By: Dr. Philip B. Olusola
Lead City University, Ibadan.
There is a fundamental economic principle that should guide Nigeria’s conversation about pensions and gratuities: money has a time value.
A naira available today is not economically equivalent to a naira received several years from now. Inflation erodes purchasing power, investment opportunities are lost, and the person deprived of the money may be forced to borrow, sell assets, or depend on others to meet basic needs.
This principle becomes particularly compelling when the money belongs to a retiree.
After decades of service to the state, a public servant should be able to retire with the confidence that the benefits earned through years of labour will be paid when due. Retirement should mark the beginning of a period of dignity and financial security – not another struggle to obtain benefits that have already been earned.
Yet, for many Nigerian retirees, retirement can mark the beginning of prolonged waiting for gratuities, pension arrears, and other lawful entitlements.
This raises a fundamental question: Should the government be permitted to withhold a retiree’s gratuity for years without compensating the retiree for the economic value lost during the period of delay?
I believe Nigeria needs a stronger legal answer to this question.
Gratuity is an earned entitlement
Pension and gratuity should not be treated as acts of governmental generosity. They are benefits arising from years of service and established conditions of employment.
Once a worker retires and becomes entitled to gratuity, the government should have a clearly defined legal obligation to pay it within a short and reasonable period.
A retiree who has fulfilled his or her side of the employment relationship should not have to spend years writing petitions, visiting government offices, seeking political intervention or commencing litigation merely to obtain money that has already become due.
This is why Nigeria should seriously consider enacting specific legislation compelling the prompt payment of gratuity upon retirement.
The law should establish a definite timeline within which gratuity must be computed and paid. Administrative procedures should not become an excuse for indefinite delay.
When payment is delayed, the law must have consequences
Suppose a retiree becomes entitled to a gratuity of ₦10 million in 2026, but the government does not pay until 2031.
The government may eventually pay the same ₦10 million. But the retiree has lost five years of access to the money.
During that period, the money could have been invested, used to acquire an asset, meet medical expenses, support dependants, or simply preserve financial security.
If ₦10 million had earned an illustrative 10 per cent annual return, compounded for five years, it would be worth approximately ₦16.1 million.
This does not mean the government should automatically pay retirees a 10 per cent investment return. It demonstrates, however, that withholding money has an economic cost.
Thus, paying yesterday’s obligation with today’s naira does not necessarily restore yesterday’s economic position.
Unpaid gratuity should become an interest-bearing government debt
This is where the law needs to go beyond merely encouraging prompt payment.
Where the government fails to pay a gratuity within the statutory period, the unpaid amount should automatically become an interest-bearing debt owed by the government to the retiree.
In effect, after the payment deadline expires, the government would be treated as having retained the retiree’s money and should be required to repay the principal together with accrued statutory interest until full settlement.
The interest rate should be objectively determined by law. It could be linked to an appropriate inflation measure, a recognised interest-rate benchmark, or a combination of both.
The purpose should not be to enrich retirees or punish the government. It should be to ensure that the retiree does not bear the entire economic cost of a delay for which the government is responsible.
The principle is straightforward:
The government should not enjoy what amounts to an interest-free loan from a retiree simply because it has failed to pay a lawful entitlement on time.
Why specific legislation is necessary
One may ask: why is another law necessary?
The answer is simple: experience demonstrates the limitations of relying solely on administrative goodwill.
Where there is no clear statutory deadline and no automatic consequence for default, retirement benefits can remain unpaid for years. The retiree is then placed in the difficult position of repeatedly demanding what is already owed.
A proper legal framework should establish:
- The exact point at which gratuity becomes due;
- A maximum statutory period for processing and payment;
- The government authority responsible for payment;
- Automatic interest where the statutory deadline is breached;
- Recognition of unpaid gratuity as an enforceable government debt; and
- A simple and inexpensive mechanism for retirees to enforce their entitlement.
Such legislation would transform gratuity from a benefit retirees wait indefinitely to receive into a legally enforceable retirement right.
Pension indexation must also be addressed
The issue of delayed gratuities is connected to another urgent question: pension indexation.
