The Organized Private Sector of Nigeria (OPSN) has opposed the Federal Government’s proposed amendment to the Pension Reform Act, warning that plans to increase pension contributions and introduce a new levy on employers could worsen the cost of doing business, trigger job losses, and weaken the country’s already fragile economy.
The Director of Legal, Regulatory and Taxation at the Nigerian Employers’ Consultative Association (NECA), Mr. Thompson Akpabio, made the position known during an interview on Trade FM, where he spoke on behalf of the OPSN, an umbrella body representing more than 30 employers’ associations across various sectors of the Nigerian economy.
According to Akpabio, the proposed amendments by the National Pension Commission (PenCom) seek to increase employers’ pension contributions from 10 per cent to 15 per cent, raise employees’ contributions from 8 per cent to 10 per cent, and introduce an additional mandatory levy equivalent to three per cent of an employer’s total wage bill.
He described the proposals as an unexpected departure from the issues discussed during previous legislative engagements on the Pension Reform Act.
“We woke up to news that PenCom is proposing amendments to the Pension Reform Act. The major concern is that these amendments are introducing additional financial burdens on employers and, by extension, Nigerian workers,” he said.
Akpabio noted that when stakeholders participated in a public hearing at the National Assembly in May last year, discussions centred primarily on issues such as the criminalisation of pension remittance defaults and workers’ access to lump-sum retirement benefits, not an increase in contribution rates.
He argued that imposing higher pension deductions at a time when businesses are grappling with inflation, rising energy costs, exchange rate instability and declining consumer demand would further strain employers and reduce workers’ disposable income.
According to him, employers already shoulder numerous obligations beyond salaries, including recruitment, staff training, healthcare, insurance and other welfare-related expenses.
“Rather than placing additional burdens on employers, government should be looking at ways to ensure businesses remain sustainable so they can continue creating jobs,” he stated.
Workers may not benefit immediately
While PenCom has argued that higher contributions would improve retirement benefits, Akpabio questioned whether there was sufficient evidence to support such claims.
He maintained that increasing deductions from workers’ salaries would reduce their immediate take-home pay without necessarily improving their living conditions.
“The money remains in the pension account until retirement, while inflation continues to erode its purchasing power. If someone contributes more today but inflation significantly reduces the value of those savings over the next 20 years, how exactly has the worker benefited?” he asked.
He stressed that government should focus on tackling inflation and improving economic conditions rather than increasing compulsory pension contributions.
Consultation process questioned
The OPSN also criticised what it described as the premature announcement of the proposed changes while consultations with stakeholders were still ongoing.
Akpabio said meaningful social dialogue should precede any policy announcement, insisting that all relevant stakeholders—including employers, labour unions and regulators—must reach a consensus before significant reforms are introduced.
“If consultation is genuinely ongoing, government should wait until the process is concluded before announcing new contribution rates,” he said.
Warning over job losses and business closures
Akpabio warned that increasing statutory payroll obligations could force many employers to reduce their workforce, suspend recruitment, freeze staff training or even shut down operations.
He said such developments would worsen unemployment and reduce government tax revenues as more workers lose formal employment.
“If employers are pushed beyond their limits, downsizing becomes inevitable. More Nigerians will lose their jobs, and social problems will increase,” he warned.
He added that some businesses may resort to automation, artificial intelligence and other technologies to reduce labour costs, while others could relocate production outside Nigeria under the African Continental Free Trade Area (AfCFTA), thereby reducing local manufacturing activities.
Call for independent actuarial review
The employers’ group called on the Federal Government to conduct an independent actuarial and economic assessment before implementing any changes to the pension contribution framework.
Akpabio said government must provide comprehensive data showing why the existing contribution rates have become inadequate.
According to him, such an assessment should include sector-by-sector analysis of pension contributions since 2014, investment performance, accountability in fund management, expected benefits of any increase and the likely impact on employers and workers.
“There should be empirical evidence—not assumptions—to justify any increase. An independent body should evaluate the pension system and determine whether the current contribution rates remain sustainable,” he said.
Existing law already allows higher contributions
Akpabio argued that the current Pension Reform Act already provides sufficient flexibility for employers and employees who wish to contribute above the statutory minimum.
He explained that Section 4 of the Act allows employers and employees to negotiate higher contribution rates through mutual agreement, while individual workers who desire additional retirement savings are also permitted to make voluntary contributions.
“The law already provides mechanisms for increasing contributions where both parties agree or where an individual employee wants to contribute more. There is therefore no justification for imposing a compulsory increase across the board,” he said.
Expand compliance instead of raising rates
Rather than increasing contribution percentages, the OPSN urged PenCom to focus on improving compliance among employers that are currently outside the pension scheme.
Akpabio noted that bringing more businesses into the contributory pension system would generate additional revenue without imposing fresh financial burdens on compliant organisations.
He also expressed concern over Nigeria’s shrinking formal employment sector, estimating that less than five per cent of the country’s workforce currently operates within the formal economy.
“The formal sector is already shrinking as businesses continue to close. Our priority should be sustaining existing employers and expanding pension coverage to those outside the system rather than penalising compliant companies,” he said.
Opposition to proposed three per cent wage bill levy
The employers’ representative also rejected the proposed mandatory three per cent contribution based on employers’ total wage bills, describing it as an additional tax that businesses cannot absorb under current economic realities.
He maintained that any review of the Pension Reform Act should begin with a comprehensive evaluation of the law’s implementation, investment management, transparency, enforcement mechanisms and overall effectiveness before introducing new financial obligations.
Call for balanced reforms
Akpabio concluded by urging government to pursue balanced pension reforms that protect workers’ retirement benefits while preserving businesses, jobs and investments.
He recommended that companies with strong records of pension compliance should receive tax incentives or other forms of recognition instead of additional statutory costs.
According to him, strengthening the economy, reducing inflation and expanding participation in the contributory pension scheme would provide more sustainable long-term solutions than increasing contribution rates.
“We are not against workers having a secure retirement,” he said. “But reforms must strike a balance between protecting employees and ensuring businesses remain viable. If businesses collapse, there will be no jobs, no taxes and ultimately no pension contributions to collect.”
