Last week, we discussed the benefits of having a retirement plan. Retirement planning involves depriving yourself of some spending money now so you can have some spending money as a retired person. Would it not be a bummer to lower your spending money now and still be unable to afford your planned lifestyle in your old age? Have you ever considered the threats to your retirement plan such as inflation and currency devaluation? 

Quite unfortunately, Nigeria has been in a time of currency devaluation and inflation for several years now. These factors pose serious threats to retirement plans as they lower the value of the money being set aside for retirement. We would not want to reserve so much of our earnings in your youth only to still not be able to afford our desired lifestyle in our retirement stage. Yes, the accumulated monthly funds deposited with the Pension Fund Administrators (PFAs) are being invested and interest is accrued on them, which the retiree can withdraw upon retirement, along with the principal but do the investment return rates beat the inflation and currency devaluation rates? Will the total amount (principal + interest) received by the retiree in retirement have a similar purchasing power to that of the principal when the retiree was in employment? The answer to these questions is No. Note that these factors affect not only retirement plans but also any savings or investment denominated in Nigerian Naira. 


Let us look at the movement in the Naira to US Dollar spot, not market, exchange rate over the last ten (10) years. In June 2011, the average central exchange rate for the month was ₦152.47 to a US Dollar (Central Bank of Nigeria, n.d.-a). In June 2021, the average central exchange rate for the month was ₦409.66 to a US Dollar (Central Bank of Nigeria, n.d.-a) showing a 168.68% devaluation of the Nigerian Naira over the last ten years. This means that in comparison to the US Dollar, our savings and investments have lost about 168.68% of their values over the last ten (10) years. Note that Nigeria is a country that relies heavily on importation using the US Dollar. We can imagine the impact this currency devaluation has had on our purchasing power as this means that prices of our imported products have increased by about 168.68% over the last ten (10) years i.e. an item that cost ₦100 in June 2011 costs about ₦268.68 in June 2021 ceteris paribus. Has your pension contribution accrued interest of up to 168.68% in the last ten (10) years? Most likely not.


Let us also consider the impact of inflation. Inflation is a fundamental economic indicator. How does it work? If a box of matchsticks cost ₦100 one year and ₦110 the next year, we can say that the inflation rate is 10%. The impact of this is that the purchasing power of the Nigerian Naira has reduced by 10% within that one year. The Nigerian people have all been complaining about the general rise in prices country-wide due to the 17.75% inflation rate in the country as at June 2021 according to Central Bank of Nigeria, (n.d.-b). Inflation is an economic indicator that needs to be kept at the barest minimum to allow for economic expansion yet minimize the loss of purchasing power of the nation’s currency over time. According to Central Bank of Nigeria, (n.d.-b), the last time Nigeria recorded a single-digit inflation rate i.e. an inflation rate below 10% was January 2016. Since then, the inflation rate has been mostly on the rise. Do the PFAs provide return rates on our pension fund invested with them that catch up with the rising inflation rate?


             To mitigate the threats to one’s retirement planning, one cannot afford to depend on the PFAs to provide return rates that exceed the inflation and currency devaluation rates. Although the Pension Reform Act 2014 allows the PFAs engage in foreign investments, the National Pension Commission is yet to permit the PFAs to do so as the Commission believes the fund should be spent within the Nigerian economic space to boost the economy. The Commission also considers foreign investments as higher risk, hence, believes they should be avoided. According to Orimisan (2021), less than 2% of pension assets are invested in real estate and below 1% invested in infrastructure fund as these are considered higher risk investments (even though they would yield more returns) rather, most pension assets are being invested in federal government securities. This creates the need for us to create our own retirement portfolio in addition to the compulsory pension contribution. 

             Our investments would perform better in foreign currency. Invest in stocks on the US Stock Market. Also purchase Exchange Traded Fund, popularly called ETFs, in US Dollars. These are long-term investments that would yield relatively heavy returns in the long run. This will help overcome the currency devaluation problem of the Nigerian Naira as well as the inflation rate faced by the US Dollar which is, for now, in single digits. Also note that the Nigerian Naira devaluation is expected to continue so placing funds in US Dollars now is already an investment as when you need to convert them back to Nigeria Naira years down the line, you would be getting more Naira. 

Also consider investing in real estate in areas with current relatively low values and expected high growth rates in the long run. 

In investments generally, due diligence is key. Several investment specialists help people navigate their way through the US Stock Exchange Market, usually at a subscription fee. They monitor the markets and determine the good-looking companies for stock purchases and sales. They also give investment advice for other investment types. There are also multiple investment applications such as PiggyVest, Bamboo, Passfolio and several others on which one can invest and save in foreign currency. 

Discipline to consistently contribute to your chosen retirement portfolio is key. According to the National Pension Commission, the retiree has no access to their Retirement Savings Account fund till the point of retirement which is typically the age the 50 years, except where the retiree retires earlier due to mental or physical incapacity and is unable to secure another employment after six months. With personal retirement portfolios, the individual will most likely have access to the fund at some point or the other before retirement and needs to maintain discipline to avoid spending the fund before retirement. 

Please drop your questions, comments and other suggestions in the comment box, share this article and engage with us via our social media platforms @ broadstreetfinancialreview on Facebook, Instagram and LinkedIn.

Thank you for reading and look out for our next article!


Central Bank of Nigeria. (n.d.-a). Central Bank of Nigeria | Exchange Rate. Retrieved July 18, 2021, from

Central Bank of Nigeria. (n.d.-b). Central Bank of Nigeria: Money and Credit Statistics. Retrieved July 18, 2021, from

Eze, M. O. (2021, July 16). Do Nigerians really have money in Pension? Vanguard Media Limited, Nigeria.

National Pension Commission. (n.d.). WHEN WILL I HAVE ACCESS TO MONEY IN MY RSA? | National Pension Commission. Retrieved July 18, 2021, from,access%20to%20his%2Fher%20RSA.

Onoro, G. (2021, June 15). The Nigerian Pension Industry – A journey with definite destination, thorns in the way. Vanguard Media Limited, Nigeria.

Orimisan, B. (2021, January 7). ‘Poor yields on securities, inflation affect pension growth.’ The Guardian Nigeria News – Nigeria and World News.

The Nation Newspaper. (2016, February 29). Why PFAs shun investments in foreign securities. Vintage Press Limited.

TRADING ECONOMICS. (n.d.). Nigeria Inflation Rate | 1996–2021 Data | 2022–2023 Forecast | Calendar | Historical. Retrieved July 18, 2021, from

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