A pension that remains nominally fixed while the cost of living rises rapidly is effectively declining in real value.
Retirees do not wait for the government to review the price of food before buying food. They do not postpone medical treatment until a pension adjustment is announced. Inflation affects them every day.
The National Assembly should, therefore, strengthen the legal framework for regular pension review and examine transparent mechanisms for appropriate indexation that protect retirees against prolonged erosion of purchasing power.
The objective should not be an unsustainable pension burden. It should be predictability, fairness, and preservation of reasonable purchasing power.
A word to the Ondo State Government
As a retiree of the Rufus Giwa Polytechnic, Owo (RUGIPO), I make this appeal also from the standpoint of one who understands the realities of retirement and the anxiety that delayed entitlements can create.
I respectfully urge the Ondo State Government, as a responsible employer and custodian of the welfare of its retired public servants, to give serious consideration to the principle of prompt and full payment of gratuities upon retirement.
Importantly, Governor Lucky Aiyedatiwa already has what may aptly be described as a round peg in a round hole in the person of the current Commissioner for Education, Professor Igbekele Ajibefun.
Professor Ajibefun’s palliative welfare package introduced during his tenure as Rector of RUGIPO provides a practical demonstration of a worker-friendly administrative philosophy that deserves to be embraced and, where appropriate, institutionalised by other tertiary institutions.
Such an approach recognises an important truth: staff welfare and institutional productivity are not opposing objectives. Workers who feel valued, secure, and fairly treated are more likely to demonstrate commitment, efficiency, and productivity.
The experience of RUGIPO under Professor Ajibefun, therefore, offers an opportunity for the present administration to draw upon an approach that places human welfare at the centre of institutional performance. Rather than seeing retirement benefits merely as financial obligations, the government can regard prompt payment and staff welfare as investments in morale, trust, and public-sector effectiveness.
Where retirement benefits have become due, retirees should not be required to wait indefinitely for their lawful entitlements.
I, therefore, call on the State Government to strengthen its retirement-benefit payment system and establish a transparent and predictable mechanism for ensuring prompt settlement of gratuities.
Where payment has already been delayed, as is the case with RUGIPO retirees, the government should also consider an equitable mechanism for addressing the financial consequences of such prolonged delay.
This is not an appeal for preferential treatment.
It is an appeal for fairness.
The moral question
Beyond economics and law lies a deeper question of social justice.
A retiree has already given the most productive years of his or her life to public service. Unlike a younger worker, the retiree may have limited capacity to return to employment and recover losses caused by inflation or prolonged financial deprivation.
When a pensioner waits years for money already earned, the consequences are not abstract. It may mean postponed medical treatment, unpaid bills, dependence on children, the sale of assets, or a diminished quality of life.
A society that remembers its workers when it needs their labour but forgets them when they retire has failed an important test of social responsibility.
Time must no longer consume retirement benefits
Nigeria’s next phase of pension reform should therefore address a simple but fundamental question:
How do we ensure that a retirement benefit retains its economic value between the day it becomes due and the day it is actually received?
The answer should include prompt payment upon retirement, automatic interest on delayed gratuity, recognition of unpaid benefits as enforceable government debt, and appropriate pension indexation.
The National Assembly should provide the necessary legal framework to make these principles enforceable.
At the state level, governments can demonstrate that commitment through transparent, predictable, and humane retirement-benefit administration.
A retiree’s money is not government revenue simply because the government has possession of it.
When a lawful entitlement is delayed for years, the passage of time is not economically neutral.
Time has value. Inflation has consequences. Opportunity has a cost. And delay has a price.
Where the government is responsible for the delay, the retiree should not be made to pay that price alone.
A gratuity arrear is, therefore, not merely an unpaid obligation. It is an obligation whose real value is being consumed by time.
Nigeria should ensure that those who spent their working lives building and serving the state do not spend their retirement years paying for the state’s failure to pay them on time.
Retirement should be a period of dignity, not a prolonged wait for what has already been earned.
—Philip B. Olusola, PhD
Public Affairs Analyst and Academic
