In a country in which the majority of entrepreneurs are self employed and have their enterprises operating in the shadows because they are not registered, the publication by the National Pension Commission (PENCOM) of the Draft Guidelines on Micro Pensions is welcome.
The Guidelines aim to segment the pensions market in such a way that the self employed or those who work in small businesses can finally at their own convenience incrementally put aside funds for pensions that will provide income security when they cease working either at the onset of old age or for health reasons.
Nationally, the pensions penetration rate is less than 8%. If uptake is successful, micro pensions will bring more people into the pensions net and perhaps help to achieve the penetration target of 40% by 2020, which is set out in Nigeria's National Financial Inclusion Strategy.
But success is by no means guaranteed.
In our Position Paper to PENCOM, we emphasized as follows:
"The success of micro pensions in Nigeria will ultimately be decided by the extent to which there is consumer acceptance and buy-in. We strongly believe that improving pension literacy and education will be critical. However, the Draft Guidelines as presently crafted only make a passing reference to this key strategy. We recommend that improving pension literacy and education should be highlighted and made a cross-cutting responsibility of all stakeholders."