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PENSION AND THE INFORMAL SECTOR



The pension scheme should be more inclusive
After 11 years of the administration of the Contributory Pension Scheme (CPS) in Nigeria, an estimated 73 million adults are yet to participate in the scheme. What that means in essence is that majority of our people could spend the latter end of their lives in destitution. But the main challenge has to do with the fact that the CPS seems to have left the informal sector behind.

Despite recent efforts by the National Pension Commission (PENCOM) to redress the situation, the reality is that the current pension regime serves only employees in the formal sector and is yet to evolve to cater to the peculiarities of informal sector participants. The bus driver, the petty trader, the house maid, the newspaper vendor, artisans and contract workers, to mention a few of those who constitute this informal sector, are still excluded. Yet this is a very important sector where many of its participants depend on slim margins and commissions on trade to eke out a living.


However, to the extent that PENCOM has already identified some of the challenges within the informal sector to include low, irregular and sometimes undefined incomes except those on fixed salaries, highly mobile and flexible jobs and lack of permanent work address in many instances, we urge the commission to begin to find workable solutions that would help to bring more inclusion.

Indeed, it is possible to serve the informal sector and the urgency to do so cannot be over emphasized. A solution can easily be found once the regulator is able to recognise the peculiarities of the sector and develop strategies that will encourage contributions from the participants on a regular basis. But that would require thinking outside the box with the realisation that there is an urgent need to capture a huge percentage of Nigerians who have been practically left behind.

As things stand today, the CPS must be deepened to provide social security to low income earners in both the formal and informal sectors, especially those who diligently contribute their (paltry) sums. In other words, such contributors must be guaranteed a minimum payout given pre-defined parameters. This would be an incentive to low-income workers, particularly those within the informal sector to contribute to their retirement savings accounts as regularly as possible.

In addition to developing strategies that encourage contribution, the regulator must embark on significant awareness/enlightenment campaigns to inform people of the benefits of pension contribution and ease their fears about the genuineness of the current pension system. The Nigerian pension system must go beyond serving 6.4 million adults (figure as at end of March 2015) to becoming more inclusive in order to actualise the purpose for which the contributory pension system was established. This pension system cannot become another source of inequality between the rich and poor or between the formal and informal sectors.

We commend the PenCom for its current nationwide inter-face with workers in the informal sector ahead of the commencement of the micro-pension scheme expected to take off before the end of this year. Addressing participants at the one day workshop for self-employed tailors and garment workers affiliated to the National Union of Textile, Garment and Tailoring Workers of Nigeria (NUTGTWN) in Lagos, Director-General of PenCom, Mrs. Chinelo Anohu-Amazu, disclosed the plan to bring over 50 million workers in the informal sector into the CPS using the Micro Pension initiative.

To achieve that objective, the PENCOM authorities must therefore act deliberately by moving beyond current achievements to what can be done to exponentially increase scale of coverage and to indeed make this a contributory pension system for all. We believe it is possible and we urge Anohu-Amazu and her team to redouble their efforts in that direction.
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