Nigerian Pension Industry: When "Big" is not enough - United Capital

The National Pension Commission ("PenCom") recently published the pension asset and membership data for Q3-17. 

Pencom reported a total pension asset of 7.1 trillion naira which Retirement Savings Accounts (RSA) accounting for 67.6 percent of the total assets. 

The RSA membership data shows a total of 7.7 million active members, 70.8 percent of whom are below the age of 40 years.

The Nigerian pension industry has grown by a CAGR of 19 percent over the last five years. 

Although this number appears impressive, it quickly pales into insignificance when compared with Nigeria's robust demographic credentials, and its current workforce. 

The most recent survey by the National Bureau of Statistics (NBS) puts Nigeria's labour force at 72.9 million, implying that only 9.5 percent of potential members have pension accounts. 

If we apply an unemployment rate of 14.2 percent, we see that only 12.3 percent of the working population are currently captured in the PFA data.
Taking it further, assuming a constant Pension Asset per Active Member, we estimate that a potential 5.4 trillion naira in pension assets is currently lost. 

If we take a more conservative stance and assume that Nigeria should be able to provide pension cover to half of its workforce, then 2.3 trillion naira in pension funds remain in the pipeline. 

This suggests that the pension industry has the potential to be significantly bigger than it is now.