Nigeria: Retirement savings, pension scheme under threat over job losses

The Contributory Pension Scheme (CPS) in Nigeria is facing a growing challenge due to the alarming rate of job losses nationwide.

According to a report unveiled by the Pension Fund Operators Association of Nigeria (PenOp), a staggering 475,230 Nigerians have tapped into their Retirement Savings Accounts (RSA) between 2011 and 2023, withdrawing a total of N208.86 billion.

The report, citing data from the National Pension Commission, highlights a concerning trend where individuals who lost their jobs had to fall back on their pension savings.

Under Section 7(2) of the Pension Reform Act 2014, individuals who voluntarily retire, disengage or are disengaged from employment can withdraw up to 25 per cent of their total RSA balance with the approval of the National Pension Commission.

This withdrawal is allowed after four months of cessation of employment, provided the individual does not secure another job.

A breakdown of the figures reveals the severity of the situation. In 2011, over N3.86 billion was accessed by more than 27,000 RSA holders. By 2015, the amount surged to N32.50 billion, withdrawn by 125,395 individuals who lost their livelihood due to unemployment.

In the third quarter of 2019, N116.88 billion was accessed by 331,003 RSA holders, and by Q3 2022, N182.2 billion was withdrawn by 443,720 individuals. As of Q2 2023, a substantial N208.86 billion was drawn by 475,230 job losers nationwide.

Aguche Agudah, CEO of PenOp, highlighted that while the number of contributors to the pension scheme has grown from 2,543,271 to over 10 million by July 2023, the rate of withdrawals due to job losses remains a significant concern.

The President of PenOp, Olimide Oyetan, emphasized the positive impact of the Pension Reform Act, acknowledging its role in providing a secure future for millions.

Comparing it to the telecommunications revolution, Oyetan highlighted the transformational nature of reforms that positively impact citizens’ lives.