NIGERIA experienced a critical turning point in its pension administration in 2004 with the introduction of a contributory scheme by the Federal Government. The Contributory Pension Scheme resonated widely. Twenty-five years on, it is still relevant.
Before then, pensioners had endured harrowing experiences in getting their benefits. Pitiable images of frail retirees have appeared on the front pages of newspapers and provided shock content on broadcast media.
The Pension Reform Act, signed by the Olusegun Obasanjo administration in 2004, established the CPS for both public and private sector employees.
This law, supervised by the National Pension Commission alongside Pension Fund Custodians and Pension Fund Administrators, replaced the unsustainable Defined Benefit Scheme, which depended heavily on budgetary allocations.
Under the CPS, employees and employers jointly contribute to each worker’s Retirement Savings Account, making the pension pool fully funded and more financially sustainable. The original minimum combined contribution was set at 15 per cent of monthly earnings, but was increased to 18 per cent under the 2014 amendment with strengthened compliance measures.
As of 2024, Nigeria’s pension assets reached N26.09 trillion, constituting 8.0 per cent of GDP, although this is below the global average of 29.44 per cent.
Despite progress, at least 26 states have yet to fully implement the CPS. In November, PenCom Director-General, Omolola Oloworaran, said, “17 states out of the 36 states in the country are currently implementing the Contributing Pension Scheme. Twelve states have not started at all, while seven states are at various stages of establishing their pension bureaus.” This is greatly disturbing.
She stressed that the success of Nigeria’s pension system depended on sub-national governments embracing the full implementation of the CPS/Contributory Defined Benefit Scheme and commended the states that had enacted pension laws and commenced contribution remittances for their workers. She is right.
The spokesperson for the Nigerian Union of Pensioners, Bunmi Ogunkolade, criticised state governments for foot-dragging on matters related to the payment of retirees’ gratuities and the implementation of the new pension scheme and urged speedy payment of outstanding entitlements.
In a country notorious for its shabby social safety nets, this means the future of workers in non-compliant states hangs in the balance.
Under the current system, 844,000 retirees are drawing monthly pensions; the scheme covers 10 million workers.
The Federal Government took a giant step forward this year after raising a N758 billion bond to clear the arrears of federal workers.
With states receiving more allocations after the petrol subsidy removal and the floatation of the naira, no state has an excuse not to implement the CPS.
So, states need to pay attention to the working conditions of their workers to guarantee a secure life after retirement.
The huge pensions awarded by some ex-governors to themselves drain the resources of states struggling with huge debts, poor capital budgets and bloated recurrent expenditure.
According to BudgIT, 28 states collectively owe retirees N626.81 billion in unpaid pensions and gratuities. BudgIT says Kaduna, Adamawa, Benue and Taraba now owe more in pensions and gratuities than they earn. This is bad governance.
Abia State Governor, Alex Otti, recently hinted at plans to settle pension arrears owed by previous administrations since 2001.
Katsina has promised to clear the N20 billion gratuity arrears it owes retirees. The state government declared its willingness to embrace the CPS when the chairman of the State and Local Government Pension and Gratuity Committee, Farouk Aminu, presented the newly enacted 2025 Pension Reform Law to journalists in the state capital recently.
He explained that the state government would retain the entitlements of workers with five years or less under a CDBS, while the benefits of others were being migrated to the CPS.
The new tax laws and enhanced fiscal resources should eliminate past delays in pension payments.
With independent Pension Fund Administrators safeguarding contributions from political interference and mismanagement, workers can expect greater security for their benefits.
The Nigeria Labour Congress must take a firm stand against governors undermining workers’ futures by failing to implement or properly manage pension schemes, ensuring that all states uphold their responsibilities to retirees and workers alike.
