Employers oppose proposed pension contribution hike, warn of job losses

The Organised Private Sector of Nigeria (OPSN) has rejected the Federal Government’s proposed increase in mandatory pension contributions, warning that the move could threaten jobs, business sustainability and economic growth.

 

The employers’ group, in a statement jointly signed by the Manufacturers Association of Nigeria (MAN), the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), the Nigeria Employers’ Consultative Association (NECA), the Nigerian Association of Small and Medium Enterprises (NASME) and the Nigerian Association of Small Scale Industrialists (NASSI), described the proposal as premature and counterproductive.

 

The OPSN was reacting to an announcement by the Director-General of the National Pension Commission (PenCom) on plans to increase the mandatory pension contribution rate and introduce an additional annual contribution equivalent to three per cent of the total wage bill.

 

The group argued that while the proposal was intended to improve retirement benefits, it could become a “Greek gift” by undermining employment, wage growth, business sustainability and regulatory compliance.

 

According to the employers, Nigeria’s current mandatory pension contribution rate of 18 per cent—comprising 10 per cent from employers and eight per cent from employees—is already comparable to the Organisation for Economic Co-operation and Development (OECD) average of 18.8 per cent.

 

They insisted that any proposal to increase the rate should be backed by Nigeria-specific actuarial evidence demonstrating that the current contribution is inadequate and that a higher rate would not negatively affect employment and businesses.

 

NECA Director-General, Adewale-Smatt Oyerinde, said announcing the increase while stakeholder consultations were still ongoing risked undermining the consultation process.

 

“The OPSN supports efforts aimed at strengthening Nigeria’s pension system and improving retirement outcomes for workers. However, announcing that contribution rates will increase while consultations are still ongoing risks prejudging the outcome of the process and reducing subsequent stakeholder engagements to a mere formality,” he said.

 

He noted that previous pension reforms were preceded by extensive consultations involving government, employers and organised labour, adding that any adjustment should be supported by credible actuarial, economic and employment impact assessments.

 

MAN Director-General, Segun Ajayi-Kadir, warned that businesses were already grappling with high energy costs, rising interest rates, exchange rate volatility, weak consumer demand and increasing production costs.

 

“Imposing an additional statutory payroll cost without a comprehensive impact assessment will place further pressure on already struggling enterprises,” he said.

 

Ajayi-Kadir added that higher employment costs could force businesses to slow recruitment, postpone wage reviews, reduce staff strength, suspend expansion plans or transfer the additional costs to consumers through higher prices.

 

Also speaking, NACCIMA Director-General, Sola Obadimu, said imposing another financial obligation on employers could undermine the Federal Government’s broader economic reforms aimed at improving competitiveness.

 

He stressed that government policies should be evaluated based on their cumulative impact on employment, investment, inflation and business survival.

 

For micro, small and medium-sized enterprises, NASSI Director-General, Ifeanyi Oputa, warned that the proposed increase could worsen existing challenges.

 

“MSMEs operate with narrow margins and limited access to affordable finance. Many are still struggling with rising energy costs, declining purchasing power, multiple levies and increasing operating expenses. An additional statutory burden could threaten their survival and discourage them from employing workers formally,” he said.

 

The OPSN urged the Federal Government and PenCom to prioritise macroeconomic stability, business sustainability and job preservation before introducing any increase in pension contributions.

 

The group called for a comprehensive assessment of the proposal’s impact on employment, wages, recruitment, inflation, investment, production costs and the survival of small businesses.

 

While stating that it was not opposed to reforms that would strengthen retirement security, the OPSN maintained that any adjustment should only follow transparent consultations with all stakeholders and be implemented when broader economic conditions improve.

 

PenCom had earlier announced plans to review the Pension Reform Act 2014 and increase the mandatory pension contribution rate beyond the current 18 per cent as part of wider reforms to strengthen retirement security. The commission said consultations with organised labour, employers, pension operators and the National Assembly are ongoing before any amendment is presented for legislative approval.