For 35 years, Josephine Obah’s daily routine rarely changed. Except at weekends, she woke up each morning and headed to work, spending the best part of her working life at an educational institution.
After retirement, she expected the pension contributions accumulated over decades of service to provide financial security.
Five years later, that expectation has increasingly given way to anxiety as inflation and rising living costs erode the purchasing power of her monthly pension.
Obah is among a growing number of Nigerian retirees confronting the consequences of inadequate retirement savings under the Contributory Pension Scheme (CPS), where years of contributions have not necessarily translated into a sustainable income after retirement.
The situation became more difficult following the increase in Nigeria’s national minimum wage to N70,000, which raised the minimum pension threshold under the CPS.
With her monthly pension below one-third of the minimum wage, equivalent to N23,333.33, Obah faced a difficult choice: continue receiving a meagre monthly pension or withdraw the entire balance in her Retirement Savings Account (RSA).
Unable to cope with the small payments from her Pension Fund Administrator (PFA), she opted for the latter.
‘I could no longer cope with the small amount I receive from my Pension Fund Administrator (PFA), so I have decided that they give me my balance,’ a frustrated Obah said.
Her experience exposes a longstanding weakness in Nigeria’s pension system, where workers can reach retirement after decades of contributions only to discover that their accumulated savings cannot provide even a modest regular income.
For Uche Moghalu, the decision to withdraw his retirement savings in bulk has brought even greater uncertainty.
After leaving paid employment about six years ago, Moghalu received a monthly pension that offered little protection against the rising cost of living. When the minimum wage adjustment increased the minimum pension threshold, he was left with the option of continuing to receive his small monthly payment or collecting his entire RSA balance.
He chose the latter, hoping to invest the money in a business that would provide an alternative source of income during retirement.
But the business has struggled amid Nigeria’s difficult economic conditions, with mounting losses gradually eroding the capital he accumulated during his working years.
What initially appeared to be an opportunity to regain financial independence has become a source of anxiety as he worries that his retirement savings could disappear entirely.
His concern goes beyond the failure of an investment. It is the prospect of reaching old age without a regular source of income after spending decades working and contributing towards retirement.
Unable to cope with the small payments from her Pension Fund Administrator (PFA), she opted for the latter.
‘I could no longer cope with the small amount I receive from my Pension Fund Administrator (PFA), so I have decided that they give me my balance,’ a frustrated Obah said.
Her experience exposes a longstanding weakness in Nigeria’s pension system, where workers can reach retirement after decades of contributions only to discover that their accumulated savings cannot provide even a modest regular income.
For Uche Moghalu, the decision to withdraw his retirement savings in bulk has brought even greater uncertainty.
After leaving paid employment about six years ago, Moghalu received a monthly pension that offered little protection against the rising cost of living. When the minimum wage adjustment increased the minimum pension threshold, he was left with the option of continuing to receive his small monthly payment or collecting his entire RSA balance.
He chose the latter, hoping to invest the money in a business that would provide an alternative source of income during retirement.
But the business has struggled amid Nigeria’s difficult economic conditions, with mounting losses gradually eroding the capital he accumulated during his working years.
What initially appeared to be an opportunity to regain financial independence has become a source of anxiety as he worries that his retirement savings could disappear entirely.
His concern goes beyond the failure of an investment. It is the prospect of reaching old age without a regular source of income after spending decades working and contributing towards retirement.
Moghalu now fears that he may eventually have to depend on his children and other family members for survival, an outcome his pension savings were supposed to prevent.
‘I can no longer hope on pensions; the money is gone,’ he lamented.
Billions withdrawn as lump-sum benefits
The experiences of Obah and Moghalu illustrate the vulnerability of retirees whose salaries were low, contribution periods interrupted or accumulated pension balances insufficient to finance sustainable retirement benefits.
Figures from the National Pension Commission (PenCom) show that approximately N177 billion has been paid out as en-bloc retirement benefits from the inception of the CPS to the first quarter of 2026.
These payments represent retirement savings withdrawn in bulk by retirees whose accumulated balances were insufficient to support regular monthly pension payments.
For many, collecting their savings in one lump sum appeared to be the only practical option. Some invested the money in small businesses in an attempt to generate income during retirement. However, Nigeria’s difficult economic conditions have eroded the capital of some of these businesses, leaving retirees exposed to financial hardship and the possibility of depending on family members for survival.
PenCom’s published figures also show that en-bloc payments have accounted for a substantial number of retirement benefit approvals since the introduction of the CPS, with private-sector workers representing the overwhelming majority of affected retirees.
The figures point to particularly difficult retirement conditions among private-sector workers, many of whom spent their working lives in relatively low-paying jobs, experienced irregular employment or worked for employers who did not consistently remit pension contributions.
12-year wait for minimum pension guarantee
The prolonged delay in implementing the Minimum Pension Guarantee (MPG) under Nigeria’s CPS has further exposed vulnerable retirees to financial hardship.
Designed to guarantee a minimum retirement income for eligible pensioners whose RSA balances are insufficient to secure regular pension payments, the policy’s non-implementation over the past 12 years left many retirees without the safety net envisaged under the pension system.
In the absence of the guarantee, retirees with inadequate balances had little option but to withdraw their savings in bulk, effectively ending their participation in the regular pension payment system.
The Federal Government’s launch of the MPG on Tuesday, led by President Bola Ahmed Tinubu, is expected to address this longstanding gap by providing a minimum income floor for eligible retirees whose accumulated pension savings cannot sustain adequate retirement benefits.
Provided for under Sections 82 and 84 of the Pension Reform Act 2014, the initiative represents an important shift in the philosophy of the CPS: from concentrating primarily on accumulating retirement savings to ensuring that eligible contributors are not left without a minimum level of income in retirement.
The guarantee is backed by the Pension Protection Fund (PPF), which is designed to provide the financial resources required to support minimum guaranteed pensions.
Its statutory funding sources include an annual Federal Government subvention equivalent to one per cent of the total monthly wage bill of public service employees, levies on PenCom and licensed pension operators, as well as investment income.
However, beyond the formal launch, for retirees to largely benefit from the MPG the government would need to provide accurate and sustainable funding, improve the eligibility criteria for beneficiaries, and the speed with which deserving retirees can access the guarantee.
While the new policy offers a ray of hope for retirees like Obah and Moghalu, the central concern is whether the new arrangement can provide the financial security that years of pension contributions were supposed to guarantee.