Incorporating the informal sector in Nigeria into the Contributory Pension Scheme (CPS) – Dec 2013

The National Financial Inclusion Strategy for Nigeria identified pension offerings as a key financial product that will enhance the objective of reducing financial exclusion. To date, pension reforms in Nigeria have mainly focused on the public and formal private sectors, with limited participation from workers in the informal sector. Recognising the need to provide pension products to the informal sector, Enhancing Financial Innovation & Access (EFInA) in partnership with the National Pension Commission (PenCom), commissioned a qualitative study to understand how to incorporate the informal sector in Nigeria into the Contributory Pension Scheme (CPS). The study was conducted through Focus Group Discussions (FGDs) with 253 informal sector workers and current pensioners. The FGDs were held across five states in Nigeria (Enugu, Oyo, Kano, Lagos, and Rivers) and the Federal Capital Territory (FCT), in both urban and rural locations.

The study explored the following topics:

  • Current savings habits: Understanding the current saving habits of workers in the informal sector, including long-term savings approaches
  • Current use of financial products: Understanding the level of use of pensions and other formal financial products
  • Awareness about pensions: Documenting the level of awareness/understanding of pensions and customers’ perceptions of the perceived benefits and disadvantages of having a pension
  • Motivating factors: Ascertaining what would motivate informal sector workers to participate in a pension scheme
  • Challenges and incentives: Identifying obstacles that may prevent the successful implementation of pensions for the informal sector, and how best to address these obstacles, including potential incentives
  • Channel for receiving payments: Defining the appropriate channel(s) that the informal sector could use to make/receive pension payments
  • Communication channels: Highlighting potential approaches to educate the informal sector about pension products

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