Key points
- Organised Private Sector of Nigeria (OPSN) rejects the Federal Government’s proposed increase in mandatory pension contributions.
- Employers warn that the proposal could weaken businesses, slow recruitment and suppress wage growth.
- OPSN argues Nigeria’s current 18% pension contribution rate is already comparable to global standards.
- Business groups call for comprehensive economic and actuarial impact assessments before any review.
- Employers urge government to focus on inflation, business sustainability and job creation instead of increasing payroll costs.
Main story
Nigeria’s organised private sector has rejected the Federal Government’s proposed increase in mandatory pension contributions, warning that the move could raise employment costs, threaten business survival and ultimately undermine the country’s formal labour market.
The Organised Private Sector of Nigeria (OPSN), an umbrella body representing major business associations, described the proposal by the National Pension Commission (PenCom) as premature and potentially counterproductive, arguing that it comes at a time when businesses are grappling with mounting economic pressures.
The position was contained in a joint statement 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).
Other members of the OPSN include more than 25 sectoral employer associations across the country.
The opposition follows comments by the Director-General of PenCom indicating plans to review the Pension Reform Act 2014 by increasing the mandatory pension contribution rate beyond the current 18 per cent and introducing an additional annual mandatory contribution equivalent to three per cent of employers’ total wage bills.
The private sector argued that while strengthening retirement security remains important, increasing statutory payroll obligations under current economic conditions could negatively affect employment, wages and enterprise sustainability.
According to the OPSN, Nigeria’s existing pension contribution rate, comprising 10 per cent from employers and eight per cent from employees, is already broadly comparable to the Organisation for Economic Co-operation and Development (OECD) average mandatory contribution rate of 18.8 per cent.
The group maintained that any proposal to increase contributions should first be supported by Nigeria-specific actuarial evidence demonstrating that the current rate is inadequate and that higher contributions would not adversely affect employment, compliance or business competitiveness.
The issues
Business groups argue that Nigerian companies are already operating under severe financial pressure arising from high energy costs, elevated interest rates, exchange rate volatility, multiple taxes and levies, rising production costs and weak consumer demand.
According to the OPSN, imposing additional statutory employment costs without a comprehensive impact assessment could force businesses to reduce recruitment, delay salary reviews, scale down operations, outsource jobs or transfer higher operating costs to consumers through increased prices.
The employers also warned that smaller businesses would bear a disproportionate burden.
Micro, small and medium-sized enterprises (MSMEs), which account for a significant share of employment in Nigeria, typically operate with thin profit margins and limited access to affordable financing. Higher mandatory pension costs, they argued, could discourage formal employment and increase non-compliance with pension regulations.
The OPSN further cautioned that reforms intended to improve retirement security should not undermine the businesses that fund the pension system.
What’s being said
Adewale-Smatt Oyerinde, Director-General, NECA
Oyerinde said the OPSN supports reforms aimed at improving retirement outcomes but insisted that announcing a contribution increase while stakeholder consultations remain ongoing undermines the credibility of the consultation process.
He stressed that any adjustment should be based on credible actuarial studies, economic assessments and transparent social dialogue involving employers, organised labour and government.
Segun Ajayi-Kadir, Director-General, MAN
Ajayi-Kadir warned that businesses are already contending with high production costs, rising interest rates, exchange rate volatility and weak consumer demand.
According to him, imposing additional statutory payroll obligations could compel companies to slow hiring, postpone wage increases, reduce workforce numbers or increase product prices.
Sola Obadimu, Director-General, NACCIMA
Obadimu argued that introducing new financial obligations on employers contradicts broader government efforts to improve Nigeria’s business environment and attract investment.
He said every economic reform should be evaluated based on its cumulative impact on employment, investment, inflation and business sustainability.
Ifeanyi Oputa, Director-General, NASSI
Oputa said MSMEs would be the hardest hit by higher pension contributions because many businesses are already struggling with rising operating expenses and declining purchasing power.
He warned that additional employment costs could push more businesses into the informal economy, ultimately shrinking the pension contributor base.
What’s next
PenCom has indicated that consultations with organised labour, employers, pension operators and the National Assembly are continuing before any amendment to the Pension Reform Act is presented for legislative approval.
The OPSN is calling on the Federal Government to suspend any increase until the economy achieves greater stability and a comprehensive assessment of the proposal’s impact on employment, wages, inflation, investment and business sustainability is completed.
The group also urged policymakers to prioritise macroeconomic stability, inflation control and policies that strengthen enterprise growth and job creation.
Bottom line
The private sector’s rejection of the proposed pension contribution increase highlights the delicate balance policymakers must strike between strengthening retirement security and preserving business competitiveness. While employers acknowledge the need for pension reforms, they insist that any increase in mandatory contributions should be evidence-based, widely consulted and introduced only when economic conditions can support additional employment costs.
