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PENSION PAYMENT IN NIGERIA: CHALLENGES AND ETHICAL 

IMPLICATIONS 

Uchenna Ofondu E. 

Department of Religious Studies 

Federal University of Kashere, Gombe State 

Email: uofondu@gmail.com 

 

ABSTRACT 

Pension is the payment intended to sustain a worker after service life. It is made of deductions 

from the workers’ wages while at work. Successive administrations at all levels of government 

in Nigeria have found it difficult, and to a large extent, impossible to pay retirees their pension. 

This challenge has so far defied all the feeble attempts made to tackle it due to several reasons. 

Consequently, a great number of Nigerian senior citizens languish in penury and a lot of them 

have been sent to their untimely graves. This situation has made retirement a nightmarish 

concept in the public service lexicon of Nigeria. This paper analyzed both the historical, socio-

economic and ethical angles of the subject matter through the use of primary and secondary 

sources of information. This paper found out that it is unethical not to pay pension because the 

labourer deserves his/her wages. Among others, corruption and lack of diligent enforcement of 

rules are the root causes of the problem. To mitigate and eventually solve this problem, this 

paper recommended for a better pay for workers and a more diligent enforcement of applicable 

laws. There is an urgent need for a thorough reform of the sector. 

Keywords: Pension, Retirees’ challenges, Social security, Contributory pension scheme. 

 

INTRODUCTION 

At a certain point in time an employee would have to retire from active service. Retirement 

could be a function of age, length of service and health considerations. It marks the official 

withdrawal from service as stipulated by law. It is only after official retirement that the issue 

of pension comes into play. Pension is a monetary remuneration given to a retiree after 

disengagement from service. However, Nigerian pensioners have suffered severe deprivations 

due to the failure of their respective organizations to pay them. While a few lucky ones are 

owed only a few months arrears, the rest have not been paid for several years. In some states, 

laws were made to permanently deny pensioners of their legitimate income. This paper 

interrogates the issue of delay and non-payment of pension in Nigeria with a view to 

highlighting the causes, the ethical implications of the malaise and to proffer some solutions. 

Pension has been variously defined. Oxford Advanced Learners Dictionary (2010) says it is 

“an amount of money paid regularly, by a government or company to somebody who is 

considered to be too old or too sick to work”. This definition is germane as it puts a stress on 

the regularity of the payment. However, a pensioner may not necessarily be too old or too sick 

to work. Another perspective conceives pension as a form of income maintenance which acts 

as a social security or a kind of social protection measure. Furthermore, pension constitutes 

one of the mainstream government domestic issues involved in the public policy process. 

Ethics has been described as the study of the science of human conduct with a view to 

determining what is good and right and what is bad and therefore wrong. Every human activity 

possesses a certain level of ethical relevance. Ethics acts as a form of guide to enable human 



 
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48 
 

beings act within established limits of freedom. Eze (1997) says an ethical consideration 

examines human actions to know how they reflect to human good. Although much has been 

written about the challenges of pension payment in Nigeria, the ethical perspective seems to 

have received trite attention. This is the lacuna that necessitated this paper. It is hope that it 

will provoke more deliberative action on the part of those concerned. 

THE IDEA OF PENSION 

Prior to the Industrial Revolution in Europe, people engaged in substance farming and worked 

for a daily pay. Whoever can no longer work due to sickness or old age was left to his/her fate. 

Many of such people encountered severe hardship and faced imminent death due to lack of 

resources. The pension plan was conceived to fill this terrible vacuum. Pension is a futuristic 

plan by an employer to pay employees a stipulated amount of money after disengagement from 

service either due to age or length of service (Allwell, 2010). It is designed to ensure that retired 

employees are appreciated for their faithful services and to guarantee them reasonable levels 

of life after leaving paid work. Mboto (2002) corroborates the above assertion by emphasizing 

that retirees need to boost their purchasing power and also receive adequate medical attention. 

Old retirees are usually confronted with age-related health challenges such as arthritis, pain 

and loss of strength among others. If such people lack regular sources of income, they face a 

sorrowful future. 

