Employers warns Proposed pension contribution increase could threaten jobs, weaken businesses, suppress wages and ultimately hurt Nigerian workers.
The Organised Private Sector of Nigeria (OPSN), has described the recent announcement by the Director General of the National Pension Commission (PenCom) regarding a proposed increase in mandatory pension contributions and introduction of an additional 3.0 per cent mandatory annual contribution as a Greek gift.
The OPSN comprises the Manufacturers Association of Nigeria (MAN); the National 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); the Nigerian Association of Small Scale Industrialists (NASSI) and 25 sectoral employer associations.
A press statement on Thursday jointly signed by MAN, NECA, NACCIMA, NASME and NASSI, said that any reform that promises improved retirement outcomes while placing additional pressure on the businesses and jobs that fund those outcomes would ultimately amount to a “Greek gift” to Nigerian workers.
It said: “While the proposal may be presented as an effort to improve retirement benefits, the OPSN warns that under the prevailing economic conditions, it could become a Greek gift to Nigerian workers.”
According to the OPSN, the proposal will ultimately threaten employment, wage growth, business sustainability and escalate compliance risks.
It maintained that the strength of any contributory pension system depends fundamentally on the survival of businesses, the availability of decent jobs and the capacity of employers and employees to make consistent contributions.
The OPSN said that under the Pension Reform Act 2014, Nigeria’s minimum pension contribution already stands at 18 per cent of an employee’s monthly emoluments, comprising 10 per cent from the employer and 8 per cent from the employee.
It claimed that this is broadly comparable with the OECD average effective mandatory pension contribution rate of 18.8 per cent at the average-wage level in 2024.
It, therefore, pointed out that Nigeria’s existing contribution rate cannot reasonably be regarded as inadequate, based on contribution percentages alone. “Any proposal for an increase must be supported by Nigeria-specific actuarial evidence demonstrating that the current rate is insufficient and that a higher rate would not undermine employment, wages, compliance and enterprise sustainability,” the group said.
For his part, the Director General of NECA, Mr. Adewale-Smatt Oyerinde, emphasised that the proposed hike is both premature and counterproductive.
He said that announcing the proposed hike on contribution rates while consultations are still ongoing might prejudge the outcome of the process and reduce subsequent stakeholder engagements to a mere formality.
He stressed that previous adjustments to pension contribution rates were preceded by extensive engagement among government, employers, organisedlabour and other relevant stakeholders.
“Any proposed adjustment must be supported by credible actuarial, economic and employment-impact assessments. It must also emerge from genuine and transparent social dialogue. Retirement security should not be pursued in a manner that threatens the businesses and jobs upon which the pension system itself depends,” he stated,” Oyerinde said.
Speaking on the proposed increase, the Director General of MAN, Mr. Segun Ajayi-Kadir, highlighted the direct threat to enterprise viability and worker earnings.
According to Ajayi-Kadir, businesses are already contending with high energy costs, elevated interest rates, exchange-rate volatility, multiple regulatory obligations, weak consumer demand and rising production expenses.
“Imposing an additional statutory payroll cost without a comprehensive impact assessment will place further pressure on already struggling enterprises,” he emphasised.
He explained that higher employment costs could compel businesses to slow recruitment, postpone wage reviews, reduce staff strength, increase outsourcing, suspend expansion plans or pass additional costs to consumers through higher prices.
“The proposed increase may directly raise the existing employee contribution, but its wider consequences could still be borne by workers through weaker wage growth, reduced employment opportunities, job losses and higher prices of goods and services,” he added.
Speaking in the same vein, the Director General of NACCIMA, Mr. Sola Obadimu, warned against imposing additional financial levies on a struggling business environment:
Obadimu said: “At a time when businesses are struggling to recover from prolonged economic pressures and the federal government is implementing reforms intended to improve competitiveness, imposing another statutory financial obligation on employers could undermine the benefits of those reforms.”
He maintained that government policies must be properly coordinated and evaluated based on their cumulative impact on businesses.
“A reform cannot be considered successful merely because it promises improved retirement benefits. Its impact on employment, investment, wage growth, prices, compliance and business survival must also be carefully considered,” he stated.
Also, the Director-General of NASSI, Mr. Ifeanyi Oputa, stressed that Micro, Micro, Small and Medium-sized Enterprises (MSMEs) would be disproportionately affected by any increase in mandatory employer pension contributions.
He warned that the proposal could also deepen non-compliance and push more businesses and workers into informal employment arrangements that are outside the pension system.
“A policy intended to strengthen the pension system must not produce the opposite result by shrinking the number of formal employers and contributors,” he added.
The OPSN, therefore, urged the government and PenCom to pivot away from policies that could erode purchasing power and prioritise macroeconomic stability, enterprise sustainability, and job preservation.
