Nigeria to raise mandatory pension rate above 18% as assets hit record
Nigeria's pension regulator plans to raise mandatory contribution rates above 18%, a move that would increase corporate payroll costs while funneling more long-term capital into a fund market that recently surpassed N31.32 trillion.
Nigeria’s National Pension Commission is preparing to raise the country’s mandatory pension contribution rate, signalling higher payroll costs for employers and a potential boost to domestic capital markets.
The current framework requires a combined 18% contribution, split as 10% from employers and 8% from employees. PenCom Director-General Omolola Oloworaran confirmed on Tuesday that this rate will increase, though the changes remain in the consultation phase with lawmakers and labour unions.
“It is still at the engagement stage. The rates of contribution will certainly go up, but we must ensure that all key stakeholders buy into it first,” Oloworaran said.
For market participants, a higher contribution floor directly expands the pool of long-term local capital available to institutional investors. Nigerian pension assets have been on a strong upward trajectory, reaching a record N31.32 trillion in May 2026. This marks a 1.23% monthly increase from April and a 29.5% year-on-year surge from N24.18 trillion in May 2025.
However, the sector’s growth is heavily constrained by a severe compliance deficit at the sub-national level. Only eight of Nigeria’s 36 states have adopted the Contributory Pension Scheme, limiting the system's overall depth.
“I am not satisfied at all with where we are,” Oloworaran said. “If you were to rate it, we still have an ‘F9.’ We still have only eight states out of 36 states complying. There has to be more political will.”
To incentivize wider adoption, PenCom is exploring ways to establish dedicated income streams for state pension bureaus. This targets the operational funding concerns raised by non-compliant states, a structural reform that could eventually unlock significant untapped capital from the public sector workforce.
The regulator is also confronting a practice that poses systemic fiscal risks: state governments deducting pension contributions from workers but failing to remit the funds to Retirement Savings Accounts.
“In my personal opinion, deducting funds from employees and putting them in a state account is something that should never happen,” Oloworaran said. “Any incoming governor who doesn’t understand the original purpose of those funds could divert them elsewhere. That results in pension obligations skyrocketing and leads to a broken system in the future.”
