Joy Agwunobi
More than five years since the launch of Nigeria’s Micro Pension Scheme (MPS)—a potentially transformative initiative aimed at integrating informal sector workers into the nation’s retirement savings net—the programme continues to grapple with low adoption, waning momentum, and systemic implementation challenges.
As concerns mount over the financial future of millions of Nigerians working outside the formal employment system, the scheme’s slow progress raises pressing questions about the country’s readiness to bridge the pension inclusion gap.
Introduced in 2019 by the National Pension Commission (PenCom), the Micro Pension Scheme was crafted as a flexible, voluntary retirement savings plan targeting self-employed professionals and informal workers traders, artisans, drivers, domestic staff, and freelancers who dominate Nigeria’s labour force but are largely excluded from conventional pension systems.
With Nigeria’s informal sector accounting for an estimated 93 percent of total employment, according to United Nations data, the scheme was envisioned as a cornerstone of the government’s broader financial inclusion strategy. It set an ambitious target: to cover 30 percent of the country’s working population by 2024.
However, that vision remains far from reality. As of December 2024, PenCom’s Q4 report revealed that only 172,936 contributors had enrolled in the Micro Pension Plan (MPP), a figure that falls dramatically short of the initiative’s targets and underscores its struggle to gain traction among the over 75 million Nigerians estimated to be in the informal workforce.
The informal sector remains a vital engine of Nigeria’s economy, not just in scale but in impact. According to estimates from the International Monetary Fund (IMF), this sector contributed a substantial 57.7 percent to Nigeria’s Gross Domestic Product (GDP) in 2022, a figure that underscores its centrality to sustaining livelihoods, fueling grassroots commerce, and driving household-level consumption across the nation.
However, despite its economic significance, the informal sector continues to be grossly underserved when it comes to access to long-term financial security instruments such as pension plans. While many workers in this segment earn enough to support basic savings, those earnings often do not evolve into structured or sustained financial planning.
This disconnect is further amplified by the financial behaviour of many informal workers, who often opt for short-term speculative ventures in place of structured savings. Analysts observe that gambling platforms particularly sports betting as well as high-risk investment schemes have become more familiar, and arguably more attractive, to this demographic than pensions. The allure of quick returns, especially in an economically volatile environment, has led to billions of naira being channeled into such ventures annually. In sharp contrast, pension products which are designed to build wealth gradually over several decades—remain largely unattractive to a populace grappling daily with inflation, income uncertainty, and the pressure of immediate financial needs. For many, the promise of future benefits does little to counter the urgency of present-day survival.
Several underlying factors have contributed to the micro pension scheme’s slow adoption in Nigeria. Among the most cited are the lack of financial literacy and limited awareness about retirement planning, particularly within the informal sector. In addition to these, widespread institutional mistrust and the broader economic instability marked by soaring inflation and persistent poverty have created an environment in which long-term planning is both difficult to prioritise and harder to conceptualise.
Speaking at a recent stakeholder engagement forum themed “Attaining Good Retirement Amid Economic Headwinds,” Olugbenga Oriowo, head of the High Net-worth Clients (HNC) Unit at Leadway Pensure PFA, drew attention to the stark disparity between the informal workforce’s size and its participation in the Micro Pension Scheme
“The informal sector in Nigeria is estimated to account for over 75 million individuals,” Oriowo stated. “Yet, as of February 2025, less than 0.23 percent of this group is actively enrolled in the Micro Pension Scheme. That’s a deeply concerning gap.”
He described this mismatch not just as a policy failure, but as a structural vulnerability that poses both economic and societal risks. According to him, the individuals left out of the pension net are traders, artisans, drivers, hairdressers, tailors, and domestic workers—representing the very backbone of the country’s day-to-day economy. Without structured retirement plans, they face an elevated risk of old-age poverty and lifelong financial instability.
“This is an economic paradox. These are everyday Nigerians, and without deliberate, coordinated interventions both in policy and public awareness—we risk condemning millions to dependency and diminished quality of life in their later years,” Oriowo noted.
