Morganable Economy Watch
The proposal has triggered concern among key business groups, who say the timing is wrong given Nigeria’s fragile economic climate
kaNo —
Employers under the umbrella of the Organised Private Sector of Nigeria have rejected the Federal Government’s proposed increase in pension contributions, warning that the move could worsen business conditions, threaten jobs and weaken the very pension system it seeks to strengthen.
The opposition follows a recent announcement by the Director-General of the National Pension Commission on plans to raise mandatory pension contributions and introduce an additional three per cent annual contribution based on total wage bills.
The proposal has triggered concern among key business groups, who say the timing is wrong given Nigeria’s fragile economic climate.
The OPSN, which comprises major employer bodies such as the Manufacturers Association of Nigeria, the National Association of Chambers of Commerce, Industry, Mines and Agriculture, the Nigeria Employers’ Consultative Association.
The Nigerian Association of Small and Medium Enterprises and the Nigerian Association of Small Scale Industrialists, described the proposal as both premature and counterproductive.
Group Warns Against Policy
In a joint statement signed by the leadership of the associations, the group warned that although the policy may be framed as a way to improve retirement benefits, it could ultimately harm workers and businesses.
They described the proposed increase as a “Greek gift,” noting that while it appears beneficial on the surface, it risks undermining employment, wage growth, business sustainability and compliance levels.
Without viable enterprises and steady employment, contributions to pension schemes cannot be sustained.
The group pointed out that Nigeria’s current pension contribution rate, set at a minimum of 18 per cent under the Pension Reform Act 2014, is already comparable to global standards.
Employers contribute 10 per cent, while employees contribute eight per cent of monthly emoluments.
Given this, the OPSN argued that there is no clear evidence that Nigeria’s contribution level is inadequate.
It insisted that any proposal for an increase must be backed by country-specific actuarial data demonstrating the need for such an adjustment and proving that it would not negatively impact employment, wages or business sustainability.
He said announcing a decision while stakeholder discussions are still in progress risks undermining the credibility of the engagement process and reducing it to a mere formality.
Oyerinde recalled that previous adjustments to pension contributions were the result of extensive consultations involving government, employers, organised labour and other stakeholders.
“Retirement security should not be pursued in a way that jeopardises the survival of businesses and jobs, which are the foundation of the pension system,” he said.
Also speaking, the Director-General of the Manufacturers Association of Nigeria, Segun Ajayi-Kadir, highlighted the economic pressures already facing businesses and warned that the proposed increase would worsen the situation.
According to him, introducing an additional statutory payroll cost without a comprehensive assessment of its impact could push many struggling businesses to the brink.
Labour Costs Could Force Employers To Cut Recruitment-MAN
Ajayi-Kadir warned that higher labour costs could force employers to cut back on recruitment, delay salary increases, reduce workforce size or shift to outsourcing arrangements.
He added that businesses might also pass on the additional costs to consumers through higher prices, thereby increasing the cost of living.
While the proposed increase may directly affect employee contributions, he said its broader consequences would likely be felt by workers through slower wage growth, fewer job opportunities and higher prices of goods and services.
Similarly, the Director-General of NACCIMA, Sola Obadimu, cautioned that the proposal contradicts ongoing government efforts to stimulate economic growth and improve the business environment.
He noted that at a time when businesses are struggling to recover from prolonged economic challenges, imposing additional financial obligations could negate the gains of recent reforms.
“A reform cannot be judged solely on its intended benefits. Its broader implications for employment, investment, wages, prices and business survival must also be considered,” he said.
The Director-General of the Nigerian Association of Small Scale Industrialists, Ifeanyi Oputa, expressed particular concern about the impact on micro, small and medium-sized enterprises.
He said MSMEs, which form the backbone of Nigeria’s economy, operate on thin margins and have limited access to affordable financing.
According to him, many small businesses are already struggling with rising energy costs, multiple taxes and declining consumer purchasing power.
Oputa warned that an additional pension burden could threaten the survival of these enterprises and discourage them from employing workers formally.
He added that the policy could inadvertently increase non-compliance and push more businesses and workers into the informal sector, thereby shrinking the pension contribution base.
“A policy intended to strengthen the pension system must not end up weakening it by reducing the number of contributors,” he said.
OPSN Urged FG To Reconsider Proposal
The OPSN further urged the Federal Government and the National Pension Commission to reconsider the proposal and focus instead on policies that support economic stability and business growth.
The group recommended prioritising measures to curb inflation, protect workers’ purchasing power and create an enabling environment for businesses to thrive.
It also called for a comprehensive assessment of the proposed policy’s potential impact on employment, wages, investment, production costs and inflation before any decision is made.
While reiterating that it is not opposed to future adjustments in pension contributions, the OPSN insisted that any such changes must emerge from transparent and inclusive dialogue involving all stakeholders.
The group emphasised that reforms should be delayed until the economy stabilises, warning that premature implementation could do more harm than good.
