The National Pension Commission targets to cover 20million membership in the nearest future by extending coverage to the informal sectors of the economy. Pursuant to this, the Commission has secured the passage of the 2014 Pension Reform Act and this brings in the informal sector, as well as makes it mandatory for State Governments to participate in the Pension Scheme. In terms of actual coverage, the total pension scheme membership stood at 6.3million as at October, 2014, an annual growth rate of 8.5 percent since 2010. Furthermore, the total pension assets stood at ₦4.57trillion as at October, 2014 with an annual growth rate of 31 percent since 2010.
Pension gaps and solutions
Lack of confidence in the pension industry due to past scandals and experiences
Financial Literacy campaigns to educate the informal sector on the benefits of a pension scheme; developing a consumer protection framework for the industry
Very low penetration into the informal sector as majority of pension holders are public sector workers
PenCOM and PenOp need to develop a structured framework for the informal sector
Operators need to develop flexible products that accommodate the peculiarities of the informal sector.
Lack of knowledge of the pension industry coupled with the past scandals in the industry has left consumers wary of pension schemes. A lot of work needs to be done to educate the population on the benefits of pension schemes as well as the checks in place in order to ensure that the scandals of the pat are prevented. As a result, PenCOM and PenOp will collaborate with the CBN on the consumer protection framework as well as the review of the financial literacy framework.
The potential for exponential growth in the pension industry lies in the vast informal sector. However several factors hinder their participation in pension schemes such as little/irregular income, low levels of education and lack of suitable products. With this in mind, the onus is on PenCOM and PenOp to work together in 2015 to develop a framework for the informal sector. This framework will guide the design of products that will be suitable and affordable for consumers who know very little about pension and how they work.
National Insurance Commission (NAICOM) and their Impacts on Financial Inclusion
In line with the goal of deepening insurance penetration in Nigeria, the National Insurance Commission (NAICOM) has committed to financial inclusion through the Takaful (Islamic/Ethical Insurance) and micro insurance for excluded and low income segments of the population. Pursuant to the above objective, the agency launched the Takaful and micro insurance guidelines in November, 2013. To support implementation, a Micro-insurance Steering Committee was constituted in January, 2014, while at the same time efforts have been made to promote necessary financial literacy to ensure accelerated adoption of the product.
Security and Exchange Commission (SEC) and their Financial Inclusion Activities
The focal point of the Securities and Exchange Commission’s financial inclusion agenda is the use of collective investment scheme and non-interest capital market products as a platform for encouraging access to capital market products targeted at financially excluded populations. The agency has established a Financial Inclusion Division and launched a capital market master plan (2015-2025) that encapsulates financial inclusion objectives. Bench-marking on the Central Bank of Nigeria Financial Inclusion Strategy, the SEC is working on a Capital Market Financial Inclusion Strategy that will provide a framework and blueprint for the activities of participants in the market.