LCCI Opposes Pension Contribution Hike, Cites Inflation, High Costs

By Adedapo Adesanya

The Lagos Chamber of Commerce and Industry (LCCI) has urged the federal government to suspend plans to increase Nigeria’s mandatory pension contribution rate.

The chamber’s Director General, Dr Chinyere Almona, warned that the move could worsen the challenges facing businesses, threaten jobs and discourage investment.

She noted that while improving retirement security is important, raising pension contributions at a time when businesses are grappling with soaring inflation, extremely high borrowing costs, exchange rate volatility, rising energy prices and multiple taxes would place an unbearable burden on employers.

According to the DG, Nigeria’s existing contribution rate is already comparable with global standards, noting that the country’s 18 per cent mandatory contribution is close to the OECD’s 18.8 per cent average and significantly higher than rates in countries such as the United Kingdom (8 per cent), the United States (12.4 per cent) and Kenya (12 per cent).

She warned that increasing payroll costs at this time would discourage recruitment, suppress wage growth, place disproportionate pressure on micro, small and medium-sized enterprises (MSMEs), reduce Nigeria’s attractiveness to investors and push more businesses into the informal sector.

The advocacy group called on the government to defer the proposal until a comprehensive Nigeria-specific actuarial and economic impact assessment is conducted and extensive consultations are held with the organised private sector and labour unions.

The group recommended that instead of increasing mandatory contributions, the National Pension Commission (PenCom) should focus on developing innovative investment instruments capable of delivering higher returns on existing pension assets, saying this would improve contributors’ retirement savings without imposing additional financial pressure on businesses.

PenCom had recently proposed an increase in mandatory pension contributions as well as a 3 per cent mandatory annual contribution equivalent to 3 per cent of the total wage bill.

According to the insurance regulator, the proposal forms part of broader pension sector reforms designed to strengthen the financial security of Nigerian workers in retirement.

LCCI’s opposition to this proposed policy comes after the Organised Private Sector of Nigeria expressed its disdain over the issue, also citing rising inflation and economic hardship for its rejection.