Pension Scandal In Nigeria: Its Impact On Public Fund Management (a Case Study Of Nigeria Pension Commission)

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This project “pension scandal in Nigeria, its impact public fund management”. A case study of Nigeria pension commission. The objective of this study was generally set towards ascertaining the impact of pension scandals in public fund management. The research reviewed the literature works done by others authors in the process of this study. Data were collected through primary and secondary sources. Questionnaire, oral interview as well as journals respectively. However the following was discovered during the course of this study, that the new pension scheme is contributory; it de-emphasizes on lump-sum payment of gratuities, removes pension administration from the public sector and place it squarely in the hands of financial institutions. The conclusion is that the success of pension reforms largely depends on the sincerity, collaboration and commitment of all stakeholders like, government institutions who manage and administer contributions, individuals who pay and employers who recommends that a comprehensive accounting standard for retirement benefits must be put in place to adequately project pension funds.




Title page                                                                     i

Approval/certification page                                             ii

Dedication                                                                    iii

Acknowledgement                                                         iv

Abstract                                                                       vii

Table of content                                                            viii



1.1      Background of the study                                          1

1.2      Statement of problem                                             4

1.3      Objective of the study                                             6

1.4      Research questions                                                 7

1.5      Significance of the study                                          7

1.6      Scopes of the study                                                       8

1.7      Limitations of the study                                           9




2.1 The Concept of Pension                                             10

2.2 Importance of Pension                                              11

2.3 The Pension Scheme in Nigeria                                          13

2.4 The Pay As You Go (PAYG) Pension Scheme                 18

2.4.1 Merits of the Pay As You Go (PAYG) Pension Scheme  20

2.4.2 Challenges of the Old Pension Schemes                           21

2.5 The Pension Reform Act 2004                                    27

2.5.1 Features of the 2004 Pension Reform                       31

2.5.2 Merits of the Contributory Pension Scheme               37

2.5.3 Challenges of the Contributory Pension Scheme (CPS)       39

2.6 The Social Pension Alternative                                    42



3.1      Research design                                                     49

3.2      Area of study                                                         49

3.3      Population of study                                                 50

3.4      Sampling method                                                   50

3.5      Research instrumentation                                        50

3.6      Validity and reliability of research instrument                     53

3.7      Sources of data                                                      55

3.8      Method of investigation                                           56



4.1      Data Presentation                                                   57

4.2      Data analysis                                                         58



5.1      Findings                                                                65

1.1      Conclusion                                                             67

1.2      Recommendations                                                  68

Bibliography                                                           72  

Appendix I                                                             75

Appendix II                                                            76   




1.1 Background of the study

Employee benefits are elements of remuneration given in addition to the various forms of cash pay. Pension is one indispensable form of employees’ solid benefits which has positive impact on employee discipline, loyalty and willingness to remain in the service of an employer, commitment to the attainment of job goals and concern for the survival of the organization.

An occupational pension scheme is an arrangement under which an employer provides pension for employees when they retire or gives deferred benefits to members who leave. It is a system designed to provide the employees of an organization with a means of securing on retirement a standard of living reasonably consistent with that which they enjoyed while in service.

Pension and related issues have received significant attention in many countries over the past decades. There are new changes in the way pension assets are managed and benefits are distributed to beneficiaries due to the difficulties associated with the pension schemes previously in existence.

Robolino (2009) notes that many countries have opted for different forms of contributory pension schemes, in which employees and their employers are expected to pay certain percentages of their monthly earnings to a Retirement Savings Account (RSA) from which they would be drawing their pension benefits after retirement. Pension reflects money withheld during the period of employment and returned with interest to an employee after cessation of work, that is, at retirement.

A retirement scheme is a way of providing an employee with either a lump sum of money when leaving the service of an employer or providing a pension to the employee. It provides benefits which can be regarded as compensation to an employee for the services rendered to the organization.

Over the years the management of pension scheme in Nigeria has been inundated by multiple and diverse problems such as inadequate funding, inadequate subventions and grants, poor documentation and filing in pension offices, direct release of pension funds to underwriters, accumulated arrears of pensioners, inability to determine appropriate investment portfolios, lack of accountability, corruption and embezzlement of funds. Others include cumbersome clearance procedures, incompetence and inexperience of pension staff added to poor human relations, lack of etiquette and simple courtesy.

This situation often affects employee loyalty and commitment to an organization negatively. There have been several reviews of pension schemes by the government which have also caused implementation problems. This paper examines the features, prospects and challenges of the new pension system in Nigeria as an important aspect of retirement planning almost a decade after its commencement.

1.2      statement of problem

Major problem of the pension fund administration in Nigeria was the non-payment or delay in the payment of pension and gratuity by the federal and state government for instance; the pension backlog was put at about N2.56 trillion as at December 2005. In-fact, pension fund administration became a thorny issue with millions of retried Nigerian worker living in object poverty and they were often neglected and not properly catered  for after retirement.

Sadly, retirees went through tough times and rigorous processes before they were eventually paid their pensions, gratuity and other retirement benefits. At one time the money to pay their benefits is not available and at another time, the pension fund administrators were not there to meet the retiree’s needs.

Basically, the old scheme has been beset with a lot of challenges and problems. Besides the information, other problems were; demographic challenges and finding of outstanding pensions and gratuities, merging of service for the purpose of computing retirement benefits. These problems coupled with the administrative bottlenecks, bureaucracies, corrupt tendencies and inefficiencies of the civil service and the economic downturn have resulted in erratic and the nonpayment of terminal benefits as at when due ((Okpaise O. 2009: Ezeala, 2007 Abade, 2004). Other problems were; gross abuse of pensioners and pension fund benefits which were politically motivated in some cases.


 This research work is generally set towards ascertaining the impact of pension scandal in public fund and management .furthermore, the study is;

1) To examine on how to detect and control pension scandal in Nigerian pension system.     

2)   To find out if there is any fraud in Nigeria pension system.              

 3)  To examine if there is any effect of pension scandal in Nigerian pension system.

4)  To recommend solutions that may help in checking pension scandal in Nigerian pension system.

5)  To identify the problem the country face as a result of Nigerian pension scandal.



The following question are the research questions

1.  Whether pension scandals, can be detected and controlled in Nigeria?

2.  Is there any fraud in Nigeria pension system?

3.  Is there any effect of pension scandals in Nigeria pension system?

4.  Is there any solution to pension scandals in Nigeria?

5.  Has the pension scandal in the country helped to impede problems towards economic failure?


This study is intended to highlight the indispensable impact of pension scandal in Nigerian pension system.

       This project will equally to be of immense help to other establishments and organisation both in public and private

sector. The dive need to establish a visible of control as a means of  controlling Nigerian pension system should not be over-emphasised.        

       This research work will be useful to the management of Nigerian pension scheme which they are to use the findings of this research to equip the audit department. This department being the watch – dog of the scheme should be given more power to operate.

 Government agencies can install adequate internal control measures to avert the incessant scandals  and fraud rampant in financial houses, ministries and parastals today.      

1.6         SCOPE OF THE STUDY

       This research work is restricted Nigeria life and pension commission Akaraka house New Haven Enugu, Enugu.





This research work has a lot of difficulties.  Firstly, top pension officers were reluctant to give away relevant statistical data on pension scandals that occurred in the organization.


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Pension Scandal In Nigeria: Its Impact On Public Fund Management