pension contribution hike
Nigeria’s leading private-sector employer groups have rejected the Federal Government’s proposed increase in mandatory pension contributions, warning that the measure could threaten jobs, weaken businesses and raise the cost of goods and services.
The Organised Private Sector of Nigeria described the proposed pension contribution hike as premature and potentially counterproductive, particularly at a time when businesses are struggling with high energy costs, expensive credit, exchange-rate instability and weak consumer demand.
The employers’ coalition comprises the Manufacturers Association of Nigeria, the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, the Nigeria Employers’ Consultative Association, the Nigerian Association of Small and Medium Enterprises, the Nigerian Association of Small Scale Industrialists and 25 sectoral employer associations.
In a joint statement issued on Thursday, the organisations urged the Federal Government and the National Pension Commission to suspend the proposal until comprehensive economic, actuarial and employment-impact assessments had been conducted.
The controversy followed an announcement by PenCom Director-General Omolola Oloworaran during the commission’s second-quarter 2026 press briefing at the State House in Abuja.
PenCom is proposing amendments to the Pension Reform Act 2014, including an increase in the statutory contribution rate and an additional mandatory employer contribution equivalent to three per cent of the employer’s total annual wage bill.
However, the proposed pension contribution hike has not yet become law. Stakeholder consultations are ongoing, and any amendment to the Pension Reform Act would require consideration and approval by the National Assembly.
Employers describe proposal as a “Greek gift”
The private-sector coalition said the proposal might appear beneficial because higher contributions could increase the amount available to workers after retirement.
It warned, however, that the immediate economic consequences could undermine the jobs and businesses needed to fund the pension system.
The employers described the proposal as a possible “Greek gift” to workers—an apparently attractive policy that could ultimately produce job losses, slower salary growth, higher prices and increased business closures.
According to the coalition, a strong pension system depends on profitable businesses, stable employment and the ability of employers and workers to make regular contributions.
A pension contribution hike that increases employment costs without addressing the broader business environment could produce the opposite result by encouraging employers to reduce formal hiring or avoid the pension system entirely.
That warning should not be dismissed as ordinary resistance to regulation. But it must also be examined alongside the government’s concern that many retired workers receive pensions that are inadequate for their basic needs.
The central policy question is therefore whether higher contributions can improve retirement security without damaging employment and enterprise sustainability.
Current contribution stands at 18 per cent
Under the Pension Reform Act 2014, employers covered by the Contributory Pension Scheme are required to contribute at least 10 per cent of an employee’s monthly emoluments.
The employee contributes a minimum of eight per cent, bringing the combined statutory contribution to 18 per cent.
The payments are deposited in the employee’s Retirement Savings Account and managed by a licensed Pension Fund Administrator.
The Organised Private Sector argued that the existing 18 per cent contribution rate is already broadly comparable with the Organisation for Economic Co-operation and Development’s reported average effective mandatory pension contribution rate of 18.8 per cent for an average-wage earner in 2024.
The group therefore maintained that the government must provide Nigeria-specific actuarial evidence showing that the existing rate is inadequate before proceeding with another pension contribution hike.
The comparison with OECD countries should, however, be used cautiously.
Contribution rates alone do not determine retirement outcomes. Pension adequacy also depends on salaries, contribution density, inflation, investment returns, administrative charges, length of service and whether employers consistently remit deductions.
Nigeria’s high inflation and low wage levels may erode retirement savings even where the contribution percentage appears comparable with international averages.
NECA questions consultation process
Speaking for the employers, NECA Director-General Adewale-Smatt Oyerinde said the timing of PenCom’s announcement risked undermining ongoing consultations.
He said announcing that contribution rates would rise while discussions were still taking place could create the impression that the outcome had already been decided.
Oyerinde maintained that earlier adjustments to Nigeria’s pension contribution rates followed extensive engagement among employers, government, organised labour and other stakeholders.
He called for credible actuarial, economic and employment assessments before any new obligation was introduced.
The NECA leader said retirement security should not be pursued in a manner that threatened the businesses and jobs upon which the pension scheme depends.
His argument goes to the heart of the dispute over the proposed pension contribution hike.
Stakeholder consultation must be more than an exercise in presenting employers and workers with a final government decision.
PenCom should publish the data supporting the proposal, explain the intended use of the additional contributions and show how the measure would affect workers at different salary levels.
The commission should also clarify whether the three per cent annual wage-bill contribution is separate from the proposed increase in the existing statutory rate.
