The Nigeria Labour Force Survey published by the National Bureau of Statistics (NBS) reports that only 26.3% of Nigerian workers have a pension plan and health insurance in 2023.

The report noted that Zamfara state in the Northwest recorded the highest number of employees with health insurance and pension at 65% while Abia had the lowest number of wage employees with health insurance and pension plan at just 3.9%.

The report states, “The percentage of employees entitled to either pension or health insurance schemes in Nigeria was 26.3%. Zamfara state had the highest (65.9%) while Abia had the lowest, 3.9% among wage employed.”

The low number of employees with pension and health insurance plan stems from the high number of informal sector workers in Nigeria. According to the study, about 92% of Nigeria’s employed population are engaged in informal employment.

Nigeria’s informal sector

The informal sector consists of businesses defined by open entry and exit, complete market knowledge, and market forces operating without formal regulations, like a competitive market. These enterprises typically lack formal organizational structures, experience low and inconsistent earnings, face business insecurity, and do not offer social benefits like pensions for employers or employees. Additionally, they often do not maintain proper record-keeping.

The IMF reports that Nigeria’s informal sector contributed 57.7% to the country’s GDP in 2022, highlighting its significant role in the economy. However, millions of Nigerians in this sector remain excluded from traditional pension systems, leaving them vulnerable to poverty in retirement.

Health insurance, pension plan in Nigeria

Employee benefits like health insurance, pensions, annual leave, and work-life balance initiatives play a crucial role in enhancing job satisfaction, which can lead to higher productivity and employee loyalty.

The Pension Reform Act mandates that employers with at least 15 employees must participate in a contributory pension scheme. Under this scheme, employers are required to contribute a minimum of 10% of an employee’s monthly salary, while employees contribute up to 8%.

Similarly, the National Health Insurance Authority Act requires health insurance for all employees residing in Nigeria. Employers with more than five staff members must enroll in a health insurance scheme, ensuring contributions are made to the public health insurance scheme of the state where they operate. Alternatively, employers can opt to provide private health insurance for their employees under the same act.

However, enrolment in health insurance has been low when compared to the total population as around 18.7 million people are enrolled according to the National Health Insurance Agency (NHIA).

nairametrics