The Organised Private Sector of Nigeria (OPSN) has opposed the Federal Government’s proposed increase in mandatory pension contributions, warning that the move could raise employment costs, weaken businesses, and undermine job creation if implemented under prevailing economic conditions.
The OPSN, which 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, described the proposal as premature and counterproductive.
In a joint statement issued on Thursday, the associations expressed concern over the recent announcement by the Director-General of the National Pension Commission (PenCom) regarding plans to increase mandatory pension contributions and introduce an additional three per cent annual levy based on employers’ total wage bills.
The OPSN argued that although the proposal is intended to strengthen retirement benefits, it could become a “Greek gift” to Nigerian workers by undermining employment, wage growth, business sustainability, and compliance.
According to the group, the effectiveness of any contributory pension system depends on the survival of businesses, the availability of decent jobs, and the capacity of both employers and employees to make regular contributions.
The group noted that, under the Pension Reform Act 2014, employers currently contribute 10 per cent of an employee’s monthly emoluments, while employees contribute eight per cent, bringing the mandatory contribution rate to 18 per cent.
It added that the existing rate is broadly comparable with the Organisation for Economic Co-operation and Development (OECD) average mandatory pension contribution rate of 18.8 per cent.
The OPSN maintained that any proposal to increase the contribution rate should be supported by Nigeria-specific actuarial evidence demonstrating that the current level is inadequate and that a higher rate would not adversely affect employment, wages, or business sustainability.
Employers seek impact assessment before policy changes
Commenting on the proposal, the Director-General of NECA, Adewale-Smatt Oyerinde, said announcing a contribution increase while stakeholder consultations were still ongoing risked undermining the credibility of the engagement 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.
Oyerinde noted that previous reviews of pension contribution rates had followed extensive consultations involving government, employers, organised labour, and other stakeholders.
He added that any future adjustment should be supported by credible actuarial, economic, and employment impact assessments and should emerge through transparent social dialogue.
Also commenting, the Director-General of MAN, Segun Ajayi-Kadir, warned that businesses were already grappling with rising energy costs, high interest rates, exchange rate volatility, weak consumer demand, and escalating production expenses.
He said imposing another statutory payroll obligation could compel employers to delay recruitment, suspend salary reviews, reduce staff strength, increase outsourcing, 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 said.
The Director-General of NACCIMA, Sola Obadimu, said introducing another statutory financial obligation could undermine ongoing government reforms aimed at improving the business environment.
He urged policymakers to assess reforms based on their cumulative impact on employment, investment, inflation, and business survival, rather than retirement benefits alone.
Similarly, the Director-General of NASSI, Ifeanyi Oputa, warned that micro, small, and medium-sized enterprises (MSMEs) would bear the greatest burden because of their limited financial capacity.
According to Oputa, many small businesses are already struggling with rising operating costs, and an additional mandatory contribution could discourage formal employment and increase non-compliance.
The OPSN urged the Federal Government and PenCom to prioritise policies that promote macroeconomic stability, preserve workers’ purchasing power, and support enterprise sustainability before introducing any increase in pension contributions.
The group also called for a comprehensive assessment of the proposal’s likely impact on employment costs, recruitment, wages, inflation, business competitiveness, and the survival of MSMEs.
While reiterating that it was not opposed to reforms aimed at improving retirement security, the OPSN stressed that sustainable pension reforms must strike a balance between future retirement benefits and current economic realities.
The Federal Government, through 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 broader reforms to strengthen retirement security.
According to the commission, consultations are ongoing with organised labour, employers, pension operators, and the National Assembly before any amendment is presented for legislative approval.
