Why pension system still excludes majority
By Omobola Tolu-Kusimo The pension industry has recorded remarkable growth in assets and institutional strength over the years, yet a critical gap persists and millions of Nigerians remain outside the
By Omobola Tolu-Kusimo
The pension industry has recorded remarkable growth in assets and institutional strength over the years, yet a critical gap persists and millions of Nigerians remain outside the system, OMOBOLA TOLU-KUSIMO writes.
Despite reforms driven by the National Pension Commission (PenCom), coverage of Nigerians in the informal sector remains largely limited to formal sector workers, leaving the informal economy significantly underserved.
Recent data highlight the scale of the imbalance. As of early 2026, total Retirement Savings Account (RSA) holders stand at about 11 million Nigerians, a modest figure in a country with a labour force exceeding 70 million. This means that the vast majority of workers, particularly those in informal employment remain outside the pension net.
To address this gap, PenCom introduced the Personal Pension Plan (PPP) in 2019 , a flexible arrangement designed to attract self-employed individuals and workers in the informal sector. However, uptake has been far slower than anticipated, raising concerns about the effectiveness of the initiative in driving true financial inclusion.
PenCom’s latest data show that as of the third quarter of 2025, only 206,917 Nigerians had registered under the Personal Pension Plan.
Yet, despite registering 206,917, only 15,677 accounts or about 7.6 per cent were actively funded, while a staggering 92.4 per cent remained dormant. This suggests that while awareness may be growing, actual participation and sustained contributions remain weak.
The figures underscore a deeper structural challenge. Analysts note that registration alone does not translate to meaningful coverage if contributors are unable or unwilling to fund their accounts regularly. In effect, millions of Nigerians are still unprotected against old-age poverty despite being nominally captured in the system.
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Since assuming office in 2024, the Director-General of PenCom, Ms. Omolola Oloworaran, has repeatedly emphasised the need to expand pension coverage beyond the formal sector.
Under her leadership, the Commission has intensified efforts to deploy technology, expand agent networks, and deepen grassroots engagement to drive enrolment under the Personal Pension Plan.
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Industry stakeholders say the challenge goes beyond policy design. For many Nigerians in the informal sector, irregular income streams make consistent pension contributions difficult. Unlike salaried employees, traders, artisans, and small business owners often prioritise immediate needs over long-term savings.
Findings by the newspaper show that trust also remains a major barrier. Despite improvements in regulation and transparency, lingering scepticism about the commission continues to discourage participation.
Many informal sector workers prefer traditional savings methods or informal cooperative systems over structured pension schemes.
Pension operators, including leading Pension Fund Administrators, argue that incentives could play a critical role in accelerating adoption. Suggestions range from government-backed matching contributions to micro-incentives that reward consistent savings behaviour.
Financial literacy is another key issue. Experts note that a significant portion of the target population lacks a clear understanding of how the Personal Pension Plan works, including its flexibility, withdrawal options, and long-term benefits. Without sustained education campaigns, adoption rates may continue to lag.
Suffice it to state that while the National Pension Commission (PenCom) has made efforts to create awareness, albeit in piecemeal fashion, Pension Fund Administrators (PFAs) have remained largely laid back, with some arguing that the Personal Pension Plan (PPP) is capital intensive and, for now, commercially unviable.
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There are also operational challenges. While PenCom has introduced frameworks for pension agents and digital onboarding, access remains uneven, particularly in rural areas where infrastructure and digital penetration are limited. Bridging this gap will be essential to scaling the scheme.
Stakeholders further stress the need for collaboration. Market associations, cooperatives, and trade unions are seen as critical channels for onboarding informal workers at scale.
Financial analyst, Emeka Njoku said embedding pension products into existing community structures could significantly improve trust and participation.
Ironically, this coverage gap persists even as the industry’s asset base continues to soar, reaching over N28 trillion in early 2026.
The contrast between rising assets and low participation highlights what many describe as a system that is financially robust but socially under inclusive.
Ultimately, the success of Nigeria’s pension reform will depend not just on asset growth, but on its ability to extend protection to the millions currently excluded.
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Unfortunately, nearly two years after the reform push was initiated, not much appears to have changed in terms of traction and broad-based adoption.
Addressing journalists, she said: “What we are doing with a micro pension is treating it a little differently from how we were doing it before. As we know, the micro pension doesn’t resonate with everyone within the informal sector, and some operators have shared feedback about the players saying, ‘I’m not micro; I’m making millions in a month, and you want me to open a micro pension account.’ We want to rebrand the micro pension plan into a new one that will speak to every sector of the economy, including people who are at the bottom of the social strata.
“What we want to do is remodel the micro pension plan and let it speak to individuals in the informal sector directly, so whether you are a farmer, fashion designer, gatekeeper, etc., we will be meeting their needs with the products that will be coming out, and I’m sure we will be able to get more people in.”
She affirmed that operators in the sector have not been pushing the micro pension scheme as desired.
“You’re right, operators are not driving it. I can understand the challenges that some of them have highlighted. When we finish revamping the scheme, I believe everyone will come on board to drive it. In addition to rebranding, we are also looking at the technology that can work for us. The numbers we are looking at are enormous. Right now, we have over 10 million contributors under the Contributory Pension Scheme (CPS) in the formal sector, but under the informal sector, we have tens of millions of people. Based on the last numbers I saw, it was about 70 million.
“If we can drive this micro pension, I expect us to go up to 20 million Nigerians getting on the scheme, and the only way we can do that is with technology. It is a lot of work we are going to do on that and working with the operators so that we can ensure that between now and next year, we have more contributors,” she said.
Unfortunately, about two years after she made this statements, not much have changed.
