Nigeria’s firms have seen their salary bill rise to the highest in at least nine years, as they scramble to retain employees amid soaring inflation, BusinessDay’s findings have revealed.
According to the latest Nigerian Gross Domestic Product Report (Expenditure and Income Approach) report by the National Bureau of Statistics (NBS), the compensation of employees rose by 77.7 percent to N28.26 trillion last year from N15.9 trillion in 2015.
“The increase in salaries shows companies’ investments for employees in light of some of the macroeconomic challenges. Inflation has gone up and companies, especially in the banking sector have revised their salaries,” Omobola Adu, an economist at BancTrust & Co, said.
Israel Odubola, a Lagos-based research economist, said that some banks took it upon themselves to increase personnel costs so that their human resources would not be affected by the cost-of-living crisis.
BusinessDay reported banks’ salaries rose by 100.7 percent in the first three months of the year. According to ten banks’ financial statements, their personnel expenses grew to N329.3 billion in Q1 from N164 billion in the same period of 2023.
The country’s salary growth also boosted household consumption as it rose to N44.84 trillion in 2023, a 261 percent increase from N12.4 trillion in 2015 in real terms, according to the Nigeria household consumption data.
It disclosed that in nominal terms, households’ final consumption expenditure rose to N141.69 trillion (purchasers’ value) in 2023, representing a 90.4 percent increase from N74.4 trillion in 2015.
In economics, the real value of an item is its nominal value adjusted for inflation, says Investopedia, an online business dictionary.
The Organisation for Economic Co-operation and Development defines household spending as the amount of final consumption expenditure made by households to meet their everyday needs, such as food, clothing, housing (rent), energy, transport, durable goods, health costs, leisure, and miscellaneous services.
Read also: Access Holdings, FBNH, UBA lead in salary growth for Q1
Inflation has been one of Nigeria’s biggest headaches. It stood at 28.92 percent in Nigeria in December 2023 as against 9.6 percent in December 2015. It has since risen significantly in Africa’s most populous nation, hitting 33.95 percent in May 2024.
High food prices, currently at 40.66 percent, have continued to exert pressure on Nigerians’ wallets.
In 2023, Picodi, an international e-commerce organisation, revealed that Nigerian households spent 59 percent of their income on food, the highest globally.
According to a ‘Cost of Healthy Diet’ report by the NBS and the Global Alliance for Improved Nutrition, the cost of a healthy diet rose by 32 percent to N1,041 per adult per day in May 2024 from N786 in December 2023,
Nigeria’s high inflation increased the number of poor Nigerians to 104 million in 2023 from 89.8 million, according to the World Bank’s latest ‘Nigeria Development Update’ report.
Inflation is fuelled by several factors in Nigeria, including excess liquidity, insecurity, and naira devaluation, among others.
A report by SBM Intelligence, an Africa-focused geopolitical research and strategic communications consulting firm, showed that five in 10 Nigerians experienced an increase in their income in the last four years.
It said 50 percent of Nigerians who had an increased income is more than double the 18.6 percent who reported an income decline.
“Respondents who reported increased income attributed it to promotions, changing jobs, and increased demand for their goods. In contrast, job losses, salary cuts, and reduced sales were cited as reasons for experiencing a reduced income,” it said.
It added that the Nigerian consumer was currently facing significant challenges because of a combination of high inflation, sluggish economic growth, and high unemployment rates.
The Federal Government reforms, such as the removal of petrol subsidy and naira devaluation, implemented in the second quarter of 2023, caused a surge in the cost of living of cash-strapped consumers.
The removal of subsidy on petrol tripled the pump price to over N600, causing public transportation providers such as buses, tricycles, and motorcycles to raise transportation fares. This situation affected those who rely on public transportation, particularly workers in the private sector.
“With higher transportation fares, many employees are forced to allocate a substantial portion of their salaries to cover commuting expenses, leaving little for other essential needs like food and rent,” analysts at SBM said.
Analysts at Comercio Partners Research noted in their recent research that high food inflation has shrunken Nigerians’ wallets.
“High inflation, particularly in food prices, has eroded purchasing power, negatively impacting consumer spending – a critical driver of economic growth,” the research-based organisation said.
Naira devaluation is also a major fuel to Nigeria’s inflation and economic crisis. Naira has lost more than 50 percent of its value since May 2023 when there was a change of government in Nigeria.
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