Over 81,000 pension contributors lose jobs in 2yrs

Due to the rising unemployment level in Nigeria caused by the impact of an increasingly harsh economic environment on companies and individuals, 81,000 pension contributors lost their jobs in the last two years, representing a 17.4 percent increase from the two previous years.Information Guide Nigeria

According to VANGUARD, this has led to a reduction in withdrawals by disengaged contributors from the pension fund rose sharply by 30 per cent to 47.8 billion in the last two years, 2021 to 2022, from N36.45 billion in two previous years, 2019 to 2020.

A report by global auditing firm KPMG states, “Although the National Bureau of Statistics (NBS) recorded an increase in the national unemployment rate from 23.1per cent in 2018 to 33.3per cent in 2020. We estimate that this rate has increased to 37.7per cent in 2022 and will rise further to 40.6 per cent in 2023.”

Pension fund operators however, express concern that the number of disengaged pension contributors may continue to increase except there is improvement in the general macroeconomic environment. However, they assured that the health of the pension scheme is still strong with monthly contributions growing.

VANGUARD reports that pension fund operators attribute the huge value of funds being withdrawn to migration of skilled workers with higher pay brackets outside the country.

The Chief Executive Officer of Pension Fund Operators Association of Nigeria, PenOp, Mr. Oguche Agudah who spoke on the development said that in the near term, the growth in the value of funds being withdrawn could persist depending on the general macroeconomic condition of the country.

Agudah said: “Over the last 2-3 years, it’s common knowledge that there has been an increasing number of Nigerians who are migrating. These economic migrants are typically highly skilled in mid level to senior positions in the higher pay brackets which translates to higher pension contributions.

“The level of unemployment is reflected in the NBS statistics that puts the figure at close to 40%. However the health of the pension scheme is still strong as monthly pension contributions are on the rise. For example Q4’2022 saw the highest level of monthly contributions in the 4 quarters of 2022. The payouts also show that the level of turnover is somewhat high.”

Speaking on the upward trend persisting in 2023, Agudah said: “Regarding the trend, much of that will depend on general macroeconomic conditions in the country. There are some schools of thought that say the level of economic migration “jappa” will plateau. But on the other hand the outlook is still tough in the near term.”

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Also speaking, Managing Director of Leadway Pensure PFA Limited, Mr. Lanre Idris who is also the Chairman of PenOp said: “The increase in the average payout is also likely a reflection of the growth of pension funds due to investment income generally across the Nigerian contributory pension space, particularly for long consistent contributors.NYSC Portal

“The data also reveals the private sector dominated the group of workers who accessed 25% of withdrawal due to temporary loss of employment in 2022, making up 95% of the total number (that is, 38,687 out of the total 40,646 sectoral approved by PenCom). Meanwhile, FGN workers and State employees comprised only 4% and 1% respectively.

“Additional data and analysis would be needed to draw any definitive conclusions about the demographic profile of disengaged workers who withdrew funds from their retirement accounts during the period under review. However, one thing is clear, the key to a sizable payout for any type of retirement is consistent contributions over a long active working life with a reliable PFA.”

On the implication of the development on the economy, Idris said: “The Nigerian economy is not immune to the shocks being witnessed globally by all nations: the tailing effects of the COVID-19 pandemic, rising Inflation, job losses, tepid outputs and the effects on the ongoing Russia-Ukraine war. For instance, several global companies cut a significant number of jobs. Meta, the parent company of Facebook, Instagram, and WhatsApp laid off more than 11,000 workers in 2022. In Nigeria, startups like Nestcoin (an African web3-based startup) laid off some employees after they lost a chunk of their assets in the FTX market. 54Gene, Kuda Bank, Eden Life, Quidax and GetEquity are a few companies (especially in tech space) that laid off employees in 2022.

“In addition, Nigeria is facing a rising increase in the exodus of people of working ages to developed nations. Despite the shaky start to the year occasioned by electioneering and naira crunch, the IMF has projected a 3.2% growth for Nigeria in 2023. This is a smaller growth than we need, but growth all the same and better than a large number of world member countries.

“A recent report by KPMG in its International Global Economic Outlook Report – H1 2023 stated that unemployment is expected to continue to be a major challenge in 2023 due to the limited investment by the private sector, low industrialization, and slower than required economic growth and consequently the inability of the economy to absorb the 4-5million new entrants into the Nigerian labour market every year.

“However, the government and in particular, the incoming government must continue to evolve ways to expand the economy and attract FDIs.”

As reported by VANGUARD, on the trend persisting in 2023, Idris said: “While the value of funds withdrawn rose by 28.9% in 2022, the number of disengaged workers marginally declined by 0.5%. Indeed, other than the spike in Q3 2022, the number of withdrawals remained largely flat which may suggest that layoffs are not increasing significantly based on the payout data available.

“Also, with continuing migration of workers abroad, one could expect some increase in the upward trend in pension fund withdrawals. However, some of those exiting may elect to keep their funds in the pension scheme because of the investment income on the funds. Whether there would be a significant increase in the number of withdrawals would depend a lot on government policies and the performance of the economy. It is my hope that the economy will continue to grow, inflation tamed and improved investments by the private sector to reduce unemployment and ensure job losses are curbed.”JAMB Result

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