CPS: Searching for the informal sector populace
The nation’s Contributory Pension Scheme (CPS) under the supervision of the National Pension Commission (PenCom) has come a long way, having succeeded in the past 10-years of its establishment in bringing stability in the management of the country’s pensions system.
This has not only given hope for a successful retirement to majority of corporate employees, but also now seeks to uplift the standard of life of the larger population of Nigerians domiciled in the informal sector.
The informal sector, which has been said to make up over 80 percent of the working population if captured under the CPS and are able to have a structured retirement plan, would not only help Nigeria succeed reasonably in meeting its Millennium Development Goals, but would also have taken it out of poverty bracket amongst other poor countries in Africa.
Besides that, the economy would have become better positioned to generate greater investible funds to further boost available resources for infrastructure development.
Today, total pension assets under management is close to N6 trillion, while registered contributors under the scheme is about seven million, meaning that capturing the over 60 million in the informal sector would have put the nation on the threshold of better growth and development.
While the debate on strategies to incorporate the informal sector workers into the scheme continues, what would be critical is identifying those who make up the sixty million workforce in the informal sector.
The Pension Reform Bill 2014 provides that effective1y July 2014, employers of labour including the ministries; departments and agencies of the federal government of Nigeria; federal capital territory; government of a state in Nigeria, local government council and any organization or business in the private sector that employs three persons or more is under obligation to join the CPS.
What this means is that the catch-net has been expanded to increase participation of organisations in the informal and semi-informal sector for the benefit of their employees, where they are up to three.
Given the benchmark of three employees therefore, it becomes clearer that the 60 million workforce being sought for, are largely employees in organisations having less than three employees or individuals who operate personal businesses as well as artisans.
Among these include the skilled and unskilled people who provides service and earns income from what they do, but are not captured by government in terms of contribution to economy or participation in tax. Experts describe the informal sector or the informal economy as part of an economy that is neither taxed, nor monitored by any form of government.
Unlike the formal economy, activities of the informal economy are not included in the gross national product (GNP) and gross domestic product (GDP) of a country.
The informal sector can be described as a grey market in labour. Other concepts which can be characterized as informal sector can include the black market (shadow economy, underground economy), “under the table”, “off the books” and “working for cash”.
Informal sector therefore encompasses all jobs, which are not recognised as normal income sources, and on which taxes are not paid, and they could also be interpreted to include legal activities, such as jobs that are performed in exchange for something other than money.
For the African Development Bank, the informal sector contributes about 55 per cent of sub-Saharan Africa’s GDP and 80 percent of the labour force. Nine in 10 rural and urban workers have informal jobs in Africa and most employees are women and youth. The prominence of the informal sector in most African economies stems from the opportunities it offers to the most vulnerable populations such as the poorest, women and youth.
Even though the informal sector is an opportunity for generating reasonable incomes for many people, most informal workers are without secure income, employments benefits and social protection. The bank further stated that organising the informal sector and recognising its role as a profitable activity may contribute to economic development. This can also improve the capacity of informal workers to meet their basic needs by increasing their incomes and strengthening their legal status.
The target to deepen the pension scheme would focus on bringing into the CPS the traders, market men and women, carpenters, bricklayers, vulcanizers, barbers, tailors, mechanics, drivers, welders, hairdressers and many others.
The objective of the Pension Reform is to ensure that every person who worked in either the public service of the federation, federal capital territory or private sector, receives his retirement benefits as and when due; (b) assist improvident individuals by ensuring that they save in order to cater for their livelihood during old age; and (c) establish a uniform set of rules, regulations and standards for the administration and payments of retirement benefits for the public service of the federation, federal capital territory and the private sector.