Employers Reject FG Pension Reform Over Planned Contribution Increase

The Organised Private Sector of Nigeria has pushed back against plans by the Federal Government to increase mandatory pension contributions, warning that the proposal could worsen the challenges already facing businesses and workers across the country.

According to the employers’ groups, the planned increase includes a proposed additional annual contribution equivalent to three per cent of an organisation’s total wage bill.

They said it would place further pressure on companies struggling with rising operating costs and a difficult economic environment.

The position was made known in a joint statement issued by leading business associations, including 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).

The groups expressed concern over recent comments by the Director-General of the National Pension Commission (PenCom) regarding plans to review the current pension contribution structure as part of wider reforms in the sector.

According to the organised private sector, the proposal may have been designed to improve retirement benefits for workers, but its consequences could be damaging for businesses, employment and economic growth.

The employers described the proposed increase as premature, insisting that ongoing consultations with stakeholders should not be seen as a mere formality.

They argued that any decision to alter pension contribution rates must be backed by detailed studies showing that the current framework is inadequate and that a higher rate would not negatively affect businesses, workers or the wider economy.

The statement noted that Nigeria’s existing pension contribution rate already stands at 18 per cent of monthly emoluments, with employers contributing 10 per cent and employees contributing eight per cent.

According to the groups, the current rate compares favourably with contribution levels in many other countries and should not be considered insufficient without clear evidence.

Speaking on behalf of the employers, Director-General of NECA, Adewale-Smatt Oyerinde, said the private sector remains committed to reforms that will improve retirement security for Nigerian workers.

However, he stressed that any adjustment to contribution rates must emerge from broad consultations and transparent discussions involving employers, labour unions, government agencies and other stakeholders.

“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,” Oyerinde said.

He added that previous pension reforms were preceded by extensive engagement and consensus-building among relevant stakeholders.

Also speaking on the issue, Director-General of MAN, Segun Ajayi-Kadir, warned that businesses are already operating under severe economic pressure.

He listed rising energy costs, high interest rates, exchange rate fluctuations, weak consumer demand and increasing production expenses as some of the major challenges confronting manufacturers and other employers.

“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 said.

Ajayi-Kadir warned that higher employment costs could force some companies to reduce hiring, delay salary reviews, scale down operations or pass additional costs to consumers through increased prices of goods and services.

He further stated that workers could eventually bear the burden through slower wage growth, reduced employment opportunities and rising living costs.

On his part, NACCIMA Director-General, Sola Obadimu, said the proposal appears inconsistent with government efforts aimed at improving the business environment and attracting investment.

He argued that introducing new financial obligations at a time when many businesses are still recovering from economic shocks could weaken the gains of ongoing reforms.

According to him, policies should be evaluated based on their overall impact on employment, business survival, investment and economic competitiveness.

The organised private sector also raised concerns about the likely impact on micro, small and medium-sized enterprises.

Director-General of NASSI, Ifeanyi Oputa, said many small businesses are operating on very slim margins and remain vulnerable to economic pressures.

“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,” Oputa stated.

He warned that the move could drive more businesses into the informal sector and increase non-compliance with pension regulations.

The employers maintained that strengthening the pension system should not come at the expense of job creation, enterprise growth and economic stability.

They urged the Federal Government and PenCom to focus on tackling inflation, supporting businesses and preserving workers’ purchasing power before introducing additional financial obligations.

The groups also called for a comprehensive assessment of the proposal’s likely effects on employment, investment, wages, inflation and business sustainability before any final decision is taken.

While reaffirming support for reforms that improve retirement benefits, the employers insisted that sustainable pension policies must reflect current economic realities.

“A strong pension system cannot be built on weakened enterprises, declining formal employment and rising business closures. The government must therefore avoid any policy that increases the cost of employment without first addressing the economic conditions threatening the survival of businesses,” the statement concluded.