially over 100 million Nigerians that will ultimately benefit. There can be no better way to empower the people and reduce poverty in the country.