The National Pension Commission (PenCom) has intensified efforts to expand Nigeria’s non-interest pension sector, a move aimed at boosting financial inclusion and attracting contributors who seek ethical and Shariah-compliant financial solutions.
As part of this initiative, the commission on Monday inaugurated the Pension Industry Non-Interest Advisory Committee (PINAC), a body tasked with providing strategic guidance on governance, compliance, and market development for non-interest pension funds.
Speaking at the inauguration in Abuja, PenCom Director-General, Omolola Oloworaran, described the establishment of the committee as a “major step” towards ensuring that the pension industry accommodates all financial preferences, particularly for those who avoid interest-based transactions.
She noted that while non-interest finance has been gaining traction in Nigeria—especially through Islamic banking and sukuk bonds—pension fund administrators (PFAs) must do more to integrate such products into the mainstream retirement savings market.
“The introduction of Non-Interest Pension Funds (Fund VI) was a groundbreaking step to provide an investment option that is free from interest-based instruments while still ensuring competitive returns for contributors,” Oloworaran stated.
She, however, acknowledged that the segment still faces challenges, including regulatory uncertainties, limited awareness, and the need for structured investment options that comply with ethical finance principles.
Growing Demand for Ethical Finance
Nigeria’s pension penetration remains low, with a significant portion of the working population either unaware of or unwilling to participate in the Contributory Pension Scheme (CPS). Analysts suggest that a well-structured non-interest pension framework could attract more contributors, particularly those in Muslim-dominated regions and individuals with strong ethical finance preferences.
Chairman of PINAC, Prof. Adam Muhammad Abubakar, emphasized the importance of a strong compliance monitoring system to ensure that non-interest pension products adhere strictly to ethical and Shariah principles.
“The credibility of this initiative depends on transparency, proper regulation, and investment strategies that align with non-interest finance principles,” Abubakar said.
He added that the committee would work closely with PFAs to ensure that Fund VI assets are invested in viable instruments that guarantee both ethical compliance and stable returns.
Challenges and the Road Ahead
Despite its potential, the non-interest pension market still faces key hurdles, including limited public awareness and a lack of diversified investment options. Unlike commercial banks that have aggressively promoted Islamic banking, most PFAs have done little to educate contributors about non-interest pension plans.
Industry experts argue that beyond forming advisory bodies, PenCom must work with stakeholders to increase public education and create stronger investment pipelines for non-interest pension funds.
With PINAC now in place, stakeholders will be watching closely to see if PenCom’s strategy can drive broader participation and make non-interest pensions a viable alternative in Nigeria’s evolving financial landscape.
