The National Pension Commission has announced plans to establish dedicated revenue streams for state pension bureaus in a major push to overhaul sub-national pension compliance.
The initiative aims to incentivise state governments across the country to fully adopt and enforce the Contributory Pension Scheme.
The Director-General of PenCom, Omolola Oloworaran, disclosed the strategy during the 2026 Consultative Forum for States, the Federal Capital Territory, and Licensed Pension Fund Operators held on Tuesday in Lagos.
Addressing the core challenge of funding and operational hurdles at the sub-national level, PenCom expressed its commitment to creating sustainable financial incentives for state administrations.
“We have listened to them, and I think there is a good point in what they are saying. We will explore ways to create income streams for state pension bureaus. It might not be in the exact form they are prescribing, but we will certainly do something,” Oloworaran said.
The move follows increasing concern over poor compliance levels nationwide. According to PenCom, only eight of Nigeria’s 36 states have fully implemented and are operating the Contributory Pension Scheme framework.
Expressing deep dissatisfaction with the situation, Oloworaran scored state-level compliance low and called on governors to demonstrate stronger political will to safeguard their workforce.
“I am not satisfied at all with where we are,” Oloworaran cautioned.
“If you were to rate it, we still have an ‘F9.’ We still have only eight states out of 36 states complying. There has to be more political will. Governors must prioritise their workers and their future when they retire, not just worry about today. All 36 states should be under the Contributory Pension Scheme”, she added.
Beyond poor adoption rates, PenCom raised red flags regarding dangerous financial practices observed in certain states. Specifically, the Commission highlighted instances where state governments deduct monthly pension contributions from worker salaries but fail to remit them into individual Retirement Savings Accounts, holding them in general government coffers instead.
Oloworaran warned that storing worker deductions in state general accounts exposes retirement funds to severe political risks and administrative diversion, particularly during leadership transitions.
“In my personal opinion, deducting funds from employees and putting them in a state account is something that should never happen.
“Any incoming governor who doesn’t understand the original purpose of those funds could divert them elsewhere. That results in pension obligations skyrocketing and leads to a broken system in the future. We will actively engage those states to stop this practice,” she warned.
To further fortify the country’s retirement architecture, PenCom revealed that active consultations are underway with key legislative and labour stakeholders to amend existing laws. The proposed review of the Pension Reform Act will focus on raising mandatory contribution rates to match current macroeconomic realities.
“We are having active conversations regarding the review of the Pension Reform Act with all necessary parties, including Labor and the National Assembly,” Oloworaran added.
“It is still at the engagement stage. The rates of contribution will certainly go up, but we must ensure that all key stakeholders buy into it first”, she added.
Reaffirming support for effective pension administration during the forum, the Director-General of the Lagos State Pension Commission, Babalola Obilana, speaking on behalf of the Lagos State Head of Service, Bode Agoro, emphasised that Lagos remains dedicated to prompt remittances, consistent benefit funding, and continuous institutional strengthening.
PenCom noted that full 36-state adoption of the CPS remains non-negotiable to eliminate growing unfunded liabilities and guarantee that workers receive their terminal benefits immediately upon retirement.
Before 2004, Nigeria operated an unfunded Defined Benefit scheme for public sector workers. The system relied entirely on government budget allocations, resulting in massive funding backlogs, unpaid entitlements, and severe distress for retirees.
To fix this, the Federal Government enacted the Pension Reform Act of 2004 (repealed and updated as the PRA 2014), which established the Contributory Pension Scheme.
The Consultative Forum serves as a critical strategic platform driving the Commission’s ongoing push to align state-level pension structures with national standards, providing a framework for engagement on CPS implementation and sub-national pension administration.