The National Pension Commission (PenCom) is taking bold steps to revamp the Micro Pension Plan (MPP), aiming to make it more inclusive for millions of Nigerians in the informal sector. The initiative, which has struggled since its launch in 2019, is set to undergo significant changes to address its shortcomings.
The MPP, a voluntary pension programme introduced under the Contributory Pension Scheme (CPS), was designed to cater to self-employed individuals and employees in organisations with fewer than three staff members. However, with only 126,941 registrations as of March 2024—far below the government’s target of 8 million—it is clear the scheme has failed to meet its potential.
Speaking at the 2024 PenCom Media Conference in Lagos, the newly appointed Director General of PenCom, Ms Omolara Oloworaran, announced an ambitious goal of attracting 20 million informal sector operators into the MPP.
Challenges Since Launch
Launched in March 2019 by former President Muhammadu Buhari, the MPP aimed to provide retirement benefits to workers in the informal economy. This sector accounts for a staggering 92.7% of Nigeria’s working-age population, including artisans, traders, and small-scale business owners.
The scheme’s structure allows contributors to make partial withdrawals after a certain period, offering a degree of flexibility not found in traditional pension plans. Yet, low public awareness, mistrust of pension systems, and the absence of tailored solutions have hindered its adoption.
“The current Micro Pension Plan does not adequately resonate with all segments of the informal sector,” Ms Oloworaran acknowledged. “We want to rebrand and remodel the Micro Pension Plan to make it more inclusive and relatable, particularly for individuals in the informal sector. Whether you are a farmer, a fashion designer, or a trader, we want the plan to speak directly to your unique needs.”
The Path to Inclusion
PenCom’s new management is determined to bridge the gap between Nigeria’s pension system and its vast informal economy. With technology as a key driver, the commission plans to introduce innovative tools for mobile enrollment, real-time account management, and benefits administration.
“Technology will play a critical role in achieving this target,” Ms Oloworaran explained. “We are working to ensure that we have the right systems in place to manage the scale and incentivize participation. Operators will also play a more active role once the product is revamped.”
By leveraging digital platforms, PenCom aims to make pension contributions more accessible, even for individuals in remote areas. This approach could transform the scheme into a cornerstone of financial inclusion in Nigeria.
Tailored Incentives and Renewed Vision
To encourage participation, PenCom plans to introduce tailored incentives. These could include bonuses for consistent contributions, matching contributions for low-income earners, or discounts on enrolment fees.
“Since assuming office, my team and I have been focused on strengthening compliance, enhancing service delivery, diversifying pension assets to optimize returns, improving benefits, and expanding coverage to include more Nigerians, especially those in the informal sector,” Ms Oloworaran stated during her keynote address.
She added, “The micro-pension initiative is something we are very passionate about. It is our way of saying that no one should be left behind, no matter how small their earnings might be.”
Why the Focus on the Informal Sector?
The informal sector in Nigeria is not only vast but also vital to the country’s economy. According to a 2023 report by the National Bureau of Statistics (NBS), this sector contributes over 50% of Nigeria’s Gross Domestic Product (GDP). Despite its size and importance, it has remained largely excluded from structured retirement savings systems.
For many workers in this sector, old age is synonymous with financial insecurity. By expanding the MPP, PenCom seeks to reverse this trend and provide a safety net for millions.
Public Perception: A Barrier to Overcome
Despite its potential benefits, the MPP has struggled to gain public trust. Many Nigerians view pension schemes with skepticism, often associating them with bureaucracy and mismanagement.
PenCom’s efforts to rebuild confidence include public awareness campaigns and collaborations with industry stakeholders. The revamped scheme will also prioritize transparency and efficiency, ensuring that contributions are secure and accessible.
