On 14th February 2023, the Business Facilitation Act 2023 (the “BFA”) was enacted to address challenges faced by both entrepreneurs and regulators, thereby simplifying the Nigerian business landscape. Notably, the BFA amended various critical business and commercial-centred legislation including the National Housing Fund Act (the “NHF Act”). Enacted in 1992, the NHF Act established the National Housing Fund (the “Fund”) to provide affordable housing for Nigerians. Section 3 of the NHF Act states that the sources of the Fund are: (a) contributions from individuals in the private and public sectors, (b) investments from commercial and merchant banks, as well as insurance companies, and (c) financial contributions from the Federal Government. However, the focal point of this article is regarding the contributions of the private and public sectors.
Section 4 of the NHF Act mandated Nigerian workers earning an income of N3,000 and above annually in the public and private sectors to contribute 2.5% of their basic monthly salary to the Fund. The NHF Act defined a Nigerian worker as an employee who receives salaries.
Crucially, the NHF Act required employers who employ a person with a basic salary of N3,000 and above to deduct 2.5% of their monthly salary as contribution to the Fund and default of which is an offence punishable upon conviction by a N50,000 fine.
That said, the BFA amended the NHF Act to the effect that (a) a public sector employee earning the minimum wage shall contribute 2.5% of his monthly income to the Fund; (b) a private sector employee may contribute 2.5% of his monthly income to the Fund; and (c) a self-employed person shall contribute 2.5% of his monthly income to the Fund. The controversy this stirs up is that while the word “shall” is used in the obligation for public sector employees and self-employed persons, the word “may” is employed for private sector employees.
Legally, when the word “shall” is used in a statute, it typically imposes an obligation, and the word “may”, connotes discretion. Under the NHF Act, although the word “may” is used regarding the obligation of private sector employees to contribute to the Fund, the obligation on employers to deduct contributions from their employees and the corresponding penalties for non-compliance have remained unchanged. Moreover, the BFA amendment fails to differentiate between employers in the private and public sectors, unlike how it distinguishes between employees. In light of these, the question is whether private sector employees are still obligated to contribute to the Fund.
The writer is of the view that private sector employees are no longer obligated to contribute to the Fund because (a) the word “may” connotes discretion; and (b) the BFA creates an ambiguity that can be resolved through the golden rule of interpretation.
First, differentiating between “shall” and “may” carries specific legal implications. As earlier stated, the word “may” when used in a statute, generally connotes discretion. However, the word “may” can impose an obligation in very limited cases including – penal statutes that confer power on the courts, where the law imposes an obligation for a person to act for the public good and where the power is to effectuate a legal right – (Taiwo v FRN, 2022). While these exceptions are not exhaustive, lawmakers do not use words in vain– (Buhari v. INEC & Ors, 2008). Therefore, despite the existing obligation on employers, the absence of “shall” in reference to private sector employees indicates a deliberate choice by the legislature to make their contributions discretionary. If the legislature intended to impose an obligation on private sector employees, it would have used the word “shall,” which connotes obligation.
Furthermore, the ambiguity created by the BFA amendment of the NHF Act can be resolved through the golden rule of interpretation which entails a wholesome examination of an entire statute to discern the legislative intent. Therefore, the obligation of private sector employers should be aligned with the discretion of private sector employees to contribute. In other words, the obligation on private sector employers should only be triggered when private sector employees elect to contribute to the Fund.
Interestingly, the National Employers Consultative Association (“NECA”) issued a Circular (“Circular”) informing members that employees can either decide to opt out or continue to contribute to the Fund. For employees who choose to continue contributions, the Circular directs employers to continue to make deductions in line with the NHF Act. And for employees who choose to opt out, the employers are directed to inform such employees to process their refund in line with the NHF Act. In this regard, Section 20 of the NHF Act provides that any contributor who has (a) attained 60 years; or (b) is retired from employment and becomes incapable of contributing to the Fund shall be eligible for a refund within 3 months of an application to the effect. Therefore, a private sector employee who wishes to opt out of his contributions and seek a refund will be required to comply with these requirements.
Buter is an associate with the Government Business Practice of Olaniwun Ajayi LP. He routinely advises both domestic and multinational clients on tax disputes and structuring, legislative and policy development, finance, regulatory compliance, and government relations.