Hill (2009) avers that pension is a social protection policy aimed at income stabilization. He 

stresses its importance with reference to the fact that some countries prioritized it for certain 

classes of workers even before regularized income provisions were made. Hill concludes that 

pension involves an element of forced savings income maintenance system aimed at 

responding to such issues as old age, sickness, disability and several other contingencies. 

Hooyman and Kiyat (1996) posit that pension was never conceived as a measure to provide 

adequate income to a retiree. Rather, it was to act as a basic protection measure and a first level 

of support to a retiree. Ogletton (2010) agrees with Hooyman and Kiyat. He argues that retirees 

easily become vulnerable to income changes and social exclusion making them incapable of 

actively participating in economic activities. The above factors affect their self-confidence and 

increase their levels of dependence. Without pension, this situation degenerates inexorably. 

Continuing in the same line of thought, Jhingan (2013) avers that pension being a form of social 

welfare must be properly monetized for it to be effective. He aligns with Pigiou’s (2015) 

submission that for pension to be effective, it must ‘be brought directly or indirectly into 

relation with the measuring rod of money”. Jhingan insists that since social welfare is regarded 

as the summation of all individual welfares in a  society, its effectiveness can only be measured 

in relationship to the extent it addresses individual needs. In accord with Jhingan, Schiller 

(2004) views pension as unarguably, the largest income transfer program in social security. To 

him, the importance of pension far weighs in favour of the aged retirees who in its absence 

could languish in severe poverty. 

Pension has also been seen as an integral part of social and economic justice. As a theory of 

justice (Rawls, 1971), pension strives to achieve the greatest benefit to the least advantaged, 

especially the aged and the sick. 

 

 



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CONCEPTUALIZING THE COGNITIVE VALUE OF PENSION 
 

All over the world, pension has become an essential part of the rule governing the workforce, 

especially the public service. The need for pension cannot be over-emphasized given its social, 

economic and physical importance in the society. 

Pension is made up of a part of a worker’s emoluments which are deducted at source on a 

monthly basis. It is, therefore, a right—being part of the pensioner’s money that had accrued 

over the period of service years. Perceived from this angle, some have argued that to deny such 

a worker of pension is tantamount to stealing. Stealing is a punishable offence under Nigerian 

legal code. 

More often than not, retirees are people who have advanced in age and may not be in the best 

physical and mental health to undertake any productive work. The retirement age for most 

public servants in Nigeria is sixty years. It is only the teachers in the higher institutions of 

learning, and until recently, the primary and secondary school teachers, who retire at sixty five 

or seventy years as the case may be. At such an age, one has unarguably passed the most 

productive years of life. Also, it is at this time of life that some age-related ailments begin to 

manifest thereby complicating the already complex situation. Without pension, the fate of some 

of these retirees is likely to become “harsh, brutish and short” (Hobbes). For several reasons—

including the unstable economic and political environment in Nigeria—most employees are 

unable to make adequate saving for the future. Poor remunerations are common features of the 

Nigerian workplace. The Nigerian national minimum wage is N 30,000 following the approval 

of the demand of the Nigerian Labour Congress (NLC) for increased wages by the Federal 

Government in 2019. This amount is barely a survival wage for any worker for a whole month. 

The present economic challenges resulting from the removal of petrol subsidy and the floating 

of the naira have exacerbated the trauma being faced by pensioners. Consequently, labour 

unions are making demands for an upward review of the minimum wage. It is only when a 

worker has enough disposable income for basic needs that savings can make sense. There have 

been a lot of policy summersaults from the Nigerian government over the years. These 

economic and political instabilities make savings difficult, if not impossible for the Nigerian 

worker. The administration of Mohamadu Buhari from 2015 to 2023 has been accused of being 

nonchalant to the plight of workers and pensioners as its policies impoverished more Nigerians. 