He emphasised that aging without a safety net is a growing threat that must be tackled with urgency, noting that the consequences of inaction are both predictable and avoidable. “The specter of old-age poverty looms large for millions, and it is a problem we can no longer afford to ignore,” he warned.
Amid these concerns, the National Pension Commission (PenCom) is working to broaden the public’s understanding of the Micro Pension Plan’s scope. During a recent interview session in Lagos, Babatunde Alayande, head of the Micro Pension Department of the commission, clarified that the initiative is not exclusively tailored for Nigeria’s informal sector.
According to him, the scheme also caters to a wide range of self-employed professionals such as accountants, lawyers, engineers, and town planners—particularly those working independently or within organisations that employ fewer than three people.
Alayande explained that a major focus of the commission’s current efforts is dispelling the notion that the Micro Pension Plan is only intended for artisans, traders, and other low-income earners. “Part of what the commission is working on is to raise awareness by clarifying that micro pensions are for all categories of self-employed individuals, not just informal sector workers,” he said.
To boost participation and reignite interest, PenCom is also working to introduce targeted incentives, especially for contributors in the informal economy. Among these proposals is the integration of additional benefits, such as access to basic health insurance, alongside pension contributions. The goal, Alayande noted, is to offer immediate value in addition to long-term savings.
“We want people to understand that this is not just about saving for retirement,” he explained. “There will be tangible short-term benefits as well. For example, we are exploring basic health insurance coverage for contributors in the informal sector. That way, they are not just setting aside money, they are also gaining something meaningful in the present.”
He also highlighted the scheme’s flexibility, designed to accommodate the unpredictable cash flows that often characterise informal and self-employed workers. “The commission has ensured that contributions into the Micro Pension Plan are flexible. You can contribute daily, weekly, monthly, or quarterly, depending on the type of work you are doing,” Alayande added.
Reinforcing this perspective, Ibrahim Garba Buwai, head of Corporate Communications of PenCom, described the Micro Pension Plan as a vital financial inclusion strategy that gives informal sector workers a safety net they can rely on in the future. He explained that the scheme was structured to reflect the unique financial realities of its target audience.
“The micro pension framework takes into account the peculiarities of this segment,” Buwai said. “We know they have ongoing needs, which is why 40 percent of their Retirement Savings Account (RSA) balance is made available for contingent withdrawals. Whether it’s for medical bills, children’s school fees, or other emergencies, contributors can access that portion when necessary. The remaining 60 percent is preserved strictly for retirement.”
By structuring the scheme this way, PenCom aims to strike a balance between present-day financial demands and future security, hoping to overcome the perception that pensions are an inaccessible luxury in a country where economic survival is often a day-to-day struggle.
However, while PenCom continues to drive awareness and introduce practical innovations, experts argue that more foundational reforms are needed to achieve sustainable, widespread uptake of the Micro Pension Plan. An advisory by PwC Nigeria noted that while sensitisation and education are critical, they are not sufficient in isolation.
“Most implementation challenges can be overcome through sustained communication and a well-designed micro pension framework supported by robust technology platforms,” the PwC report stated. It recommended leveraging scalable, cost-effective digital tools such as mobile applications and social media to amplify outreach and engagement—particularly with younger, tech-savvy informal workers.
However, the advisory also acknowledged the limits of voluntary enrolment in a nation where millions still face daily struggles to afford food, shelter, and clothing, noting that for those on the margins of poverty, saving for retirement—no matter how flexible the plan can seem irrelevant or even impossible.
To bridge this gap, PwC proposed that Nigeria consider adopting a broader, government-backed support model, drawing inspiration from global best practices from countries like Australia, Spain, and Greece, for instance, have implemented multi-pillar pension systems in which voluntary contributions are complemented by government co-contributions, particularly for low-income earners.
“Given the socioeconomic context in Nigeria, a social assistance programme should be introduced to cater to the poorest elderly citizens who were unable to contribute meaningfully during their active years,” the advisory recommended.
Such a system, PwC added, could be either universal or means-tested, ensuring that no Nigerian is left entirely vulnerable in old age regardless of their ability to contribute to a pension plan during their working life.
