The Nigeria Police Force: Consequences of exiting the contributory pension scheme

For decades prior to 2004, Nigeria operated a fragmented, inconsistent, and largely unfunded Defined Benefit Scheme (DBS). Pension obligations under this model were dependent almost entirely on annual government budgetary provisions. As the number of retirees expanded and fiscal revenues tightened, the system collapsed under the weight of trillions of naira in unpaid pension arrears. Modestus Anaesoronye in this report presents the past, the future and impact of the Contributory Pension Scheme (CPS).

The consequences for Nigerian retirees particularly members of the Nigeria Police Force were severe and well documented. Retirees endured long queues for verification and payment, persistent delays or outright non-payment of pensions, rampant fraud, ghost pensioners, and widespread administrative leakages. Perhaps most damaging was the erosion of dignity suffered by men and women who had devoted their productive years to national service. The pension system had no sustainability mechanism and could not meet its obligations.

By the early 2000s, the crisis had reached a breaking point. Protecting workers, restoring trust in public institutions, and eliminating systemic fraud became unavoidable imperatives. This context gave rise to the CPS, established under the Pension Reform Act (PRA) 2004, a landmark reform in Nigeria’s public finance and social protection architecture.

The CPS was designed around three core objectives: guaranteeing that every worker would retire with a fully funded benefit; eliminating the fiscal unpredictability and ballooning liabilities of the old DBS; and creating a transparent, regulated, and fraud-resistant pension system anchored on long-term savings. For the first time in Nigeria’s history, every worker, including police officers had a personally owned Retirement Savings Account (RSA), a system in which contributions were invested and grown throughout their careers, and a pension framework insulated from budget delays, corruption, and political interference.

The CPS was not merely a pension reform; it was a national recovery effort intended to prevent the re-emergence of a crisis that had crippled the country’s pension system for decades.

Today, the proposal for the Nigerian Police Force (NPF) to exit the CPS threatens to reverse these hard-won gains. It risks reopening the door to the same unfunded liabilities, fiscal instability, and retiree hardship that previously destabilized public finances and eroded confidence in government. The implications extend far beyond the police; they pose systemic risks to Nigeria’s economy, pension architecture, and long-term development.

A fiscal catastrophe in the making

The most immediate consequence of the NPF exiting the CPS is the creation of a massive and unmanageable fiscal burden for the Federal Government of Nigeria. Moving from a pre-funded contributory system back to a pay-as-you-go Defined Benefit Scheme would mean that government instantly assumes responsibility for all past and future pension obligations of the police workforce.

Current actuarial estimates indicate that this decision would generate liabilities in excess of N7 trillion. This figure reflects the obligation to fund full past-service and future-service benefits for approximately 350,000 police officers. The magnitude of this exposure is stark when juxtaposed with existing budget realities. In the 2023 fiscal year, total budgetary provision for pensions, gratuities, and retirees’ benefits stood at N854.8 billion, while police pension and gratuity specifically received just N8.9 billion.

The gap between N8.9 billion and a N7 trillion liability reveals a fiscal impossibility. Bridging it would require either an unprecedented immediate cash injection or a permanent commitment to massive annual allocations that would divert scarce resources from healthcare, education, infrastructure, and security operations. Such an unfunded liability would immediately weaken the federal balance sheet, undermine fiscal sustainability efforts, and heighten sovereign debt risk in an economy already burdened by a high debt-to-revenue ratio.

Read also: KBL Insurance taps NIIRA for recapitalisation

Security pressures and ballooning pension debt

Nigeria’s security challenges insurgency, banditry, communal violence have intensified calls for large-scale police recruitment to address manpower deficits and improve police-to-citizen ratios. However, under a revived DBS, every new recruit would automatically add to the government’s unfunded pension liabilities.

Instead of strengthening security capacity, increased recruitment would mechanically expand pension debt, creating a vicious cycle in which efforts to improve national security simultaneously worsen fiscal instability. Over time, pension obligations would crowd out operational funding for the police itself, weakening effectiveness, morale, and capability. The result would be a pension system that drains resources while failing to deliver security outcomes.

