In 2014, Nigeria enacted the Pension Reform Act, which was supposed to provide the government with information about the currently available assets on most of the country’s personal and company accounts. This may sound quite different, but considering that almost 30% of the country is self-employed or working in companies with under 3 employees, it was essential for the government to tally up these numbers and determine the available budget for future pension coverage.
Unfortunately, though, the Nigerian economic landscape does not allow for much savings in case of both individual and company finances, forcing most people to immediately re-invest their monthly profits in order to stay afloat or increase their future income. Because of this, paired up with the economic hurdles of the coronavirus, the Micro Pension Plan slowly started to fall apart as people kept failing to save up at the end of the month.
Due to this lack of information and further issues with the cashflow supplying the Micro Pension Plan and executing it with 100% accuracy became impossible, forcing a pause.
Savings vs investing
It is very unlikely that the government did not consider this possibility, but it needs to be mentioned regardless. The fact that there are not that many people who save in the country is hard to believe, especially considering the rather larger income compared to the rest of Africa.
Many experts have noted that instead of saving, Nigerians tend to invest their excess funds in hopes to grow it further. This is wholly supported by the number of investors in the country as well, especially ones targeting markets like FX and cryptocurrencies.
The forex market is especially important as most of Africa’s FX volume comes from Nigeria due to its relatively stronger currency. This enabled a healthy FX market to develop in the country. However, most companies soon found out that it was not necessarily only Nigerians that were interested in trading with sophisticated companies, but other African nations as well. The interest was particularly large in the digital center of Africa, Ghana.
Thanks to forex brokers that accept mobile money in Ghana, many Ghanian traders managed to migrate over to Nigeria-registered companies, thus receiving better service and more favorable terms. Naturally, this caused even more growth in the industry, giving forex brokers the resources needed to attract more and more traders from the entire continent. But no matter how much they tried, the heart of the market still lies in Nigeria.
The rapid growth inspired many self-employed Nigerians as well as regular workers to try their luck on the markets due to the beneficial promotions held by forex companies.
With all this evidence, it becomes much harder to say that Nigerians don’t save at all. It could be completely possible that they invest instead of saving, thus making the Micro Pension Plan much stronger than currently anticipated.
Will the plan recover?
It is likely for the plan to recover once the pandemic is over and dealt with, or at least contained in a way that allows for most jobs to return as they were in the past. Until then, it is very likely for the plan to just decrease in volume significantly. Although this will be disastrous for those who rely on the plan, completely stopping it would be a much bigger challenge, especially considering the tenuous political nature of Nigeria.