The Organised Private Sector of Nigeria (OPSN) has strongly opposed a proposal by the National Pension Commission (PenCom) to increase mandatory pension contributions, warning that the move could place additional financial pressure on businesses already struggling with rising operating costs.
According to the umbrella body, the proposed increase may appear beneficial to workers’ retirement savings on the surface, but under Nigeria’s current economic conditions, it could have unintended consequences for employers, employees, and the broader economy.
The OPSN argued that any adjustment to pension contribution rates should be supported by comprehensive actuarial studies and broad stakeholder consultations before implementation.
Proposed Increase Raises Concerns
PenCom is considering a proposal that would increase mandatory pension contributions, including the introduction of an additional three per cent mandatory annual contribution equivalent to three per cent of employers’ total wage bills.
The proposal has sparked concerns among employers who believe it would significantly increase labour costs at a time when businesses are battling inflation, exchange rate volatility, high energy costs, and multiple taxes.
The OPSN warned that introducing new mandatory financial obligations without considering prevailing economic realities could discourage business expansion and negatively affect employment opportunities.
OPSN Represents Key Business Organisations
The Organised Private Sector of Nigeria serves as the umbrella body for several of the country’s leading business associations.
Its members include:
- 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)
- The Nigerian Association of Small Scale Industrialists (NASSI)
- More than 25 sectoral employer associations
Collectively, these organisations represent businesses across manufacturing, commerce, industry, services, and small and medium-scale enterprises.
Employers Warn of Economic Consequences
The OPSN described the proposal as a “Greek gift,” arguing that although it is presented as a measure to improve retirement benefits, it could ultimately hurt both employers and workers.
According to the group, increasing mandatory pension contributions during a period of economic uncertainty could reduce businesses’ ability to invest, hire new workers, or increase employee salaries.
The organisation warned that higher labour costs may force many companies—particularly small and medium-sized enterprises—to delay expansion plans, reduce recruitment, or cut operational expenses in order to remain financially viable.
It also noted that the proposal could limit wage growth as employers adjust compensation structures to accommodate higher pension obligations.
Existing Contribution Rate Already Meets Global Standards
The OPSN pointed to the Pension Reform Act 2014, which currently requires a minimum pension contribution of 18 per cent of monthly emoluments.
Under the existing arrangement:
- Employers contribute 10 per cent
- Employees contribute eight per cent
The group noted that Nigeria’s current contribution rate is broadly comparable with international standards.
According to the OPSN, the Organisation for Economic Co-operation and Development (OECD) reported an average pension contribution rate of 18.8 per cent for average-wage earners in 2024.
Based on this comparison, the organisation argued that Nigeria’s contribution rate cannot automatically be regarded as inadequate.
Instead, it maintained that any proposal for higher contributions should be supported by country-specific actuarial evidence demonstrating both the necessity of the increase and its long-term economic sustainability.
Call for Evidence-Based Policy Decisions
The OPSN stressed that pension reforms should be based on detailed research rather than assumptions.
The organisation argued that policymakers should conduct actuarial assessments that reflect Nigeria’s demographic profile, labour market conditions, wage levels, and economic realities before introducing additional mandatory contributions.
It maintained that evidence-based policymaking would help ensure that reforms improve retirement security without imposing excessive costs on businesses or discouraging investment.
The group also emphasised the need to balance workers’ long-term welfare with the immediate financial capacity of employers.
NECA Criticises Timing of PenCom Announcement
Reacting to the proposal, Director-General of the Nigeria Employers’ Consultative Association (NECA), Adewale-Smatt Oyerinde, criticised PenCom for publicly announcing proposed contribution increases while consultations with stakeholders were still ongoing.
According to Oyerinde, announcing policy proposals before concluding engagement with employers risks undermining the consultation process and creating uncertainty within the business community.
He urged the pension regulator to continue engaging employers and other stakeholders before making any final decision on changes to the pension contribution framework.
The OPSN believes that meaningful dialogue between regulators, employers, labour unions, and other stakeholders is essential to developing pension policies that are both socially beneficial and economically sustainable.
Businesses Seek Balanced Pension Reform
While reaffirming support for a strong and sustainable pension system, the OPSN said reforms should not come at the expense of business survival or job creation.
The organisation urged PenCom to adopt a collaborative approach that considers the challenges facing Nigerian businesses while protecting workers’ retirement interests.
As discussions continue, employers are calling for transparent consultations, detailed actuarial analysis, and policies that strengthen the pension system without placing additional strain on enterprises already navigating a difficult economic environment.
