Micro pension scheme


The National Pension Commission [PenCom] has come up with a laudable pension scheme called Micro Pension Plan (MPP) for the informal sector. The plan is to cover those not involved in formal employment. The target includes those in trades like photography, catering, hairdressing, motorcycle services, tailoring, fashion designing, carpentry, painting etc.

The scheme launched by President Muhammadu Buhari in Abuja last week with the registration of tricycle (Keke NAPEP) operators in Karu, is geared towards mobilising some N3 trillion savings into the N8.6 trillion pension assets already accumulated in the country.


PenCom’s Acting Director-General Aisha Dahiru-Umar told beneficiaries of the scheme that MPP was initiated to ensure financial inclusion of all working Nigerians, ensuring that they are brought into the pension safety nets for their old age. Though the informal sector is not captured in generating the Gross Domestic Product (GDP) of Nigeria, the International Monetary Fund (IMF) estimated that it constitutes about 60% of the entire Nigerian economy. Its contribution to the economy is estimated to be about $240 billion, according to IMF. Though it is assumed that those in the informal sector are not highly educated, there are indications that Nigerians with high formal education find employment in the informal economy when well- paid formal sector jobs are unavailable.

The launch of MPP is a right step taken in the right direction, but a lot needs to be done in order to win the confidence of those in the sector. For instance, it is essential to properly educate the 69 million Nigerians who are targeted on the importance of saving part of their incomes, no matter how little, for their old age. Though many of them have adopted short-term saving strategies, there is need to encourage them to adopt long-term saving culture, which is what MPP is all about.


In order to achieve this objective, it is vital for PenCom to work with the various unions and associations to which those in the informal sector belong. To a great extent, those in the informal sector repose a measure of confidence in their associations and their leadership, such that if government can convince their leaders, members of the association could collectively embrace MPP. They should be given the assurance that their contributions to the scheme are safe. They must be guaranteed that their contributions to PenCom would not go the way of other schemes which were not properly account for.

This social safety scheme is being implemented in various measures and standards in several developing countries, especially in Asia. Countries like India, China, Thailand, Sri Lanka, Vietnam, Philippines, South Korea, Indonesia and Bangladesh have begun to experiment with the scheme. However, some measures should be put in place before this policy could be properly implemented. For one, there has to be insurance policy designs to cover those in the informal sector. Without insurance policies those whose sources of income are exposed to natural disasters or seasonal hazards may not be able to consistently contribute to the scheme.

Farmers whose crops are prone to floods or drought need insurance covers that would compensate them for poor harvests.  Also, PenCom should fashion out how to cover those who live in rural communities. The scheme, as now conceived, seems to target the informal sector in urban centres, which is only a fraction of Nigerians who are in that fold. A larger number are found in rural areas, many of whom cannot be accessed because of poor road and communications networks. It is essential to help them to form clusters that could be captured under the MPP.

It is for these reasons that we urge PenCom to think through the policy before launching into its full implementation. The pension scheme for the informal sector should not be a mere populist policy of government, but it should be meaningfully implemented to provide genuine safety net to vulnerable Nigerians.

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