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HomeInsuranceThe Nigeria Social Insurance Trust Fund – All You Need To Know.

The Nigeria Social Insurance Trust Fund – All You Need To Know.

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Introduction

The government of Nigeria’s primary purpose is to serve the interest of its citizens. One of the ways to ensure that, is by establishing institutions and organizations that will see to the welfare of its citizens. When it comes to Employees working in either private or public institutions, the government has to see that certain policies and rules are being set out to ensure that employees are not exploited and to also meet the needs of employees.

 

Nigeria social insurance trust fund was one among the many institutions set up by the government of Nigeria for the main purpose of protecting and safeguarding employees in the public and private sector in the event of work-related accidents or injuries.

 

To get a full glimpse of the subject of discussion, let’s take some time to look at what the Nigeria social insurance trust fund is all about, a brief history of how it came into existence, some functionalities and its contributions.

 

What Is The Nigeria Social Insurance Trust Fund?

The Nigeria social insurance trust fund is a governmental institution that was set up for the purpose of looking after the welfare of employees working in either public or private institutions in the event of work-related accidents or injuries.

 

They provide social protection and safety nets for all employees against deprivation and income insecurity in accordance with national and international laws, conventions and world best practices and they apply to all employers and employees in both public and private sectors.

 

This scheme was set up by the government primarily to look after employee welfare in the event of work-related accidents or injuries. The Nigeria social insurance trust fund (NSITF) is backed by the Employees Compensation Act (ECA) 2011, this is a  well defined Benefit Scheme for workers in Nigeria and the Nigeria social insurance trust fund is the only government institution backed up by law to ensure that the Employee’s compensation scheme strictly adheres to its Employers of labour.

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NSITF is mandated to implement the Employee Compensation Scheme (ECS), a no-fault employee injury insurance scheme that covers workers in both the public and private sectors of the Nigerian economy. With about 67 offices nationwide, NSITF has a presence in all 36 States of the Federation and the Federal Capital Territory (FCT).

 

History Of The Nigeria Social Insurance Trust Fund

Nigeria Social Insurance Trust Fund (NSITF) is one of the foremost social insurance organizations in Africa with a long history of service dating back to 1961.

 

Regulated pensions for employees in the Organized private sector, began in 1961 with the establishment by an Act of Parliament of the National Provident Fund (NPF). The Act provided income loss protection for employees as stipulated by the International Labor Organization (ILO) Convention 102 of 1952 on Social Security (minimum Standard).

 

Under the NPF, the monthly contribution was 6% of the basic salary, subjected to a maximum of N8.00 to be contributed in equal proportion of N4.00 each by the employer and the employee.

 

In 1993, the National Provident Fund (NPF) changed into the Nigeria Social Insurance Trust Fund (NSITF) following the promulgation of the NSITF Decree No 73 of 1993. The Act mandated all employers of labour in the Organized Private Sector (OPS), with a workforce of not less than 5 persons to register as members of the scheme and remit monthly contributions.

The NSITF was a Defined Benefits Scheme and the initial monthly contribution was 7.5% of the basic salary, 2.5% to be borne by the employee, and 5% by the employer. This was reviewed upwards in 2001 to 10% of gross salary, 3.5% to be borne by the employee and 6.5% by the employer but has also been reviewed over the years.

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The Function Of The Nigeria Social Insurance Trust Fund.

 

Below are some of the functions and tasks entrusted to the Nigeria social insurance trust fund.

 

  • To ensure that all employers of labour strictly comply with the federal government initiative to protect and cater for its employees in the event of work-related accidents or injuries.
  • To ensure that all employers are duly registered with the fund.
  • To ensure that all employers are up to date with their contribution.
  • To ensure that all employers provide a safe working environment constantly to their employees.
  • The Nigeria social insurance trust fund Board performs a risk assessment to classify contributions on workers’ exposure and estimate the appropriate payments. This contribution is not a deduction from an employee’s monthly salary. Rather, it is a statutory payroll contribution by an employer.

 

About The Contributory Pension Scheme Under The Nigeria Social Insurance Trust Fund Scheme.

 

Under the provision of the NSITF Act 1993, all employers of labour in the Private Sector registered under the Companies and Allied Matters Act (CAMA) 1990, either as companies or partnerships, regardless of the number of their employees or were sole businesses with a workforce of not less than five employees, were required to register as members of the NSITF Scheme and remit their contributions monthly.

 

It was mandated to provide the following benefits

 

  • Retirement pension benefit.
  • Survivors benefit.
  • Retirement grant.
  • Invalidity benefit.
  • Invalidity grant and such other benefits as may be approved from time to time by the Board.

 

How Is The Scheme Funded?

The NSITF scheme was a defined benefit scheme which enabled contributions to enjoy pensions and grants far beyond their contributions. The new rate of contribution was effected in January 2002, after it was reviewed. The cost of administering the fund was funded from the cumulative contribution gotten and the surplus of it was channelled into investment purposes to generate income for the payments of benefits.

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Registered members were permitted, subject to certain qualifications, to receive pension and grants as benefits in the event of attaining the retirement age of 60 (or 55), invalidity or death, which would be paid to them or their survivors as the case might be.

 

In order to deliver on its mandate, the Fund was given operational autonomy in order to;

  • Evolve more result-oriented and accountable management based on performance contracts.
  • Strengthen financial/accounting controls.
  • Ensure financial solvency through effective cost recovery, cost control and prudent management.
  • Remove bureaucratic bottlenecks and political interference through clear role definitions between the supervising Ministry, the Board and the Management.

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The NSITF scheme was funded with contributions from the registered members of the scheme. The cost of administration of the scheme by the NSITF Board (capital and recurrent) were borne by the Fund, as the scheme plan allowed between 5-25% of contributions received to meet administrative costs (normally higher at inception of scheme and progressively lower as the scheme matures).

NSITF was also empowered under the Act to carry on the business of profitable nature, investment, etc. The financial provisions of the NSITF Act (Ss 27 & 23) permit NSITF to do as outlined above.

 

Conclusion

Following the enactment of this scheme, employees are guaranteed that the interest of their welfare is backed up by the government of Nigeria and this will enable equitability in the workplace.  Summarily, it can be deduced that the birth of the Nigeria Scheme Insurance trust fund has been of great benefit to the general populace. 

 

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