The Lagos Chamber of Commerce and Industry (LCCI) has urged the Federal Government and the National Pension Commission (PenCom) to suspend the proposed increase in Nigeria’s mandatory pension contribution from 18 per cent to 21 per cent, warning that the policy would raise the cost of doing business, threaten jobs and undermine enterprise sustainability at a time of mounting economic pressures.
The Director General of the LCCI, Dr. Chinyere Almona, said while strengthening retirement security remains an important policy objective, increasing mandatory pension contributions by three percentage points would impose additional financial burdens on businesses already grappling with high borrowing costs, persistent inflation, foreign exchange volatility, rising energy prices and multiple taxes.
According to the chamber, the proposed increase comes at a period when many businesses, particularly micro, small and medium-sized enterprises (MSMEs), are struggling to remain profitable amid Nigeria’s challenging operating environment.
The LCCI noted that Nigeria’s existing mandatory pension contribution rate of 18 per cent comprising 10 per cent by employers and 8 per cent by employees is already broadly aligned with the Organisation for Economic Co-operation and Development (OECD) average of 18.8 per cent.
It argued that raising the contribution to approximately 21 per cent would place Nigeria above several comparable economies, including the United Kingdom, where mandatory contributions stand at 8 per cent; the United States at 12.4 per cent; Kenya at 12 per cent, subject to earnings caps; and South Africa, where there is no equivalent mandatory private-sector pension contribution.
The chamber warned that implementing the proposed increase would significantly raise employment costs for employers, discourage new recruitment, constrain wage growth and place disproportionate pressure on MSMEs, which account for a substantial share of employment in Nigeria.
According to the LCCI, the higher payroll obligations could also reduce Nigeria’s competitiveness as an investment destination, encourage non-compliance with pension regulations and push more businesses into the informal sector.
“A stronger pension system cannot be built on weaker businesses,” the chamber stated, stressing that economic sustainability and business growth remain critical to expanding pension coverage over the long term.
The LCCI therefore called on the Federal Government to defer the proposal until a comprehensive Nigeria-specific actuarial and economic impact assessment is conducted to determine its implications for businesses, workers and the broader economy.
It also urged policymakers to engage in extensive consultations with organised private sector groups, labour unions and other key stakeholders before implementing any changes to the country’s pension contribution framework.
According to the chamber, the government’s immediate priority should be restoring business confidence, preserving existing jobs, encouraging investment and expanding the formal economy, which it described as the most sustainable pathway to improving retirement savings.
As an alternative to increasing contribution rates, the LCCI advised PenCom to focus on developing more innovative investment instruments capable of generating stronger returns on pension assets.
The chamber said improving investment performance would enhance contributors’ retirement savings without imposing additional financial obligations on employers and employees already facing difficult economic conditions.
(The Whistler)
