OPS rejects PenCom’s planned pension hike

…warns against job losses, suppressed wage growth amid inflation

Nigeria’s organised private sector (OPS) has declared its opposition to the National Pension Commission’s (PenCom) proposed hike in mandatory pension contributions, warning that the move could trigger job losses, suppress wage growth, and push more businesses into the informal sector.

In a joint statement issued by the OPS members – the Manufacturers Association of Nigeria (MAN), the Nigeria Employers’ Consultative Association (NECA), the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), the Nigerian Association of Small and Medium Enterprises (NASME), the Nigerian Association of Small Scale Industrialists (NASSI), alongside 25 sectoral employer associations, they described the proposal as a “Greek gift” to Nigerian workers.

The business groups argued that although the proposal is being presented as a measure to improve retirement benefits, it could ultimately weaken businesses, reduce employment opportunities and undermine the very pension system it seeks to strengthen.

The opposition follows comments by Omolola Oloworaran, PenCom director-general, indicating plans to increase mandatory pension contributions and introduce an additional annual contribution equivalent to three percent of employers’ total wage bill.

According to the OPS, Nigeria’s current minimum pension contribution of 18 percent: 10 percent from employers and eight percent from employees under the Pension Reform Act 2014 is already comparable with the OECD average of 18.8 percent and cannot be considered inadequate without compelling actuarial evidence.

The employers insisted that any proposal to raise contributions must be backed by Nigeria-specific actuarial studies and comprehensive assessments of its likely impact on employment, wages, investment and business sustainability.

Adewale-Smatt Oyerinde, NECA director-general, criticised what he described as the premature announcement of the proposal while stakeholder consultations were still ongoing. According to him, announcing a decision before concluding consultations undermines meaningful engagement and reduces the consultation process to a mere formality. He stressed that previous pension contribution adjustments followed extensive dialogue among government, employers and organised labour, adding that retirement security should not be pursued at the expense of businesses that create jobs and fund pension contributions.

Also expressing concern, Segun Ajayi-Kadir, MAN director-general, said manufacturers are already grappling with high energy costs, elevated interest rates, exchange-rate volatility, multiple regulatory obligations and weak consumer demand. He warned that imposing another statutory payroll obligation would further squeeze businesses, forcing many employers to delay recruitment, suspend salary reviews, reduce workforce, outsource more jobs or transfer additional costs to consumers through higher prices.

Ajayi-Kadir noted that while employees may contribute more directly, the broader consequences would include slower wage growth, fewer employment opportunities and increased inflationary pressures.

On his part, Sola Obadimu, NACCIMA director-general, argued that the proposal contradicts ongoing government reforms aimed at improving Nigeria’s business environment and attracting investment. He said imposing fresh statutory costs on employers at a time businesses are still recovering from prolonged economic challenges could undermine the gains of broader fiscal and economic reforms.

According to him, the success of any reform should be measured not only by improved retirement benefits but also by its impact on employment, business survival, investment and economic competitiveness.

Ifeanyi Oputa, the director-general of NASSI, warned that micro, small and medium enterprises (MSMEs), which account for the bulk of Nigeria’s businesses, would be hardest hit. He said many MSMEs already operate on thin margins amid rising operating costs, multiple taxes and weak purchasing power, adding that another compulsory financial obligation could force more firms out of formal employment and reduce pension compliance.

The OPS urged the Federal Government and PenCom to suspend plans for higher pension contributions until Nigeria’s economic conditions improve. The group called on government to prioritise inflation control, business sustainability and job creation while undertaking a comprehensive economic and employment impact assessment before considering any adjustment.

It also demanded transparent social dialogue involving employers, labour unions and other critical stakeholders before any changes are introduced. The business groups maintained that they are not opposed to pension reforms but insisted that a sustainable pension system can only thrive when businesses remain competitive and capable of creating and retaining jobs.

“A strong pension system requires strong businesses,” the OPS stated, warning that any reform that increases employment costs without addressing prevailing economic challenges would ultimately hurt both employers and workers.