Thursday, May 7, 2015

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Nigeria: Two States Take the Initiative on Social Pensions

Whilst national level attempts at a social protection strategy have stalled in Nigeria, two states have acted independently to ensure income security for older people.
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In rude health? President Jonathan has not tackled the issue of social pension schemes. Photo courtesy of the Commonwealth Secretariat.

In the estimations of many international institutions, Nigeria can be classified as a middle-income country. However, although its overall wealth may have increased, the distribution of its wealth remains deeply inequitable – more than 60% of the population live in poverty.

Despite an urgent need for broader social protection and safety nets, national plans to cater to the most marginalised groups have too frequently been defeated by a lack of political will. Drafts of a national social protection strategy were never finalised and Vision 20: 2020, Nigeria’s medium-term development plan, failed to put forward a vision for a comprehensive social protection system.   

This dynamic is clearly played out by the government’s approach to pension schemes. Studies have illustrated that a universal pension of N5000 ($33) a month for those over the age of 65 would cost less than 1% of the country's GDP. Yet in its absence, the amount spent on civil service pensions and benefits is vastly disproportionate to any outlays for contributory pensions and bears little reality to the country’s demographics. Older generations - often unable to work – have been left particularly vulnerable. Two initiatives have implemented at state level in effort to provide this missing protection.

Social Pensions in Ekiti and Osun

Ways to engage with a burgeoning youth population has been a prominent concern in public discourse in recent years. However, Nigeria is also home to an increasing number of older people – 7.8 million of them in 2010. Few of these 7.8 million people will have pensions and it is unlikely that this will improve over the coming years.

Contributory pensions in Nigeria are aimed almost exclusively at the formal sector, which according to recent estimates makes up only 10% of the workforce. And weaknesses within the pension system mean that only 1.2% of the Nigerian workforce is currently covered by contributory pensions.

In October 2011, Ekiti State in south-west Nigeria established a social pension scheme aimed at providing a minimum level of security to older generations. The only qualifying criteria are that recipients must be over the age of 65 and must have been a resident in Ekiti for at least three years.

As of May this year, 20,000 older people were in receipt of this pension, which entitles them to N5000 ($33) a month. And following the signing of the Social Security Bill in Ekiti State this social pension scheme now has a legal backing, which Governor Fayemi hopes will ensure its sustainability.

However, with the population of over 65s in Ekiti estimated to be 120,000, there is still a long way to go all eligible peoples are covered. Unfortunately, the 2012 budget allocation means that this will not be possible during this financial year.

Nine months after the first payments were made in Ekiti its neighbour Osun State announced the implementation of a monthly pension of N10,000 ($66) to 1,602 older people who have been identified as the "most vulnerable". It also includes the provision of some medical treatment for recipients. At nearly 50% of the national average income, Osun’s pension scheme is, in relative terms, the second most generous social pension in the world.

Information on the number of older people living in Osun is unavailable, but with an overall population larger than Ekiti state, it is safe to assume that a large proportion of those eligible are currently not covered. Delays in the implementation of the scheme meant that 40 older people shortlisted to benefit from the scheme apparently died of starvation before they could receive their entitlements.

Regardless of their shortcomings, the introduction of these pension systems - the first of their kind in Nigeria - marks a major step forward in providing a minimum income to older people. And with calls for social protection increasing, these pensions have garnered interest from local and national politicians. The Ekiti State Commissioner for Labour, Productivity and Human Capital Development has commented that many states in Nigeria have already approached him to learn more about and potentially adopt the scheme.

A substitute for federal action?

There is an increasing trend in favour of high-coverage social pensions - countries such as Ghana, Zambia, Kenya, Tanzania and Uganda have expressed interest in social pensions or begun to implement pilot schemes. These schemes are part of a growing recognition that social pensions provide an effective and affordable response to the inadequacy of contributory systems. What is the likelihood that Nigeria will follow a similar trajectory?

It is easy to overstate the positive influence that the above examples can have. However, they remain two of thirty-six states. Without further direction from central government, the extension of pension coverage in Nigeria is likely to happen on a state-by-state basis – something that undermines the urgency of the situation.

The social pensions in Ekiti and Osun may have galvanised other states to think about social pensions but it has not yet resulted in a serious debate at national level. Ultimately, national debate is vital not just because it can bring about universal coverage much more quickly, but because it can indemnify schemes from changing political whims and make it a sustainable project.

Nigeria has the capacity to bring about this fundamental and much-needed change. It currently shares expenditure responsibility for health and social welfare spending between federal and state governments and could adopt a system like India, also a federal state, that provides an example of how this could be achieved with a centrally-funded basic pension, which is ‘topped-up’ with cash or payments from state coffers. Until this basic form of protection is guaranteed to all its citizens, Nigeria cannot truly consider itself a middle-income country. 

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