Repeating a failed history

The CPS was established precisely because the DBS failed spectacularly. The pre-2004 era was defined by underfunding, corruption, administrative weakness, and human suffering. Images of retired civil servants and police officers queuing for pensions in the 1990s and early 2000s remain a national scar. Outstanding pension liabilities ran into trillions of naira, while cases of falsified withdrawals and institutional fraud were commonplace.

The CPS replaced this chaos with transparency, accountability, and certainty. Contributions are tracked, funds are invested, and benefits accrue directly to individuals. Reverting to a DBS managed by a Police Pension Board risks reintroducing the same vulnerabilities that the PRA was enacted to eliminate. Crucially, it offers no credible guarantee that future governments will meet pension promises when fiscal conditions tighten.

Systemic and macroeconomic risks

Beyond pensions, the CPS has become a cornerstone of Nigeria’s economic architecture. As of May 2025, pension assets exceeded N24 trillion, providing long-term domestic capital for government securities, infrastructure bonds, and capital markets. Removing a cohort as large as the police potentially over N1 trillion in assets would weaken domestic demand for government debt, raise borrowing costs, and destabilize financial markets.

The CPS also smooths pension costs over officers’ careers. A DBS concentrates costs at retirement, crowding out spending on training, equipment, welfare, and operations. Ironically, this undermines the very police effectiveness that proponents of exit claim to seek.

Undermining pension reform and setting a dangerous precedent

Exempting the NPF from the CPS would erode confidence in the Pension Reform Act and create a powerful precedent. Other public sector groups’ paramilitary agencies and segments of the civil service would inevitably demand similar treatment. Such fragmentation would unravel centralised oversight, weaken professionalism, and reverse two decades of reform progress.

Importantly, previous government reviews concluded that the NPF should remain under the CPS, leading to the establishment of NPF Pensions Limited. The fact that many officers have chosen to retain their RSAs with existing PFAs suggests that agitation for exit does not reflect a universal preference within the force.

Viable solutions within the cps framework

The core concerns driving agitation including low retirement benefits and welfare can be addressed within the CPS without dismantling it. The PRA 2014 explicitly allows employers to provide additional benefits. Section 4(4)(a) permits government to pay gratuities or top-up benefits at retirement. Implementing such measures would immediately improve take-home benefits without creating unfunded liabilities.

Furthermore, the Constitution provides for periodic pension reviews. While retirees under the old DBS have benefited from multiple increases, similar adjustments have yet to be extended to CPS retirees. Implementing these reviews would significantly improve welfare for retired police officers and all federal retirees under the CPS.

Lessons from experience and global practice

A Defined Benefit Scheme may appear generous because its promises are explicit. But Nigeria’s experience shows that when promises exceed fiscal capacity, retirees suffer delays, queues, and erosion of value through inflation. The CPS forces discipline, funding promises in advance, investing contributions, and reducing intergenerational inequity.

Internationally, Nigeria’s reform path aligns with global best practice. Countries across Africa and advanced economies such as the United States and the United Kingdom have moved away from unsustainable DBS models toward contributory systems. Reversing course now would isolate Nigeria as a policy outlier and repudiate its own reform logic.

The ethical and responsible response to police welfare concerns is not to revive an unsustainable promise machine, but to fully deploy the tools already embedded in the Pension Reform Act and the Constitution. Increasing contributions, paying gratuities, and implementing periodic pension reviews can deliver better outcomes now, without destabilising public finances or undermining economic development.

Exiting the CPS would be fiscally ruinous, historically regressive, and economically destabilising. Preserving and strengthening the CPS is not only in the interest of police officers and retirees; it is essential to Nigeria’s capacity to finance security, growth, and opportunity for generations to come.

Modestus Anaesoronye is a leading Nigerian financial journalist with over two decades of experience reporting on the insurance and pension sectors across Nigeria and West Africa. He has held key editorial positions at major national media outlets, including The Comet, The Nation, and Financial Standard, and currently serves as a Senior Financial Analyst at BusinessDay Media Ltd.

A widely travelled reporter, he has covered industry developments in more than 14 countries across Africa and Asia.

Anaesoronye is a multiple award-winning journalist, honoured several times as Insurance Journalist of the Year and Pension Journalist of the Year by recognised industry bodies, including PensionScope and the Pension Fund Operators Association of Nigeria (PenOp), among others.

Join BusinessDay whatsapp Channel, to stay up to date