Furthermore, some people are not good financial managers. There are several instances where 

employees exceed the limits of their salaries even before the end of the month. Sadly, when 

salaries come, they are severely mutilated through numerous inexplicable deductions. This has 

further compounded the dilemma of the average Nigerian public servant, in particular, and 

makes financial planning nonsensical. Such people are almost always in debt and cannot make 

ends meet. Since savings are constituted by what is left unspent, such persons lack what to fall 

back on when they retire from service. Thus, without pension, life for them can only be 

imagined. 

As earlier adumbrated, the Nigerian worker is, perhaps, among the most poorly remunerated 

in the whole world. Nigerians are paid peanuts as salaries. This makes savings difficult, if not 

impossible. It was only in April 2019 that the government approved a national minimum wage 

of N30,000 (about 60% increments) for workers. Prior to this time, the minimum wage was 

N18,000 per month (Nigeria Minimum Wage Act, 2019). Despite the approval of N30,000 as 

minimum wage for the Nigerian worker only an egligible number of them have received the 



 
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new salary several years after. It is doubtful if governments at all levels and private sector will 

implement whatever will be the outcome of the present negotiations between the labour unions 

and the government, as the labour unions agitate for the increase the national minimum wage 

to N70,000. The exchange rate of a dollar to the Nigerian naira is about N1,600. At this rate, 

the newly proposed minimum wage will still amount to less than $60 for a whole month. The 

implication of the above scenario is that many people do not have enough to cater for the basic 

needs of life and thus are left with nothing to save for the future. The severity of this fact is 

made even more poignant by the observation of Hubbard and Obrien (2013) that one of the 

common traits of the average citizen is the reluctance to save money. 

Pension serves as a modest way to appreciate a retiree for the services he/she rendered to the 

organization throughout the time of the Retiree’s service life. This assures the people concerned 

that their useful contributions while in service have not been forgotten. Consequent upon the 

above, those who are still in service are encouraged to put in their best in view of the fact that 

they will continue to be appreciated even long after leaving office.  

PENSION AS RIGHT, NOT A PRIVILEGE 

This aspect could be approached from two broad perspectives, the old and the modern. At the 

inception of the Industrial Revolution which gave birth to pension, it was largely considered as 

a privilege which the employers of labour gave to the retired employees as a compassionate 

gift. It was not codified because what would be paid was totally dependent upon the whims and 

caprices of the employer. Consequently, the “pension” was largely a privilege. 

However, modern day pension is the right of any pensionable employee. Pension laws have 

been codified and enacted by the appropriate arm of government. The provisions of the law are 

not negotiable as it stipulates some penalties for any breach. The pension reform Act (2004) of 

Nigeria introduced the contributory pension scheme whereby a part of the monthly earning of 

a worker is deducted as part of his/her contribution to a future pension. It is within the above 

context that pension has become a right and not a privilege. From another conceptual angle, 

pension is the right of the worker regardless of whatever amount of salary he/she had received 

during service life. The argument is hinged on the fact that no salary could be commensurate 

with the contributions of an employee in a workplace. Every worker, it is believed, is always 

underpaid, and in view of that, is entitled to a pension. 

 

PROBLEMS OF PENSION PAYMENT 

The average Nigerian pensioner has virtually become an endangered species because of 

nonpayment of his/her monthly pension. The federal government and the various state 

governments have found it extremely difficult to fulfill their monthly obligations to individual 

pensioners. And when pensions are paid, they often come in fits and in starts. Some states owe 

their pensioners arrears that run into several years. Here below are some of the factors militating 

against the prompt and regular payment of pensions in Nigeria: 

Corruption, perhaps, is the greatest social evil prevalent in Nigeria. The pensions sector is not 

spared from the corruption monster. In 2016, the director of pension in the office of the head 

of service of the Federation, Alhaji S. S. Teidi was alledged to have stolen N3 billion pension 

money. About N23.1 billion belonging to the police pension fund went missing and Mr. John 

Yusuf and his collaborators were tried and convicted for the crime. Similarly, the former 

chairman of the Pension Reform Task Team (PRTT), Alhaji M. Maina, is undergoing trial for 



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51 
 

embezzling several billions of naira belonging to the organization. These are the notable ones 

but it is widely believed that more corrupt activities are carried out in that area. 

