Explain pension reform in nigeria under new public management pdf

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Here's an explanation of pension reform in Nigeria under the New Public Management (NPM) framework, based on a PDF document:

Background

The Nigerian pension system was characterized by inefficiencies, corruption, and inadequate coverage before the reform. The pension fund was managed by the National Provident Fund (NPF), which was established in 1958. However, the fund was plagued by mismanagement, corruption, and inadequate funding, leading to a significant decline in its financial health.

New Public Management (NPM) Framework

In the 1990s, Nigeria adopted the NPM framework, which aimed to reform the public sector by introducing private sector management practices, increasing efficiency, and promoting accountability. The NPM framework emphasized the importance of decentralization, privatization, and public-private partnerships.

Pension Reform

In 2004, the Nigerian government launched a comprehensive pension reform program, which aimed to address the challenges facing the pension system. The reform was designed to:

  1. Establish a new pension scheme: The reform created a new pension scheme, the Pension Reform Act (PRA) 2004, which replaced the NPF. The PRA established a contributory pension scheme, where both employees and employers contribute to the pension fund.
  2. Decentralize pension administration: The reform decentralized pension administration by establishing state-owned pension funds, which were responsible for managing the pension funds of their respective states.
  3. Introduce private sector management: The reform introduced private sector management practices to the pension industry, including the establishment of pension fund administrators (PFAs) and pension custodians.
  4. Promote transparency and accountability: The reform emphasized the importance of transparency and accountability in pension management, including the establishment of a pension commission to regulate the industry.

Key Features of the Pension Reform

The pension reform introduced several key features, including:

  1. Contributory pension scheme: The reform introduced a contributory pension scheme, where both employees and employers contribute to the pension fund.
  2. Multiple pension funds: The reform established multiple pension funds, including the Retirement Savings Account (RSA) and the National Pension Commission (NPC).
  3. Pension fund administrators (PFAs): The reform established PFAs, which are responsible for managing the pension funds of their respective employers.
  4. Pension custodians: The reform established pension custodians, which are responsible for holding and managing the pension funds.
  5. Pension commission: The reform established a pension commission, which is responsible for regulating the pension industry.

Benefits of the Pension Reform

The pension reform has several benefits, including:

  1. Increased coverage: The reform has increased pension coverage, with over 8 million Nigerians currently enrolled in the pension scheme.
  2. Improved pension fund management: The reform has introduced private sector management practices, which have improved the management of pension funds.
  3. Increased transparency and accountability: The reform has emphasized the importance of transparency and accountability in pension management, which has reduced corruption and improved the overall efficiency of the pension system.
  4. Improved pension benefits: The reform has improved pension benefits, including the introduction of a minimum pension guarantee and a pension increase factor.

Challenges of the Pension Reform

Despite the benefits of the pension reform, there are several challenges, including:

  1. Low pension coverage: Despite the increase in pension coverage, the reform has not yet achieved universal coverage.
  2. Inadequate funding: The pension funds are still underfunded, which poses a risk to the sustainability of the pension system.
  3. Corruption: Corruption remains a significant challenge in the pension industry, which can undermine the effectiveness of the reform.
  4. Regulatory challenges: The pension commission faces regulatory challenges, including the need to balance the interests of different stakeholders in the pension industry.

Conclusion

The pension reform in Nigeria under the NPM framework has introduced several positive changes, including increased coverage, improved pension fund management, and increased transparency and accountability. However, the reform also faces several challenges, including low pension coverage, inadequate funding, corruption, and regulatory challenges. To address these challenges, it is essential to continue to monitor and evaluate the effectiveness of the pension reform and to make necessary adjustments to ensure the sustainability of the pension system.