MICRO-PENSION INCLUSION AND PRODUCTIVITY IN NIGERIA’S INFORMAL SECTOR: RETHINKING THE PENSION REFORM ACT

Abstract

Nigeria's informal sector constitutes a significant portion of the national economy,
contributing substantially to employment and Gross National Product (GNP). Despite its vital role,
this sector remains largely excluded from formal social security provisions, particularly pension
schemes, leading to widespread financial vulnerability among its workforce in old age. This study
aims to: (1) analyze the policy gap concerning social security for the informal sector workforce
within Nigeria's existing pension legislation; (2) advocate for legislative amendments to the
Pension Reform Act (PRA) to mandate the inclusion of the informal sector in the contributory
pension scheme via the Micro-Pension Plan; and (3) propose institutional and operational
strategies for the effective implementation and regulation of a national micro-pension scheme.
This research adopts a qualitative-descriptive approach, primarily relying on secondary data
analysis. The methodology involves a systematic review of existing pension legislation
(specifically the Pension Reform Act of 2004 as amended), relevant government reports (e.g.,
National Pension Commission annual reports), academic literature on pension administration and
the informal sector, and policy documents from international organizations. The study critically
analyzes these documents to identify policy deficiencies and propose actionable recommendations.
Analysis reveals that the current PRA inadequately addresses the social security needs of the
informal sector, leaving millions without retirement provisions. A functional Micro-Pension Plan,
integrated into the existing contributory scheme, is identified as a critical mechanism to extend
coverage, enhance financial stability, foster a savings culture, and ultimately boost national
productivity. Projections indicate a substantial increase in pension assets and economic activity
with widespread informal sector inclusion. The effective functionality of the Micro-Pension Plan
is imperative for addressing poverty and ensuring social security for Nigeria's informal sector
workforce. Legislative amendments, coupled with strategic implementation measures, are crucial
for harnessing the socio-economic potential of this sector and contributing to broader national
development goals.
Keywords: ,  ,
, , Retirement