In Nigeria, the word “pension” evokes different reactions. For many civil servants and corporate workers, it symbolizes hope for a near-comfortable retirement. However, for the majority of Nigerians working in the informal sector, it represents a bleak future. These are the market traders, motorcycle riders, small-scale farmers, artisans, and workers in countless micro and nano-scale businesses. With approximately 90% of Nigeria’s workforce operating outside the formal economy, pension coverage for informal workers is almost non-existent. Believe me this has serious implications, as millions of Nigerians are facing old age without financial security, retirement plans, or any form of pension to rely on. The absence of meaningful pension participation in this sector intensifies the vulnerability of the elderly, deepens poverty, and places undue pressure on families who are ill-equipped to provide support.
The importance of pension coverage for informal workers in Nigeria cannot be overstated. These workers form the backbone of the economy, and their well-being directly affects the country’s economic stability. Without a pension system, the elderly in the informal sector faces a future of poverty and insecurity, impacting not only their lives but also the economy at large. Having a pension system in place for informal workers is essential to ensure dignity, security, and well-being as they transition into retirement. Pensions for informal workers in Nigeria is not just a technical issue, it is a matter of social and economic stability, deeply connected to Sustainable Development Goal 1 (No Poverty) and Sustainable Development Goal 3 (Good Health and Well-Being). These goals emphasize the need for a society where all citizens have access to financial security, especially in their later years.
Nigeria’s current pension system, based on the Contributory Pension Scheme (CPS), has made strides for formal sector workers. However, the informal sector remains largely excluded. In 2019, the Micro Pension Plan (MPP) was introduced to address this gap, aiming to provide a voluntary contributory framework for informal workers. Unfortunately, its uptake has been underwhelming. After several years, only a small fraction of the millions targeted have enrolled, and even fewer make regular contributions. The primary challenge here is that informal workers, unlike their formal counterparts, do not have regular incomes, making pension contributions difficult. They also face a lack of documentation, limited financial literacy, and a deep mistrust of government institutions, making it hard for traditional pension models to meet their needs. For example, a motorcycle rider in Lagos who makes around ₦14,000 on a good day faces numerous daily expenses such as fuel, bike maintenance, “settlements,” and family expectations. How can such a commercial rider commit to a regular pension contribution when their income fluctuates wildly? This illustrates why the Micro Pension Plan has struggled to gain traction among informal workers. The plan’s complexities, lack of tailored flexibility, and the need for more awareness and trust have limited its impact. To truly make pensions work for informal workers, Nigeria must rethink its approach, designing a system that accommodates the unique realities of informal workers rather than forcing them into rigid formal-sector structures.
One source of hope lies in innovation. Fintech-driven pension models that allow small, frequent contributions, similar to informal savings practices like esusu (rotating savings), can make pensions more accessible. Digital technology offers a transformative solution. By using mobile-based platforms linked to Bank Verification Numbers (BVN) or National Identification Numbers (NIN), informal workers could make daily, weekly, or even micro-contributions as small as ₦500. Such contributions could seamlessly integrate with fintech apps like OPay, Paga, or bank USSD services, making savings as simple as buying airtime. Simplified contribution schedules, designed to accommodate irregular earnings, can increase participation. Additionally, strengthening enforcement and ensuring transparent management of pension funds will build trust in the system. If Nigeria can create a pension framework that aligns with the realities of informal workers, it can guarantee that those who built the country’s economy will retire with dignity, security, and improved well-being.
Beyond innovation, public education is essential. To increase participation in pension schemes, financial literacy campaigns must be launched to educate informal workers on the benefits of retirement savings. Collaborations with community leaders, trade associations, and digital platforms can help shift perceptions, making pensions not a distant bureaucratic program but an accessible form of self-insurance. Given Nigeria’s large and growing population, integrating informal workers into the pension system is critical. The country’s aging population will increase in the coming decades, and without a structured pension system for informal workers, Nigeria faces the risk of a serious old-age crisis, one that could lead to mass poverty, social unrest, and greater pressure on healthcare and social services. The role of Sustainable Development Goals (SDGs), particularly SDG 1 (No Poverty) and SDG 3 (Good Health and Well-Being), cannot be overlooked. A pension system for informal workers contributes directly to these goals by ensuring financial security for the elderly and promoting better health outcomes in old age. A society that provides for its elderly not only ensures their well-being but also fosters a sense of social stability and cohesion. When informal workers can retire with financial security, they no longer become a burden on their families or society at large. Instead, they can continue to contribute to their communities with dignity and peace of mind. Ultimately, transparency and accountability are essential to the success of any pension system. Regular public reporting on pension funds, contributions, and growth will reassure citizens that their money is being managed responsibly.
If Nigeria combines innovation with a commitment to transparency, it can reduce the uncertainty surrounding the future of its informal workers. Policymakers must act boldly, creatively, and innovatively to address this issue. A nation that allows its hardest workers to age in poverty undermines the essence of key SDGs. However, a nation that secures its workers’ retirement not only builds better pensions but fosters peace and prosperity and aligns with many SDGs. For a country where the majority of workers are in the informal sector, excluding them from pension coverage is not just an oversight it is a major structural weakness. Addressing this gap is crucial for Nigeria’s long-term prosperity and social cohesion. By adopting innovative solutions, fostering financial literacy, and aligning pension reforms with national development goals, Nigeria can build a more inclusive and resilient pension system, ensuring a better future for all its citizens. Good luck!
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Dr. Timi Olubiyi is an expert in Entrepreneurship and Business Management, holding a Ph.D. in Business Administration from Babcock University in Nigeria. He is a prolific investment coach, author, columnist, and seasoned scholar with good international networks. Additionally, he is a Chartered Member of the Chartered Institute for Securities and Investment (CISI) and a registered capital market operator with the Securities and Exchange Commission (SEC). He can be reached through his Twitter handle @drtimiolubiyi and via email at drtimiolubiyi@gmail.com for any questions, feedback, or comments. The opinions expressed in this article are solely those of the author, Dr. Timi Olubiyi, and do not necessarily reflect the views of others.
