• Say it will threaten business survival
Onyebuchi Ezigbo in Abuja
The Organized Private Sector of Nigeria (OPSN), has expressed deep concern over the recent announcement by the Director-General of the National Pension Commission (PenCom) regarding a proposed increase in mandatory pension contributions and introduction of an additional 3 percent mandatory annual contribution equivalent to 3 percent of the total wage bill.
The body comprising 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 described the measure as a “Greek gift” to Nigerian worker.
It said 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”.
A statement, jointly signed by MAN NACCIMA, NECA, NASME, NASSI, the group said while the proposal may be presented as an effort to improve retirement benefits, “under the prevailing economic conditions, it could become a “Greek gift” to Nigerian workers: an apparently beneficial policy that ultimately threatens employment, wage growth, business sustainability and escalate compliance risks”.
“The OPSN maintains that the strength of any contributory pension system depends fundamentally on the survival of businesses, the availability of decent jobs and the capacity of employers and employees to make consistent contributions,” it said.
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.
OPSN said that Nigeria’s existing contribution rate cannot reasonably be regarded as inadequate, based on contribution percentages alone, adding that 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”.
The statement quoted the Director-General of NECA, Mr. Adewale-Smatt Oyerinde, as having emphasized that the proposed hike is both premature and counterproductive:
“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.”
Smatt Oyerinde 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 stated.”
On his part, the Director-General of MAN, Mr. Segun Ajayi-Kadir, highlighted the macroeconomic consequences, saying it will constitute a direct threat to enterprise viability and worker earnings.
He said that businesses are already contending with high energy costs, elevated interest rates, exchange-rate volatility, multiple regulatory obligations, weak consumer demand and rising production expenses, noting that 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.
Similarly, the statement said that the Director-General of NACCIMA, Mr. Sola Obadimu, cautioned against imposing additional financial levies on a struggling business environment.
According to him: “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.
Expressing similar concern, the Director-General of NASSI, Engr. Ifeanyi Oputa, said that micro, small and medium-sized enterprises would be disproportionately affected by any increase in mandatory employer pension contributions.
In the joint statement, the OPSN urged the federal government and PenCom to do away with policies that erode purchasing power and instead prioritize macroeconomic stability, enterprise sustainability, and job preservation:
Specifically, the OPSN called on government to focus on core priorities such as directing efforts towards reining in inflation, preserving workers’ immediate cash flow, and promoting business sustainability to create decent jobs and improve welfare.
Secondly the body advised government to carry out a comprehensive economic and employment-Impact 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 employers said that federal government should commit to genuine and transparent social dialogue