Nigeria’s Pension Success Story Faces Inclusion Crisis
Two Decades After Reform, A Growing Coverage Gap
MORE than 20 years after Nigeria overhauled its troubled pension system, fresh concerns are emerging about the long-term sustainability of the Contributory Pension Scheme (CPS). Despite significant asset growth and regulatory reforms, an estimated 153 million workers remain outside the framework established under the Pension Reform Act 2014.
Investigations indicate that about 73.1 million workers in the formal public and private sectors, along with roughly 80 million in the informal economy, are yet to enroll. The development raises critical questions about the inclusiveness of what is often described as one of Africa’s most structured pension systems.
The CPS, first introduced under the Pension Reform Act 2004, replaced a defined-benefit scheme plagued by arrears and inefficiencies with a contributory structure built around individual Retirement Savings Accounts (RSAs), professional fund managers and strict oversight by the National Pension Commission (PenCom).
Since inception, pension assets have grown to over ₦27 trillion, with more than 10 million registered contributors. The fund has become a key source of long-term capital in Nigeria’s financial markets, supporting infrastructure financing and macroeconomic stability.
Reform’s Gains, Inclusion’s Weakness
While the CPS is widely regarded as a reform success, analysts warn that its limited coverage undermines its core objective — universal retirement security.
A significant barrier is uneven compliance among sub-national governments. Of Nigeria’s 36 states, only 17 are actively implementing the CPS. Several have passed enabling laws but have yet to fully remit contributions, while at least a dozen states have not meaningfully operationalised the scheme.
The situation is more acute at the local government level. Across the country’s 774 councils, participation remains minimal, largely due to funding constraints and irregular remittances controlled by state authorities.
Industry stakeholders describe the trend as a structural vulnerability. Without comprehensive state and local government participation, the contributory framework risks remaining confined to segments of the federal civil service and compliant private-sector firms.
Informal Economy: The Largest Blind Spot
Beyond government inertia lies the deeper challenge of informal sector exclusion. According to PenCom Director-General, Omolola Oloworaran, more than 90 percent of Nigeria’s workforce operates within the informal economy, yet pension penetration among them is estimated at just 0.25 percent.
This translates into tens of millions of traders, artisans, transport workers and small-scale entrepreneurs facing retirement without structured savings.
PenCom has attempted to bridge the gap through the Micro Pension Plan and expanded grassroots enrollment initiatives. However, uptake has been slow, hindered by irregular incomes, limited financial literacy and trust deficits within informal communities.
Institutional Exits and Credibility Concerns
The CPS has also encountered institutional resistance. Sections of the military, the Nigeria Police Force, university lecturers and some political office holders have either exited the scheme or agitated for withdrawal.
Analysts warn that selective disengagement could weaken public confidence and create perceptions of inequity within the system.
A Demographic and Fiscal Risk
Experts identify three systemic risks arising from the exclusion of 153 million workers.
First, limited participation constrains asset growth, reducing the pool of long-term investment capital available for national development.
Second, widespread exclusion heightens the risk of old-age poverty, potentially deepening intergenerational financial strain as retirees depend heavily on younger relatives.
Third, governments could eventually face fiscal pressure to provide social assistance for millions of unprotected elderly citizens — recreating the financial instability the CPS was designed to prevent.
As Nigeria confronts demographic expansion and rising life expectancy, stakeholders argue that enforcement — not just advocacy — must define the next phase of pension reform. Without decisive action to close the coverage gap, the celebrated reform may struggle to deliver on its promise of retirement security for all.
