The Nigeria Pensions Commission’s (PENCOM) aim to extend the current pension scheme to the informal sector is a herculean task, as it faces a host of challenges.
One of these is the fact that a large chunk of the sector comprise uneducated people who may see it as a form of taxation, analysts have observed.
If this situation persists, it means the majority of the nation’s workforce will be left without official welfare security cushions when they age and are no longer able to work.
The case is made worse by the erosion of the old Nigerian custom, where better-off and younger family members and even distant relations felt obliged to cater for the elderly and the indigent.
Already, an increasing number of elgerly and indigent Nigerians are seen squatting in the open as a result of lack of such support.
Speaking on the perception of the pension scheme in society’s lower stata, Olugbenga Olufeagba, chief economist at Edward Kingston associates in Lagos says ,“No doubt, it is a difficult task, but with proper education and sensitisation, the informal sector will buy into it.”
“The people may also feel it is a way by which the government wants to know how much they earn, so they can tax them eventually,” Olufeagba added.
The informal sector employs about two-thirds of the labour force, according to data from the Nigeria Bureau of Statistics (NBS), which suggests that there is a huge market if a number of them can subscribe to the pension scheme.
The NBS statistics further reveals that of all job creation in 2013, the informal sector which comprise of people in the informal productive and service subsector had 54 percent (232,327) of the total employment.
One of the major challenges according some analysts is convincing these people who have distrust for government policies to contribute to the scheme.
There is also the issue of mistaking the new scheme with the old which has a negative connotation and is almost synonymous with fraud in the eyes of the public.
It will be recalled that series of frauds have been perpetuated where police pension money have been diverted to private pockets by their custodians.
Recently, the Economic and Financial Crimes Commission (EFCC) traced N1.1 billion stolen pension fund money to the account of the Chief Accountant (Uzoma Cyril Attang) of the police pension office.
There are two broad ways to bring the informal sector in, according to Olufeaba.
Pencom can either use a community based approach by leveraging on the communal authority they already trust, or use the, “occupational association approach, which helps bring people under the same umbrella together.”
Festus Onyebula, owner of Frankman Chemist, a small business outfit, says that majority of his peers may not buy the idea of the contributory system as they are not enlightened enough to know the long run benefits of a retirement scheme.
“The easiest way to get to these people is to use the associations and trade unions which they belong to, as they are more attentive during these meetings,” said Onyebula.
It is not easy managing this category of people,s as proper communication mechanisms have to be in place by way of sensitization, to convince them of the benefits of the scheme,” according to Martin Oluba, economist and Founder Value Frontier Limited, a consultancy firm.
“The first major challenge in forging ahead with this initiative is managing the challenge of low literacy which characterises this sector,” Oluba said.
“This is largely responsible for most of the observed self-exclusion of the participants from the financial system.”
Pension assets in Africa’s second largest economy have surged twelve-fold from N265 billion or 1.4 percent of Gross Domestic Product (GDP) in 2006 to today’s level of N3.72 trillion equivalent to 8.5 percent of GDP.
However only about 5 million people (10 percent of the working age population), are contributing to the scheme, from a total possible pool of 50 million.
The Acting Director General of Pencom Chinelo Anohu – Amazu has said regulations are on the way to encourage people in the informal sector to open more Retirement Savings Accounts.
“We will keep working on the formal sector, while we will focus more on increasing the figures for the informal sector as these people have been disenfranchised,” said Anohu – Amazu, at the FBN capital conference in Lagos last week.
The current N3.7 trillion in Pension assets is insignificant, considering the size of the economy and population of Nigeria, according to Olufeagba.
“The potential is huge, and should be speedily and carefully harnessed,” he added.
“The average education level of many in the informal sector is low hence, PENCOM needs to educate these people by creating enough awareness and highlighting the benefits of the scheme,” he further stated.
By: BALA AUGIE
