June 21 (THEWILL) — Numerous unemployed Nigerians, having lost their jobs due to severe economic difficulties, have resorted to utilising their retirement savings for immediate sustenance, raising concerns among industry stakeholders. The early withdrawals, which fundamentally impact the accumulated savings meant to bolster retirement funds, have emerged as a troubling sign regarding what was supposed to provide adequate support for future retirees.
Figures from National Pension Commission (PenCom) show that 8,082 unemployed workers withdrew a total of N12.11 billion from their Retirement Savings Accounts (RSAs) in the fourth quarter of 2025 (October – December) after losing their jobs.
The withdrawals were made under a provision of the Pension Reform Act 2014, which allows contributors who have been out of work for at least four months to access up to 25 percent of their pension savings before retirement. The data highlights the growing financial pressure facing many Nigerian households as inflation, high living costs and a challenging job market continue to squeeze incomes.
The provision was established to offer temporary financial assistance to employees during times of unemployment. However, industry experts are worried about the twofold effect of this situation: the reduction of total accumulated pension assets and the diminishment of what could have been substantial retirement savings.
The N12.11 billion withdrawn between October and December 2025 represents a significant amount of retirement savings being used to meet immediate needs rather than future financial security. On average, each beneficiary accessed about N1.5 million from their RSA during the period. The trend suggests that more Nigerians are increasingly relying on pension funds as a safety net while searching for new employment opportunities.
Pension savings are designed to provide income after active employment ends, and early withdrawals may weaken long-term financial security for contributors. Despite these concerns, many unemployed Nigerians see the option as a necessary lifeline in the face of rising economic hardship and limited job opportunities.
“The latest PenCom figures underscore the difficult choices many households are making as they balance present-day survival with future retirement plans,” said Innocent Okehi, an insurance and pension expert. Okehi maintains that the situation indicates the severely challenging economic conditions in the country, which are unlikely to improve in the near future due to rising inflation, escalating living costs, business closures, and job losses.
An analysis of the PenCom data indicates that a significant majority of the temporary pre-retirement withdrawals were made by private sector employees. Approximately 96 percent of individuals who accessed their pension funds following job loss were from the private sector, in contrast to a mere four percent from the public sector.
Industry analysts argue that this trend highlights the susceptibility of private sector workers to economic disturbances manifesting in business shutdowns, downsizing, and restructuring processes. These trends have become more prevalent across various industries as companies contend with increasing operational costs, currency fluctuations, and diminished consumer spending in recent times.
It also mirrors the wider bleak economic conditions that have influenced the landscape since the second quarter of 2023, when the President Bola Ahmed Tinubu-led government introduced several reforms aimed at rejuvenating the economy which entailed the eliminating of fuel subsidy and devaluing the naira.
The sharp decline in the naira’s value has contributed to rising inflation, increasing the cost of imported goods, raw materials, fuel, and essential services. Many businesses have struggled with higher operating costs, while households have faced a decline in purchasing power as wages have failed to keep pace with rising prices.
The resultant pressure on living standards has sparked debates about whether the long-term benefits of the pre-retirement withdrawal policy outweigh its short-term economic and social costs with many organisations resorting to lay-off, staff rationalisation or wage cut as economic hardship bites.
In essence, three years after floating the naira on June 14, 2023, the country’s manufacturing sector, a major employer of labour, has been at the receiving end of the consequences. The result has been one of painful adjustment marked by job losses, factory downsizing, balance-sheet shocks and shrinking access to credit. Some firms have resorted to indirect employment via outsourcing as downsizing becomes inevitable.
Recently, the Manufacturers Association of Nigeria (MAN) revealed that an estimated 18,900 manufacturing jobs were lost during the reform period as companies grappled with surging production costs, foreign exchange volatility, weak consumer demand and rising borrowing costs.
The impact extended beyond employment. Manufacturers also struggled with declining sales volumes as inflation eroded household purchasing power. The consequence was a build-up of unsold inventory estimated at n1.04 trillion, one of the largest stock overhangs recorded by the sector in recent years.
“All this affects employers’ part of pension contribution which results in layoff or staff rationalisation. To survive, employees who lost their jobs resort to their pension savings to stay afloat the storm of economic hardship,” said Adenike Bamidele, a human resource expert.
Enumerating the wider impact of the pre-retirement pension withdrawal, industry experts stress that it has individual, collective and economic consequences that have become a source of concern.
Among the consequences is severe old-age poverty risk as early withdrawal of a quarter of retirement savings eliminates compound interest on those funds. Combined with career breaks, this significantly reduces the worker’s final pension payout, increasing the likelihood of poverty in retirement.
It also leads to erosion of the capital base: The 25 percent lump sum effectively halves the compounding potential of the total savings, making it incredibly difficult for younger displaced workers to rebuild a robust pension pot before the statutory retirement age.
Additionally, the savings withdrawal is often treated as a “lifeline” to offset immediate costs (e.g., rent, food) rather than for its intended purpose of funding a new business. Once spent, the worker has no fallback buffer if the job search extends for a longer period. Hence it leads to a loss of safety net for reintegration.
At the macroeconomic level, high volumes of early savings withdrawals force PFAs to maintain higher levels of cash and liquid – low-yield assets. This reduces their capacity to invest in long-term, high-yield national infrastructure or economic instruments. Because fund managers must liquidate assets to pay out the 25 percent, they lose the “illiquidity premium” that comes with locking money into long-term investments. This ultimately affects the yield for all contributors in the scheme, resulting in diminished returns on investment.
Loss of confidence in pension administration could also occur from prolonged delays in processing the 25 percent withdrawal—often caused by employers failing to remit deducted funds to the PFA. This could lead to public distrust and frustration with the Nigerian pension system.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