Without that clarity, employers may struggle to calculate the full cost of the reform.
Manufacturers warn of job losses
MAN Director-General Segun Ajayi-Kadir said manufacturers were already confronting severe operating pressures.
He identified high energy expenses, elevated interest rates, volatile exchange rates, multiple regulatory obligations, rising production costs and reduced consumer purchasing power as major challenges.
Ajayi-Kadir warned that an additional statutory payroll obligation could force companies to slow recruitment, delay salary reviews, reduce their workforce or increase outsourcing.
Some employers could also postpone expansion projects or transfer the increased cost to consumers through higher prices.
This means that even where an employee’s direct contribution does not rise significantly, the wider consequences of the pension contribution hike could still affect workers.
An employer facing higher payroll expenses may decide not to increase salaries. Another may replace permanent employees with temporary workers or independent contractors who fall outside the formal pension structure.
Larger companies may be able to absorb part of the additional cost, but businesses operating on narrow margins may have fewer options.
The government must therefore assess the likely impact across different industries rather than treating every employer as though it has the same financial capacity.
Small businesses fear deeper informality
NASSI Director-General Ifeanyi Oputa warned that micro, small and medium-sized enterprises would be disproportionately affected by the proposed contribution.
Many small businesses operate with limited capital, expensive credit and unstable revenue.
They are also affected by electricity costs, multiple levies, weak demand and the difficulty of passing higher production expenses to consumers.
Oputa argued that an additional mandatory payment could discourage small businesses from employing workers formally.
Some employers may choose to keep their workforce below the legal coverage threshold, hire workers without written contracts or fail to register employees under the Contributory Pension Scheme.
Such a development would weaken the very pension system the pension contribution hike is intended to strengthen.
A reform that increases the contribution rate but reduces the number of compliant employers may produce less sustainable progress than one that expands coverage and improves remittance enforcement.
Nigeria has a large informal economy, with millions of workers outside regular employer-sponsored pension arrangements.
PenCom must therefore consider whether increasing the burden on existing contributors should take priority over bringing more workers and businesses into the system.
https://ogelenews.ng/pension-contribution-hike
NACCIMA urges policy coordination
NACCIMA Director-General Sola Obadimu said the proposed measure should be assessed alongside other government economic policies.
He warned that imposing another statutory obligation on businesses could undermine reforms intended to improve competitiveness and encourage investment.
Government policies do not affect businesses in isolation.
A company may simultaneously face taxes, regulatory fees, higher electricity tariffs, rising transport costs, more expensive imports and increased borrowing costs.
A pension reform that appears manageable when considered alone could become difficult when added to these other obligations.
That is why the economic effect of the pension contribution hike should be measured cumulatively.
The government must determine whether the additional cost would affect job creation, inflation, salary negotiations, domestic production and the competitiveness of Nigerian businesses.
A sound pension policy should not solve one social problem by creating several new ones.
Better retirement income remains necessary
The employers’ concerns are substantial, but Nigeria also faces a genuine retirement-security problem.
Many workers reach retirement with balances that cannot provide adequate monthly income, especially after years of inflation and currency depreciation.
Low salaries naturally produce low pension contributions. Irregular remittances, interrupted employment and poor compliance further reduce the funds available at retirement.
PenCom’s desire to strengthen future retirement benefits is therefore understandable.
The difficulty lies in determining whether another pension contribution hike is the most effective solution.
Before raising the statutory rate, the regulator should identify why existing retirement balances remain inadequate.
If the primary problem is low wages, increasing the employee’s deduction may reduce already limited take-home pay.
Where non-remittance is the main problem, raising the rate may simply increase the amount employers fail to transfer.
Where inflation is eroding pension value, contribution increases alone will not address the wider economic instability.
The reform must therefore be based on a careful diagnosis rather than the assumption that higher deductions will automatically guarantee better retirement outcomes.
Workers’ take-home pay must be protected
Any proposal affecting employee contributions must consider the immediate financial realities of Nigerian households.
Workers are already managing rising prices for food, transportation, housing, electricity, education and healthcare.
Increasing deductions from salaries could reduce workers’ present purchasing power, even if it improves their future retirement balances.
That trade-off should not be decided without the full participation of organised labour.
Workers must understand how much would be deducted under the new arrangement, how their retirement benefits would improve and what protections would be introduced against inflation and poor remittance.
The proposed pension contribution hike must also be coordinated with salary policy.
It would be unreasonable to increase mandatory deductions without considering whether wages have kept pace with the cost of living.
