By Modupe Gbadeyanka

The plan by the National Pension Commission (PenCom) to increase mandatory pension contributions and introduce an additional 3 per cent mandatory annual contribution equivalent to 3 per cent of the total wage bill is not going down well with the Organised Private Sector in Nigeria.

This group comprises the Manufacturers Association of Nigeria (MAN), the National 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), the Nigerian Association of Small Scale Industrialists (NASSI), and 25 sectoral employer associations.

In a statement made available to Business Post, the group described the proposal as a “Greek gift” to Nigerian workers because of the prevailing economic conditions in the country.

OPS argued that under the Pension Reform Act 2014, Nigeria’s minimum pension contribution already stands at 18 per cent of an employee’s monthly emoluments, comprising 10 per cent from the employer and 8 per cent from the employee.

“This is broadly comparable with the OECD average effective mandatory pension contribution rate of 18.8 per cent at the average-wage level in 2024.

“Nigeria’s existing contribution rate therefore cannot reasonably be regarded as inadequate, based on contribution percentages alone.

“Any proposal for an increase must be supported by Nigeria – specific actuarial evidence demonstrating that the current rate is insufficient and that a higher rate would not undermine employment, wages, compliance and enterprise sustainability,” it noted.

OPSN said the government’s attention should be directed toward reining in inflation, preserving workers’ immediate cash flow, and promoting business sustainability to create decent jobs and improve welfare.

It also asked for a detailed assessment to determine the likely effects of the proposal on employment costs, wage growth, recruitment, job security, investment, production costs, inflation, business formalisation and MSME sustainability.

The group stated that while the private sector is not entirely opposed to future adjustments, any increase must be the product of constructive, transparent social dialogue among all critical stakeholders and delayed until broader economic stability is achieved.

It stressed that no adjustment should be introduced without adequate consideration of its impact on existing jobs, future recruitment, inflation rate and the capacity of businesses to remain competitive and sustainable.

Also commenting on the matter in Lagos, the Director-General of NECA, Mr Adewale-Smatt Oyerinde, described the proposed hike as both premature and counterproductive, noting that, “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 stressed that previous adjustments to pension contribution rates were preceded by extensive engagement among government, employers, organised labour and other relevant stakeholders.

“Any proposed adjustment must be supported by credible actuarial, economic and employment-impact assessments. It must also emerge from genuine and transparent social dialogue. Retirement security should not be pursued in a manner that threatens the businesses and jobs upon which the pension system itself depends,” he submitted.

On his part, the DG of MAN, Mr Segun Ajayi-Kadir, said, “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 explained that higher employment costs could compel businesses to slow recruitment, postpone wage reviews, reduce staff strength, increase outsourcing, suspend expansion plans or pass additional costs to consumers through higher prices.

“The proposed increase may directly raise the existing employee contribution, but its wider consequences could still be borne by workers through weaker wage growth, reduced employment opportunities, job losses and higher prices of goods and services,” he added

The DG of NACCIMA, Mr Sola Obadimu, in his submission, warned against imposing additional financial levies on a struggling business environment, saying, “At a time when businesses are struggling to recover from prolonged economic pressures and the Federal Government is implementing reforms intended to improve competitiveness, imposing another statutory financial obligation on employers could undermine the benefits of those reforms.”

He maintained that government policies must be properly coordinated and evaluated based on their cumulative impact on businesses.

“A reform cannot be considered successful merely because it promises improved retirement benefits. Its impact on employment, investment, wage growth, prices, compliance and business survival must also be carefully considered,” he stated.

The DG of NASSI, Mr Ifeanyi Oputa, while speaking on the issue, stressed that micro, small and medium-sized enterprises would be disproportionately affected by any increase in mandatory employer pension contributions.

“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,” he said.

Mr Oputa warned that the proposal could also deepen non-compliance and push more businesses and workers into informal employment arrangements outside the pension system.

“A policy intended to strengthen the pension system must not produce the opposite result by shrinking the number of formal employers and contributors,” he added.