THE NIGERIA’S PENSION REFORMS: A CRITIQUE OF THE SOCIAL SECURITY SYSTEM

This paper considers the degree of social security risk of public policy inherent in the Pension Reform Act 2004 in response to the palpable old age risks in the Nigerian state. The Act was conceived and prescribed flowing from budgetary deficits needed to fund liabilities which arose from pension accretion rates that were not actuarially factored (fiscal risks) under the Defined Benefit Scheme. In spite of the reform, about 5% of workers are covered under the Pension Reform (2004) as at 2014. It is, therefore necessary to examine what the Act seeks to achieve by a privatized pension system within a financial market that is susceptible to frequent bubbles, low life insurance penetration and double digit inflation rate. Using document analysis and descriptive statistics, it is argued that there are policy gaps in reducing the risks of old age poverty and survivorship from the Pension Reform (2004). The reform’s switch from Defined Benefit to Contributory scheme should go beyond pension objective of assisting myopic workers to save for retirement, but to confront social security risks, and therefore, reduce vulnerability to old age poverty. This should pave the way towards sensitizing the large informal sector to participating in the Contributory scheme that will become a road map to sustainable Social Security System. Future reforms should consider introducing social risk management template that involves retiree’s investment risk attitude in pension management, subsidized social health insurance for all retirement account holders above 65 years, as well as compulsory micro-life insurance scheme for the informal sector.