Government and private-sector employers should examine options that improve retirement security while protecting workers’ immediate welfare.
These could include voluntary additional contributions, targeted incentives, improved investment performance, stronger enforcement and better pension coverage for informal-sector workers.
Enforcement may matter more than higher rates
One of the major weaknesses in Nigeria’s pension system is not necessarily the contribution percentage but the failure of some employers to remit deductions promptly.
Workers have reported cases in which pension contributions were deducted from their salaries but not credited to their Retirement Savings Accounts.
PenCom publishes information relating to uncredited contributions and has powers under the Pension Reform Act to regulate the industry and pursue defaulting employers.
Before implementing another pension contribution hike, the commission should demonstrate that existing obligations are being effectively enforced.
Raising the rate for compliant businesses while non-compliant employers continue to evade payment could punish responsible organisations and create an uneven business environment.
The regulator should strengthen audits, improve reconciliation systems, impose appropriate penalties and make it easier for workers to verify monthly remittances.
A contribution rate is only valuable when the money actually reaches the employee’s retirement account.
Proposal requires National Assembly approval
The employers’ statement should not be interpreted as the rejection of an already enacted law.
PenCom has announced a proposal as part of a wider review of the Pension Reform Act.
Consultations are reportedly ongoing with employers, organised labour, pension operators and the National Assembly.
Any change to statutory contribution rates would require legislative action.
This gives lawmakers an opportunity to examine the evidence behind the proposed pension contribution hike.
Public hearings should allow workers, retirees, employers, pension administrators, economists and civil-society groups to present their views.
The National Assembly should demand a detailed impact assessment and insist on clear answers regarding the additional three per cent wage-bill contribution.
Lawmakers should also determine whether the reform would apply uniformly to all employers or whether phased implementation and exemptions would be necessary for smaller businesses.
A rushed amendment could create compliance confusion and provoke legal disputes.
PenCom should publish full proposal
Public debate is currently being shaped largely by summaries of PenCom’s announcement and the employers’ reaction.
The commission should publish the complete proposal in an accessible document.
That document should state:
- the proposed new employer and employee contribution percentages;
- the purpose of the additional three per cent annual wage-bill contribution;
- the category of workers or benefits the additional money would support;
- the proposed implementation date;
- the treatment of small businesses;
- the expected increase in retirement benefits; and
- the economic and actuarial evidence supporting the change.
Until those details are available, public debate about the pension contribution hike will remain vulnerable to misunderstanding.
Employers may assume the worst possible cost, while workers may be led to believe that higher deductions will immediately resolve all pension problems.
Transparent data would allow the proposal to be evaluated on its merits.
Dialogue offers the best way forward
The Organised Private Sector said it was not completely opposed to future adjustments in pension contributions.
Its central demand is that any increase should follow economic stability, proper impact assessment and meaningful consultation.
That position creates room for negotiation.
The Federal Government and PenCom should not dismiss employers as merely protecting profits. Employers, in turn, should not reject every reform intended to improve the welfare of retired workers.
A sustainable compromise could involve phased implementation, tax incentives, different treatment for small businesses or a review tied to wage growth and inflation.
The government could also prioritise improved compliance and wider pension coverage before increasing statutory rates.
The debate over the pension contribution hike should be guided by one principle: retirement security and employment security must not be treated as competing goals.
Workers need adequate income after retirement, but they also need businesses capable of employing them throughout their working lives.
Reform must balance present and future welfare
The proposed increase has reopened an important national debate about who bears the cost of protecting workers in retirement.
PenCom is right to examine whether the current system provides adequate benefits.
The Organised Private Sector is equally right to demand evidence that additional payroll costs will not destroy jobs or weaken struggling enterprises.
The government must now provide the data.
It should explain why the existing 18 per cent rate is considered insufficient, quantify the benefits expected from the additional contribution and publish an honest assessment of the risks.
Until that work is completed, the proposed pension contribution hike should remain what it currently is: a proposal subject to consultation, scrutiny and legislative approval.
Nigeria needs a pension system that protects workers in old age.
But that system cannot be strengthened by policies that reduce employment, force businesses into informality or further weaken workers’ immediate purchasing power.
The most credible reform will be one that expands coverage, enforces existing remittances, protects businesses and delivers measurable improvements in retirement income.
Anything less risks becoming exactly what employers have warned against—a well-intentioned policy with damaging consequences.
https://www.penop.com.ng/contributory-pension-scheme
