By Olivia Nnorom
The Nigerian pension system is at the bottom of the global rankings, scoring 4.3 points in the Allianz Pension Index (API) presented by international services provider, Allianz.
Allianz, in the second edition of its global pension report, analysed 75 pension systems around the world using the API, which comprises of three pillars: Analysis of basic demographic and fiscal conditions as well as determination of the sustainability (e.g. funding and contribution periods) and adequacy (e.g. degree of diffusion and pension level) of the pension system.
The research considered a total of 40 parameters, with values ranging from 1 (very good) to 7 (very poor). The weighted sum of all parameters and evaluation of the respective system were accumulated into an overall score.
The report stated that Denmark, The Netherlands, Sweden, New Zealand, and the United States emerged as the relatively best pension systems worldwide, with 2.2 points, 2.6 points, 2.6 points, 2.8 points, and 2.9 points, respectively.
According to Allianz, Nigeria, with an overall score of 4.3 points, is an indication that the country’s pension system is at the bottom of the global rankings,attributed to the low coverage of the pension system. The report however, noted that the poor score was not attributed to Nigeria alone as most other African countries have very similar scores.
To address the challenges highlighted, Allianz suggested that access to financial services and financial literacy need to be further improved to foster private pension provision, especially against the background that private households’ net financial assets are also still rather low in international comparison.
With Nigeria expected to be one of the countries with the youngest population worldwide by 2050, Allianz said the country has two big advantages, pointing out that Nigeria has financial leeway as public spending for the elderly is very low. The report also noted that Nigeria will remain a very “young” country in the long term as the old-age dependency ratio is expected to rise only moderately to 6.8 per cent by 2050.
Nonetheless, it maintained that the sooner reforms are enacted the better for the country’s pension system.
