A Critical Study Of Nigeria Pension Management System

Pension systems were introduced into the country by the colonial administrators. The first legislative document on pension in Nigeria was the1951Pension Ordinance. Equally, the last legislation on pension matters in the country is the Pension Reform Act2004, which established a Contributory Pension Scheme and unified the administration and management of pension for both the Public and Private Sectors. It established for the first time, a single Regulator to oversee both public and private pension schemes in the country. The contributory pension scheme addresses the pension liability by stemming its further growth and provides a platform for addressing this liability. The scheme is contributory in the sense that both the employees and the employer contribute towards the retirement benefit of the employee. The Nigerian pension reform of2004has created a departure from PAYG (Pay-As-You-Go) to a fully contributory scheme between employers and employees, based on personal accounts. The reform was based on the fact that contributors fund will be invested in the capital markets. Though there has been a lot of criticism against this new scheme based on the Chilean model that was adopted without considering the unsophisticated nature of both Nigeria’s capital market and the financial system, the Nigerian economy which is based on oil revenue that is always exposed to international financial volatility, coupled with high inflation and unstable government finances, all these factors have an impact on the new scheme. Despite repeated calls from some quarters on the government to adopt a double pillar system as being done in some countries in order to ensure a higher income at retirement, but this calls has never been heeded.This paper seeks to examine and analyze the contents of the Pension Reform Act (PRA)2004. It equally tries to analyze the implications of the Pension Reform Act (PRA) and its contributions towards the retirement social benefits of employees both in the Public and Private sector.