Despite N24trn assets, 26 states yet to fully implement contributory pension

Despite pension funds maintaining steady growth, 26 states are yet to fully implement the Contributory Pension Scheme (CPS) for its workers across the country, Daily Trust can report.   Our correspondent reports that the National Pension Commission in its latest data stated that Nigeria’s pension industry sustained its upward trajectory in May 2025, as total pension […]

Despite pension funds maintaining steady growth, 26 states are yet to fully implement the Contributory Pension Scheme (CPS) for its workers across the country, Daily Trust can report.  

Our correspondent reports that the National Pension Commission in its latest data stated that Nigeria’s pension industry sustained its upward trajectory in May 2025, as total pension fund assets rose to N24.10 trillion, which shows a 1.91% month-on-month growth from N23.65 trillion in April.

The Contributory Pension Scheme (CPS) was introduced as one of Nigeria’s social security reforms, designed to tackle decades of pension liabilities and ensure retirement income sustainability for workers.

Its central principle provides that both employers and employees contribute a fixed portion of monthly emoluments to individual Retirement Savings Accounts (RSAs), which are managed by licensed Pension Fund Administrators (PFAs). 

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Under the Pension Reform Act of 2014, the minimum contribution rate stands at 18% of monthly emoluments, 8 per cent from employees and 10 per cent from employers.

The scheme is regulated by the National Pension Commission (PenCom), which ensures compliance and safeguarding workers’ savings.

As of July 2024, the system had over 10 million active RSAs and total pension assets exceeding N24 trillion, as pension funds are increasingly being deployed into the capital markets, fixed income securities, and infrastructure investments amongst others. 

However, despite the progress, state-level adoption remains relatively low and uneven.

While the federal government and some states have implemented the scheme, others continue to delay, resist, or only comply partially. 

Experts in the industry have stated that the trend continues to undermine the broader objectives of pension reform and raises deep concerns about the retirement security of millions of public-sector workers, especially at the subnationals

 

Low CPS adoption in states

 Data from the National Pension Commission indicated that very few states have fully implemented the Contributory Pension Scheme as of December 2024.

According to PenCom, only states like Lagos, Kaduna, Ekiti, Edo, Ondo, Delta, Benue, Anambra and Jigawa States, as well as the Federal Capital Territory (FCT) have fully implemented the CPS.

Similarly, Akwa Ibom, Borno, Kwara, Plateau, Cross River and Yobe are yet to commence the implementation of CPS.

The regulator further stated that some states have enacted the law to adopt the CPS but are yet to take significant steps towards implementation.

These states include Abia, Adamawa, Bauchi, Bayelsa, Ebonyi, Enugu, Gombe, Imo, Kano, Katsina, Kebbi, Kogi, Nasarawa, Niger, Ogun, Oyo, Rivers, Sokoto, Taraba and Zamfara.

 

Lingering challenges and what can be done to boost adoption 

Meanwhile, Pension Fund Operators Association of Nigeria (PenOp) had noted that one major challenge lies in managing legacy pension liabilities. 

PenOp noted that “Many states entered the CPS with large unpaid arrears to employees under the old Defined Benefit Scheme (DBS) system. Transitioning to a contributory model while simultaneously clearing these debts has proven daunting. Some states have sought to stagger payments, but this often results in partial implementation and disillusionment among workers.”

It however stated that “Innovative solutions have been proposed, particularly the issuance of state government debt instruments targeted at infrastructure projects and financed largely by pension funds. Under this model, a portion of the proceeds raised would be ring-fenced to clear outstanding pension arrears, while the remainder would fund long-term development projects. 

“This approach not only provides states with a structured way to address legacy pension obligations but also channels pension assets into productive investments that can stimulate growth,” PenOp explained.

It however, warned that the success of such strategies hinges on political will, sound governance, and credible debt management practices, adding that in their absence, many states remain stuck between mounting arrears and the demands of implementing the CPS, unable to advance with conviction.

The operators highlighted that even among states that have adopted the CPS, challenges remain for early entrants.

