By Victor AhiumaYoung

Federation of Informal Workers of Nigeria, FIWON, has said only government part funding of the Micro Pension Plan, MPP,  can make the informal sector workers key into the scheme with enthusiasm. 

General Secretary of FIWON, Gbenga Komolafe, lamented that it is said less than 100,000 informal workers have joined the MPP while estimated 65 million informal workers remain excluded since commencement of the scheme. 

Quoting from the Women in Informal Employment Globalizing and Organizing, WIEGO, based in Manchester, UK, he said It had been observed that individual long-term savings schemes such as MPP, cannot guarantee adequate retirement incomes for most informal workers, saying   A Ghanaian study shows “…Based on the average membership age of 48 and a standard monthly contribution of US$15, by the time workers reach 60 their payout would amount to just US$2,468.

“This cannot ensure that people will not outlive their savings in little time… Government support in the form of matching subsidies could play an important role in enhancing the reach, sustainability and impact of the Trade Union Congress-Union of Informal Workers Associations TUC–UNIWA, scheme. This would enable the scheme to extend beyond its current consumption-smoothing function to enable insurance, poverty relief and redistribution”.

Komolafe argued that “This study mirrors FIWON’s fear right from the inception of the Nigerian MPP. Consistently, FIWON has maintained that the meagre savings that the average informal worker can afford, without comple-mentary support, will largely be gutted by inflation in the long term. Government support will also encourage rapid uptake of the scheme by informal workers who would like to take advantage of such support. So far about 100,000 informal workers have joined the MPP while estimated 65 million informal workers remain excluded.

“The fear about how government part funds the MPP is not without merits.“But it is our considered opinion that if government has the most basic political will, Government could explore innovative means to raise the funds. More importantly, it should be realized that pensions are historically, a means of savings for the long term while in the mean time; the funds are available for government to fund infrastructural projects through bonds issues. So a government funded MPP really is a win, win in the long term.”

Recall that at a recent workshop organised for members of the Labour Writers Association of Nigeria, LAWAN, in Lagos, by PenCom, its Head Micro Pensions Department, Dauda Ahmed, while speaking on “Facilitating Financial Inclusion in the informal sector through the MPP”, had explained that it was imperative to have informal workers be financially inclusive as it’s a tool for economic development, particularly in the area of poverty reduction, employment generation, wealth creation.

He noted that it was also a way of improving welfare and general standard of living as a policy response to ensure that informal sector workers have an opportunity to save for old ages.Ahmed explained that “MPP is a long term voluntary financial plan for the provision of pension coverage to the self-employed, and persons working for organizations with less than three employees who are mainly in the formal sector.”

He enumerated benefits of MPP to include “improvement of the standard of living of the elderly as it provides a regular stream of benefits at old age and provides access to other incentives. It secures financial autonomy and independence of retirees. The contributions will be passed to the next of kin in case of the contributor’s death. There is mandatory contribution under MPP.”

Speaking on the challenges of MPP, Ahmed lamented insufficient awareness of micro pension by the workers in the informal sector and lack of adequate incentives to encourage participation.

Other challenges are different competing products in the markets with more flexibility towards access to funds such as thrift savings/daily collections etc.

The rest are negative perception/trust deficit stemming from the experience of Nigerians on pension administration under the defunct defined benefit scheme as well as slow adoption of shared services arrangements by pension fund operators.