Pension Gaps and Inflation: The struggle for a secure Nigerian retirement

Joy Agwunobi

Across the African continent, the aspiration for a peaceful and financially secure retirement has remained a common dream for generations. For many today, particularly in Nigeria that vision is becoming increasingly difficult to attain.

The harsh realities of the current economic landscape, defined by soaring inflation, a continually rising cost of living, and limited access to pension schemes for millions of workers, especially those in the informal sector, have made retirement planning more complex and uncertain than ever.

In Nigeria, as in many parts of the world, retirement is typically triggered by age, health challenges, or the completion of the statutory 35 years of service, especially within the public sector. According to Nigeria’s Public Service Rules, the mandatory retirement age for civil servants is 60 years or 35 years of pensionable service.

Yet, instead of marking the beginning of a period of rest and fulfillment, retirement is often viewed by many as the start of financial hardship. For a significant number of workers, the absence of a regular monthly income after retirement presents a daunting reality.

Countless retirees are left grappling with the burden of meeting basic needs ranging from food and shelter to increasing  healthcare costs. This transition, often devoid of a reliable safety net, generates a deep sense of anxiety in a country where social welfare systems remain inadequate.

In response to growing concerns over the inadequacies of the former pension structure, Nigeria implemented the Contributory Pension Scheme (CPS), a reform intended to replace the flawed and corruption-prone defined-benefit system. The CPS was introduced as a means to ensure sustainable financial support for retirees through a more transparent and accountable system. However, despite its potential, the scheme’s reach remains disappointingly limited.

A report published in the Journal of Law and Sustainable Development reveals that only about 15 per cent of Nigeria’s labor force—approximately 10.5 million individuals are currently enrolled in the CPS. This statistic highlights the vulnerability of the majority workforce, many of whom remain outside the formal pension safety net and continue to depend on personal savings or support from extended families—an arrangement that is proving increasingly unreliable in today’s economic climate.

In light of Nigeria’s persistent economic pressures, experts and stakeholders in the insurance and financial sectors have urged Nigerians to take greater ownership of their retirement planning.

This call was a central theme at a recent industry summit focused on the future of retirement in Nigeria, the event theme: “Attaining Good Retirement Amid Economic Headwinds,” sought to reshape public perceptions of retirement and empower individuals to plan early and strategically, so they can enter this life stage with confidence and peace of mind rather than fear and uncertainty.

Bringing together a wide spectrum of participants—including industry experts, policy stakeholders, insurance professionals, and financial advisors—the summit served as a platform to address the deep-rooted challenges confronting Nigeria’s retirees and to explore sustainable solutions for financial security in old age.

During the event, Olusegun Omosehin, the chief executive officer of the National Insurance Commission (NAICOM) and commissioner for Insurance, represented by Julius Odidi, the Lagos State director of NAICOM, highlighted the critical role that long-term financial planning and risk management play in securing a stable and reliable retirement.

Omosehin underscored the necessity of proactive retirement savings and investment strategies, stressing that individuals should  adopt a long-term perspective to counteract the challenges posed by inflation, market fluctuations, and demographic shifts.

He noted, “The reality today is that more individuals are nearing retirement with significant concerns about the sustainability of their income, healthcare costs, and the adequacy of their pension savings. These are not  just abstract figures—they reflect the daily struggles of millions of Nigerians.”

The CEO called upon all stakeholders, including regulators, insurers, pension administrators, and policymakers, to confront these challenges with innovation, empathy, and resilience. “As regulators and industry leaders, we must rise to the occasion and ensure that our systems are equipped to safeguard the financial future of our citizens,” he stated.

In his address, Omosehin stressed that effective retirement planning should be anchored in financial protection and robust risk management. He emphasised the importance of tools such as annuities, life insurance, and structured retirement savings plans, which play a pivotal role in ensuring long-term financial stability. “These financial instruments are not just tools—they are critical components for providing peace of mind in later life. We must make sure that these products are accessible, transparent, and responsive to the evolving needs of our aging population,” he explained.

Omosehin further advocated for policy alignment across the insurance, pension, and financial sectors. He emphasised that regulations must focus on long-term goals, rather than reactive, short-term solutions. He also called for increased financial literacy, particularly for workers in the informal sector who often lack access to formal retirement plans.

Highlighting the need for closer cooperation between insurers, regulators, and policymakers, Omosehin urged for the development of innovative and inclusive retirement products.

He suggested leveraging micro-insurance and digital platforms to extend coverage and ensure that no segment of the population is left behind. “We must ensure that our policies across the various sectors are in harmony. Regulation should be enabling, responsive, and focused on creating long-term value rather than immediate returns,” he concluded.

Similarly, Fola Daniel, director of FBS Reinsurance Limited, also stressed that financial stability in retirement is achievable through proactive planning, disciplined savings, smart investment strategies, and the flexibility to adapt to changing circumstances. “With the right approach, a financially stable and fulfilling retirement is within reach,” Daniel noted.

Funmi Sesi, the chairperson of the Nigeria Labour Congress (NLC) Lagos Chapter, called on all levels of government to ensure full compliance with the Contributory Pension Scheme (CPS).

She highlighted that only six states are fully adhering to the policy, which remains a significant challenge in achieving broader pension coverage across the country.

Sesi also emphasised the critical importance of timely gratuity payments to retirees. She cautioned that delays in these payments could lead to financial instability for retirees, underlining the need for efficient processing and disbursement of funds. According to Sesi, a failure to prioritise this could have far-reaching consequences, not only for retirees but also for the overall pension system’s credibility and sustainability.

Additionally, Babatunde Oguntade, President of the Nigerian Council of Registered Insurance Brokers (NCRIB), proposed a forward-thinking approach to pensions.

He recommended that pensions should start from the very first day of a child’s life. “The moment a child is born,” Oguntade said, “they should receive a national identification number, and the government should set aside a small amount for their pension. By the time they enter the workforce, financial literacy and discipline would have already been instilled.” This, he believes, would contribute to a more financially aware and prepared future generation.