“Workers who retired soon after its inception in 2004 often contributed relatively modest sums, leaving their RSAs with balances insufficient to sustain retirement. This problem is compounded by government failure to remit counterpart contributions or accrued rights on time. The result is a generation of retirees who feel shortchanged, further undermining confidence in the system. 

“For unions and state workers, these cases are frequently cited as evidence that the CPS cannot deliver on its promises despite the fact that such challenges stem more from poor implementation than from flaws in the scheme itself,” the operators said.

PenOp further highlighted that pension reform is ultimately a political process, and in many states, political considerations have proven decisive. 

“Politicians frequently campaign on promises to clear pension arrears or implement CPS, yet these pledges often evaporate once they assume office. Pension obligations are sidelined in favor of more visible projects with immediate electoral appeal. When administrations change, reform momentum is lost, and the cycle of delay and neglect resumes.

“This inconsistent political commitment has arguably been the single greatest barrier to CPS adoption in the states. Without sustained leadership and prioritization, pension reform struggles to compete with other fiscal demands, leaving workers in prolonged uncertainty and undermining the credibility of government promises.

“The consequences of state-level resistance ripple across multiple levels. For employees, it translates into insecurity about their retirement income and diminished trust in both government and pension institutions. For the pension industry, irregular contributions constrain the growth of assets under management, limiting the ability of PFAs to invest in productive, long-term ventures. 

At the national level, partial compliance undermines one of the CPS’s most important goals: the mobilization of long-term capital to fund infrastructure, housing, and industrial development. By refusing or delaying adoption, states not only jeopardize the welfare of their workers but also deprive themselves and the nation of a powerful tool for economic transformation,” it further explained 

Subsequently, it stated that overcoming these challenges requires a coordinated, multi-pronged strategy. 

Oguche Agudah, CEO, PenOp said, “First, PenCom must be empowered with stronger enforcement mechanisms to ensure compliance, including sanctions for states that fail to remit contributions. Secondly, states need to develop clear frameworks for addressing legacy pension liabilities, possibly through innovative financing structures like infrastructure funds or debt instruments specifically tied to pension arrears. Third, labour unions must be engaged in sustained dialogue and education, highlighting the long-term sustainability and transparency of the CPS relative to the collapsed DB model.

“Above all, political leaders must demonstrate consistency and commitment. Pension reform should not be treated as a campaign slogan but as a moral and economic obligation to the workforce. Building credibility requires not only policy declarations but concrete actions—timely remittances, transparent reporting, and accountability mechanisms that reassure workers of the scheme’s integrity,” he explained.

Also, the Director General of the National Pension Commission, Omolola Oloworaran had stated on different fora that the National Pension Commission will engage states who are yet to fully implement the CPS to commence the process as soon as possible. 

So far she has visited Abia and Yobe states with commitment from the governors to fully key into the Scheme.

 

Pension fund assets rose N24.6trn

Meanwhile, data from PenCom show that Nigeria’s pension industry sustained its upward trajectory in May 2025, as total pension fund assets rose to N24.10 trillion, reflecting a 1.91% month-on-month growth from N23.65 trillion in April.

The increase was driven by a combination of new Retirement Savings Account (RSA) registrations, robust investment income, and strategic reallocations across asset classes (both fixed-income and alternative investment classes), despite economic headwinds.

The regulator added that as of May 2025, total RSA registrations reached 10.76 million, up from 10.72 million in April, maintaining consistent growth in coverage.

A breakdown of fund performance showed that Fund II, the default fund for active contributors under 49 years, retained its dominance with N10.04 trillion in assets, representing a commanding 41.65% of total pension assets.

Fund III (typically for contributors aged 50 and above) rose to N6.32 trillion, accounting for 26.24% of the total pension asset, reflecting steady accumulation among older RSAs.

Fund IV (Retiree Fund) posted N1.79 trillion, a 7.42% contribution, as pensioners maintain stability-focused allocations.

Fund I, targeted at aggressive investors under 49, climbed 4.73% to N319.34 billion, suggesting modest traction in high-risk appetite.

Fund V (Micro Pension Fund) inched up to N1.41 billion, a marginal yet crucial 0.04% foothold for informal sector coverage.