Registering contributors (Retirement Savings Account (RSA) holders) under the Contributory Pension Scheme (CPS) is one of the main ingredients for the success of the CPS. Registration of contributors by Pension Fund Administrators (PFAs) under the Scheme started in February 2006.
Based on available data from the National Pension Commission (PenCom), the total number of contributors under the CPS as at 30 April 2020 was only 9,005,498 compared to Nigeria estimated population of around 200 million, even at a viable 10% estimated working population, that’s 20 million people.
This means that the CPS arguably still has the opportunity to at least double Retirement Savings Account RSA contributors. To increase the number of contributors under the CPS, among other reasons, PenCom in March 2019, launched the Micro Pension Scheme, which enables people working in the informal sector to participate under the Scheme.
In this piece, we are looking at the history, i.e increase in the number of RSA contributors from inception in February 2006 to end of April 2020 and the challenges of increasing RSA contributors in 2020.
RSA Contributors History
Pension Fund Administrators (PFAs) started registering contributors under the CPS in February 2006. As at the end of December 2006 a total of 1,504,297 Retirement Savings Account holders had been registered under the Scheme, with the public sector 1,036,839 having over double of the registration in the private sector 467,458. This was majorly due to the fact that the Federal Government ensured that its employees complied with the provisions of the Scheme by ensuring awareness among the public sector employees with series of sensitisation programmes focused on them at the early stages of implementation of the scheme.
As at 31 December 2007, total RSA contributors was 2,543,178 with a year on year increase of 1,038,881, representing 69% increase over 2006 and public sector contributors 1,754,028 continued to lead with over double the number of the private sector 789,150. As at 31 December 2008, the public sector still continued to take the lead in the number RSA contributors and the private sector was not able to even get close until 31 December 2013 when the total RSA contributors was 5,919,299 with public sector 2,970,144 and private sector 2,949,155.
Though the total number of RSA contributors increased over time, the rate of increase reduced year over year YoY. In 2007 the YoY increase was 69.06%, in 2008 it was 36.36% and it reduced further to 15.71% and 13.20% in 2009 and 2010 respectively. Between 2011 to 2014 the average rate on increase YoY in RSA contributors was 8.93% and it further reduced to 7% between 2015 to 2018. Though PenCom is yet to release its annual report for 2019 and it also did not release the monthly report for RSA contributors as at 31 December 2019, we were able to extrapolate the YoY increase for 2019 to be around 6% using the monthly figure as at 30 September 2019 and 31 March 2020.
The number of new RSA contributors for 2020 has been very low. The number of RSA contributors as at 30 April 2020 was 9,005,498 compared to the 8,850,000 as at 30 September 2019. This shows an increase of just 155,498 for seven (7) months representing an average increase of 22,000 per month compared to the average increase of 42,000 per month from 2010 to September 2019. The figure gets more concerning when we compare the actual figures released by PenCom for 31 March 2020, which is 8,998,567 with the 9,005,498 for 30 April 2020, this shows a mere 6,931 actual increase month on month.
What caused the sharp reduction in the usual increase in RSA Contributors for 2020?
Those not following the industry critically will quickly attribute the sharp reduction in the month on month increase of RSA contributors in 2020 to only the global Coronavirus pandemic. Acute industry watchers know that we also have to consider the Data clean up exercise going on in the pension industry. PenCom, the regulator for pension in Nigeria, in 2018 commenced a data clean up exercise for the industry in which one of the objectives was to identify and eliminate multiple registrations from the RSA Contributors Database.
The exercise was skeletal in 2018 and early 2019 but we noticed an increase in the exercise from last quarter of 2019 to 1st quarter of 2020. Also, coincidentally PenCom didn’t release the monthly report for number of RSA Contributors from June 2019 to February 2020. The figure we have for September 2019 was disclosed by the Acting Director General. Hajia Aisha Dahir-Umar, during a 2019 Journalists Workshop. The data clean up exercise would have resulted in the invalidation / deletion of some Retirement Savings Accounts. Unfortunately, PenCom has not been releasing the number of invalidated RSA contributors accounts so we might not be able to identify the actual number attributable to the data clean up exercise.
The Coronavirus pandemic in Nigeria which started around late February 2020 has had an adverse effect on practically every sector in Nigeria. It has led to some companies closing down, reducing salaries, or placing embargo on employment. It is also necessary to note that some sectors are still under lock-down i.e Schools, Churches, Clubs, Event centres etc. All these have contributed greatly to the reduction in the number of new employees that PFAs are able to register.