The Pension Fund Administrators (PFAs) in whose hands the huge pension resources are 

entrusted seems to lack adequate capacity to manage pension funds. These funds are usually 

invested in government bonds and other safe but low yielding schemes. This deprives 

pensioners of huge returns on investment. According to the National Bureau of Statistics 

(NBS), Nigeria has about 69 million workers but only about 7 million have retirement savings 

accounts (RSAs). This poor savings culture affects the amount of funds available to the PFAs. 

Contrarily, about 50% of employees in the USA and UK respectively, have retirement savings 

accounts. This challenge is largely attributable to the low level of awareness and education 

concerning pension matters. 

There is also the problem of non-remittance of pension deductions by some establishments, 

including government owned institutions. It was reported that the Pension Commission 

(Pencom) imposed and collected about N7 billion penalties from certain employers for non-

remittance in 2018. This is in accordance with the 2% penalty as stipulated by the law. 

Small and medium scale business establishments have resisted and restrained their workers 

from following any kind of retirement plan. This is contrary to the pension laws of the country 

which says any organization with 15 workers is expected to join in a contributory pension plan 

(PRA, 2014). 

Furthermore, Hill (2009) had contended that part of the problem bedeviling the payment of 

pension in several parts of the world is that most pension laws were made during a period when 

life expectancy was lower than what obtains today. According to him, rising settlement of 

entitlements as fresh retirees join the long queue puts so much pressure on available pension 

funds. Perhaps, this is one of the main reasons for which the contributory pension scheme came 

into operation. 

 

ETHICAL IMPLICATIONS OF NON-PAYMENT OF PENSION 

The ethical implications of non-payment of pensions to retirees are not farfetched and can be 

fairly deduced from the angles already addressed by this paper. 

1. High sense of indignation: Pension serves as a way of expressing appreciation for the 

years the retiree offered in service and when it is not being paid, it generates a high 

sense of indignation in the mind of the retiree. He/she wonders if the services provided 

over the years were indeed worth the effort and the sacrifices. This corroborates the 

assertion of Bond (1997) that the society rewards, usually, the present and not the past. 

Concomitant with the above is the fact that pension encourages those who are still in 

service to put in their best, cognizant of the fact that their contributions shall be well 

appreciated on retirement. When this expectation is not fulfilled, it tends to breed a 

lackadaisical attitude to work. Some people see it in local Nigerian parlance as “monkey 

dey work, baboon dey chop”. 

2. Encouragement of fraudulent conduct: The sufferings which befall retirees as a 

result of non-payment of pension usually encourage some workers  to get involved in 

fraudulent conduct. A large portion of the fraud that occur in different places of work 

is traceable to the attempt by some employees to gather as much as possible from their 

various organizations since they are most likely to die in penury after retirement. The 



 
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objective here is to “draw” your own pension plan and equally “collect” it while in 

service. 

3. Age falsification and alteration of records: This is one of the prominent and common 

issues related to non-payment of pension. Many workers out of fear of an uncertain 

future after retirement falsify their ages as an alternative so that they can spend more 

time in service and avoid, at least for a time, the drudgeries that come with retirement 

in Nigeria. Others alter their service records to bring forward their years of resumption 

of duty. 

4. Untimely death of retirees: It is common for retirees to take ill and die not long after 

disengaging from work. This syndrome is easily attributable to nonavailability of funds 

to take care of their basic needs. Such needs include proper medication for those who 

are sick, good housing, food and other family related issues. Inability to address such 

needs often lead to avoidable untimely death. Elderly retirees who hardly receive 

pension have been subjected to all forms of deprivations, especially those who have no 

children or relatives capable of caring for them. Oluwabamide (2007) aptly captures 

this situation while arguing that most aged retirees in Africa are poor and cannot cater 

for themselves. The dilemma of the aged retiree is aggravated by the breakdown of the 

much cherished African culture of care for the elderly and the spirit of communalism. 

