Based on the Chilean experience, many countries have transitioned from a pay-as-you-go system to one of individual capitalization, including Nigeria in 2004.

 

Prior to the system's establishment in my country, Nigerian authorities and experts visited Chile to meet with José Piñera, the architect of the successful capitalization system created in Chile in 1980. They also met with executives from the company SONDA, which developed the system's administration software.

 

The system applies to all workers, both public and private, with the sole exception of those who, at the time of its introduction, had only three years left until retirement.

 

Like Chile, Nigeria adopted economic modernization measures to finance the transition, during which the state must continue paying the pensions of retirees from the old pay-as-you-go system without receiving contributions, which now flow into private pension funds.

 

Similar to Chile, Nigeria introduced four funds with varying risk levels to allow younger workers to access higher returns over longer periods and those closer to retirement to access returns with lower risk. The average annual real return has been 3.76%.

 

The system now has 8,000,000 affiliates who choose among 21 administrators that invest their accumulated funds totaling $30 billion, equivalent to 7.5% of GDP.