LAGOS, NIGERIA — A new report has revealed that approximately 90 per cent of Nigerian adults lack formal pension coverage, despite an increase in overall financial inclusion to 79 per cent in 2026, highlighting a critical gap in the country’s social protection framework.
The report, titled “Financial Inclusion and Social Protection in Nigeria: 2026 Assessment,” was released on Wednesday by the Enhancing Financial Innovation and Access in collaboration with the Central Bank of Nigeria and the National Pension Commission. It found that while more Nigerians now have access to financial services, the vast majority remain without any form of formal retirement savings or pension arrangement.
According to the report, only about 10 per cent of Nigerian adults are covered by any formal pension scheme, including the Contributory Pension Scheme, the Micro Pension Plan, and other employer-sponsored retirement arrangements. The remaining 90 per cent, comprising mostly self-employed individuals, informal sector workers, and rural dwellers, have no formal pension coverage.
Key Findings
The report noted that the informal sector, which accounts for over 80 per cent of Nigeria’s workforce, remains largely excluded from formal pension arrangements. It found that only 2.5 per cent of informal sector workers participate in the Micro Pension Plan, which was introduced by PenCom in 2019 to extend pension coverage to self-employed Nigerians. The report attributed the low uptake to inadequate awareness, low income levels, and the absence of incentives for informal sector participation.
The report also revealed significant regional disparities in pension coverage. Urban areas recorded higher coverage rates, with Lagos, Abuja, and Port Harcourt accounting for the majority of pension contributors. Rural areas, particularly in the North-East and North-West regions, had the lowest coverage rates, with less than 5 per cent of adults covered by any formal pension scheme.
Causes of the Pension Gap
The report identified several factors responsible for the low pension coverage, including the dominance of the informal sector, low financial literacy, inadequate awareness of pension products, and the lack of enforceable regulations for informal sector participation. It also noted that many employers, particularly small and medium enterprises, fail to remit pension contributions for their employees, further worsening the coverage gap.
“The low level of pension coverage in Nigeria is a ticking time bomb. If urgent action is not taken, millions of Nigerians will retire into poverty, with no source of income to sustain themselves in old age,” said Dr. Olayinka Adebayo, a social protection expert who contributed to the report.
Recommendations
The report recommended a multi-pronged approach to expanding pension coverage, including the introduction of incentives for informal sector participation, the simplification of pension enrolment processes, and the use of technology to reach underserved populations. It also called for stronger enforcement of existing pension regulations and the establishment of a national social protection framework that integrates pension with other social safety nets.
The Director-General of PenCom, Mrs. Aisha Dahir-Umar, said the commission was working to expand pension coverage through the Micro Pension Plan and other initiatives. She said PenCom had embarked on a nationwide sensitisation campaign to educate Nigerians about the benefits of pension savings.
“We are committed to ensuring that every Nigerian has access to some form of pension coverage. The Micro Pension Plan is designed to capture the informal sector, and we are working with stakeholders to increase awareness and participation,” she said.
Financial inclusion experts have called for a more aggressive approach to pension expansion, noting that financial inclusion without social protection is incomplete. The EFInA report noted that while financial inclusion had increased to 79 per cent in 2026, the gains had not translated into improved social protection for the majority of Nigerians.
“The challenge is not just about access to financial services; it is about ensuring that financial services translate into improved welfare and security for all Nigerians. Pension coverage is a critical component of that,” said EFInA Chief Executive Officer, Esme O’Keeffe.
As Nigeria’s population continues to grow and the informal sector expands, the pressure to expand pension coverage will intensify. The report’s findings serve as a wake-up call to policymakers and financial institutions to take urgent action to address the pension gap before it becomes a full-blown crisis. For now, millions of Nigerians face an uncertain future in retirement, with no formal pension to fall back on.