5. Contradiction of divine injunction: The Holy Bible (Jer. 22: 13) expressly states that 

the worker deserves his or her wages, therefore, whoever withholds the wages is already 

in breach of divine injunction. Pension is constituted by a portion of a worker’s monthly 

pay and for that reason belongs, unconditionally, to the retiree. Consequently, there 

could be no acceptable reasons for retirees not to be paid their entitlements. As earlier 

adumbrated, pension is a right and not a privilege that could be negotiated. 

Unfortunately, certain state governments have made laws designed to short-change 

pensioners. 

6. Corruption: Corrupt practices in the pension sector seem to suggest that the younger 

generations which are still in service are desperately stealing the savings made by their 

elders. This unconscionable action presents a case of double jeopardy where those in 

service and therefore receive regular salaries are depriving retired and often tired and 

old workers of their due entitlements. 

7. Erosion of trust in government: The inability or outright unwillingness by the 

government to abide by the pension laws which it freely enacted makes the ordinary 

citizen to lose confidence in the ability of the government to protect him/her. The 

general implication of this development is that people easily resort to self-help with its 

dire consequences. 

8. Crime: Retirees who have young children, especially those who are still in school, can 

no longer afford school fees and sundry needs because their pensions are unpaid. This 

exposes the children to all sorts of criminal tendencies. Furthermore, a retiree who can 

no longer make basic provisions for his/her family easily looses self-esteem and the 

dependants often consider them as disposable liabilities. The Bible alludes to this (I 

Timothy 5:8). 

 

RECOMMENDATIONS AND PROGNOSIS FOR ACTION 

1. Proper supervision: A thorough and efficient supervisory system should be put in 

place to ensure that the rules and regulations guiding all pension matters are strictly 



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followed. It is not enough to make laws, it is more important to enforce such laws. 

Nigerian public officers easily over-reach themselves and break laws with impurity. 

2. Punishment of offenders: Following from the preceding point, it is necessary to visit 

the full sanctions of the law on any confirmed offender. This will act as a deterrent to 

others with similar intentions. When people in breach of the law are not swiftly 

punished or in extreme cases, not punished at all, criminals are more emboldened to 

wreck havoc on law abiding citizens. 

3. Use of technology: Developments in science and technology have made it easier to 

computerize pensioners and their monthly benefits. Diligent application of technology 

will make it difficult for fraudulent persons to manipulate the system for their selfish 

interest. It will also curtail the seemingly endless verification exercises with its 

attendant implications and challenges. 

4. More stringent law against non-remittance of deductions:  Pension laws should be 

tightened, especially, with regard to non-remittance of deductions by MDAs and other 

corporate bodies. The current 2% penalty seems not be enough encouragement for them 

to remit their pension deductions to Pencom. Also, any reluctance on the part of 

employers to remit deductions and subsequent failure of Pencom to wield the big stick 

should be criminalized. 

5. Capacity building for Pencom and other pension managers: The inability of 

pension fund administrators (PFA’s) to invest in high yielding ventures could be traced, 

largely to a lack of capacity. These organizations must be run like the business venture 

which they are. Capable business-minded people should be recruited to fill this gap and 

the civil service oriented ones should be retrained so as to equip them to fit into the new 

paradigm. In many countries, pension funds constitute the main source of funding 

groups and therefore, control the capital exchanges where they operate (Nawal and 

Noura, 2020). 

 

 

CONCLUSION 

This paper has perused the issue of non-payment of pension in Nigeria and concludes that it is 

unethical not to pay retirees their due benefits. Most pensioners are elderly people and are prone 

to a lot of vulnerabilities. Emphasis on the youth for the realization of economic goals and the 

erosion of the extended family system for which Africa was known has made life unbearable 

for retirees. Non-payment of pension could simply imply a death sentence. Therefore, those 

who engage in any organized, interdependent system of corruption to deny pensioners of their 

money should be visited with the appropriate severity of sanctions. Nigerian pensioners should 

be treated with the highest level of decorum and as first line charge in the financial system. 

 

 

  



 
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