Private Sector rejects proposed Pension contribution hike, warns of job losses

The Organized Private Sector of Nigeria (OPSN) has cautioned the Federal Government and the National Pension Commission (PenCom) against plans to increase mandatory pension contributions, warning that the proposal could undermine job creation, suppress wage growth and threaten business sustainability.

The OPSN, comprising the Manufacturers Association of Nigeria (MAN), the Nigeria Employers’ Consultative Association (NECA), the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), the Nigerian Association of Small and Medium Enterprises (NASME), the Nigerian Association of Small Scale Industrialists (NASSI), and 25 other sectoral employer associations, described the proposal as a potential “Greek gift” to Nigerian workers.

The warning follows comments by PenCom Director-General, Omolola Oloworaran, on plans to increase mandatory pension contributions and introduce an additional annual contribution equivalent to three per cent of employers’ total wage bills.

While acknowledging the need to strengthen Nigeria’s pension system, the OPSN argued that introducing additional statutory payroll costs amid prevailing economic challenges would place further strain on employers and workers alike.

According to the group, Nigeria’s current mandatory pension contribution of 18 per cent—comprising 10 per cent from employers and eight per cent from employees—is broadly comparable to the 18.8 per cent average mandatory contribution rate among OECD countries.

It insisted that any proposal to increase the contribution rate must be backed by comprehensive actuarial evidence demonstrating that the current rate is inadequate and that higher contributions would not negatively affect employment, wages, compliance or business survival.

Speaking on behalf of the group, Director-General of NECA, Adewale-Smatt Oyerinde, faulted the timing of the announcement, saying it was premature to signal an increase while stakeholder consultations were still underway.

“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 stressed that previous pension reforms followed extensive consultations involving government, employers and organised labour, adding that any future review should emerge from credible economic assessments and transparent social dialogue.

The Director-General of MAN, Segun Ajayi-Kadir, warned that manufacturers are already grappling with soaring energy costs, high interest rates, exchange-rate volatility, multiple taxes and weak consumer demand.

According to him, imposing additional employment costs could force businesses to freeze recruitment, delay salary reviews, reduce workforce numbers, suspend expansion plans or pass the increased costs to consumers through higher prices.

“The proposed increase may directly raise employee contributions, but its broader consequences could include weaker wage growth, fewer employment opportunities, job losses and higher prices,” he said.

Also expressing concern, NACCIMA Director-General Sola Obadimu said the proposal contradicts ongoing government efforts to improve the business environment through economic reforms.

He argued that introducing new statutory financial obligations at a time businesses are struggling to recover could erode the gains of recent fiscal and tax reforms.

Similarly, Director-General of NASSI, Ifeanyi Oputa, warned that micro, small and medium-sized enterprises (MSMEs) would bear the heaviest burden.

He noted that many small businesses are already operating on thin margins amid rising operating costs, adding that higher pension obligations could force more businesses into informality and weaken compliance with the pension scheme.

The OPSN urged the Federal Government to focus on tackling inflation, preserving workers’ purchasing power and creating a more enabling environment for businesses before considering any increase in pension contributions.

It also called for a comprehensive economic and employment impact assessment, genuine stakeholder consultations and greater consideration of the proposal’s implications for investment, job creation, inflation and enterprise sustainability.

The group maintained that while it supports reforms aimed at improving retirement security, sustainable pension reforms must strike a balance between protecting workers’ future benefits and preserving the businesses and jobs that fund the pension system.

“A strong pension system cannot be built on weakened enterprises, declining formal employment and rising business closures,” the OPSN said, warning that any reform that increases employment costs without addressing current economic realities would ultimately amount to a “Greek gift” to Nigerian workers.