Notes on the economics of the 2004 Nigerian pension scheme

Abstract

Poor social security arrangement imposes large costs on government and it becomes an attendant economic cost. As a result, large fiscal deficits result along with a high poverty rate. Though, much has been done by the government to address old age poverty and bring dignity to labour for Nigerian workers who (should) deserve to enjoy their retirement, the defined benefit scheme which has been practised over the years has neither help but compels the need for an option in the face of the heavy social and economic costs to both the government and the society. The new pension scheme (Contributory Pension Scheme; CPS) passed under the Pension Reform Act (PRA) 2004 has great benefits for the country’s socio-economic wellbeing. This paper takes an overview of the scheme vis-a-vis past schemes with an economic explanation of its impact on the country. The reduced poverty and economic growth, as we will show, are important benefits of the new pension scheme. Key words: Nigeria, pension, poverty, retirement savings accounts (RSAs), contributory pension scheme (CPS), pension reform act (PRA).