[Nigeria] Workers’ salaries eroded by inflation and naira depreciation

In Nigeria, the ongoing depreciation of the naira and persistent inflation have eroded the N13.72tn that workers’ salaries managed to gain in the last four years, Punch reports.

Workers’ salaries in the formal sector, in nominal terms, reached N52.33tn in 2022; a 35.54 per cent increase from 2019’s N38.61tn wage.

The figure reportedly represents a N13.72tn increase in the period under review. However, when adjusted for inflation, the National Bureau of Statistics (NBS) 2020 data on employees’ compensation revealed a N3.89tn rise. 

In real terms, the total salaries of workers only increased by 19.83 per cent from N19.6tn in 2019 to N23.49tn in 2022.

Nominal GDP is the market value of goods and services produced at a particular period while Real GDP is gotten after inflation has been factored into nominal GDP. According to economists, real GDP is the true reflection of the economic status of a country.

Inflation in Nigeria rose to 21.34 per cent in December 2022 from 11.37 per cent in January 2019, according to the NBS. The country’s statistics body reportedly defines compensation of employees as the total remuneration of employees in the formal sector, inclusive of their wages and salaries and benefits in kind (such as pensions).

Commenting on the third and fourth quarters of 2022, NBS said, “In Q3 and Q4 of 2022, the Compensation of Employees grew by 4.28 per cent and 3.28 per cent respectively in real terms year-on-year.

“These growth rates were lower than the Q3 of 2021 and Q4 of 2021 rates recorded at 14.54 per cent and 11.79 per cent respectively. On a quarter-on-quarter basis, the CoE in real terms fell by 1.14 per cent in Q3 and grew by 12.32 per cent in Q4 of 2022.

“On an annual basis, growth was 4.41 per cent in 2022, lower than the growth of 2021. In nominal terms, the compensation of employees grew by 12.31 per cent and 13.43 per cent in Q3 and Q4 of 2022 respectively.”

In 2022, the NBS stated that naira depreciation was one of the factors fuelling inflation in the country. Alex Sienaert - the World Bank Lead Economist for Nigeria - said cumulative inflation has risen by 55 per cent between 2019 and 2022.

During a 2022 Nigeria Development Update report presentation, Mr Sienaert stated that Nigeria’s minimum wage has lost 35.48 per cent of its actual value between 2019 and 2022. He added, “The cumulative inflation between 2019 and 2022 was 55 per cent.”

According to Mr Sienaert, rising inflation has led to a slump in the purchasing power of Nigerians and the country’s consumer price inflation is one of the highest in the world.

Addressing the effect of inflation since 2019, the World Bank reportedly said, “High inflation has been persistent in Nigeria for the past two decades, but since 2019 inflation has increased substantially, driven by the multiple exchange rates and exchange rate depreciation in the parallel market, intensified trade restrictions, and the monetization of the public deficit by the Central Bank of Nigeria.”

Source: Punch

(Quotes via original reporting)

In Nigeria, the ongoing depreciation of the naira and persistent inflation have eroded the N13.72tn that workers’ salaries managed to gain in the last four years, Punch reports.

Workers’ salaries in the formal sector, in nominal terms, reached N52.33tn in 2022; a 35.54 per cent increase from 2019’s N38.61tn wage.

The figure reportedly represents a N13.72tn increase in the period under review. However, when adjusted for inflation, the National Bureau of Statistics (NBS) 2020 data on employees’ compensation revealed a N3.89tn rise. 

In real terms, the total salaries of workers only increased by 19.83 per cent from N19.6tn in 2019 to N23.49tn in 2022.

Nominal GDP is the market value of goods and services produced at a particular period while Real GDP is gotten after inflation has been factored into nominal GDP. According to economists, real GDP is the true reflection of the economic status of a country.

Inflation in Nigeria rose to 21.34 per cent in December 2022 from 11.37 per cent in January 2019, according to the NBS. The country’s statistics body reportedly defines compensation of employees as the total remuneration of employees in the formal sector, inclusive of their wages and salaries and benefits in kind (such as pensions).

Commenting on the third and fourth quarters of 2022, NBS said, “In Q3 and Q4 of 2022, the Compensation of Employees grew by 4.28 per cent and 3.28 per cent respectively in real terms year-on-year.

“These growth rates were lower than the Q3 of 2021 and Q4 of 2021 rates recorded at 14.54 per cent and 11.79 per cent respectively. On a quarter-on-quarter basis, the CoE in real terms fell by 1.14 per cent in Q3 and grew by 12.32 per cent in Q4 of 2022.

“On an annual basis, growth was 4.41 per cent in 2022, lower than the growth of 2021. In nominal terms, the compensation of employees grew by 12.31 per cent and 13.43 per cent in Q3 and Q4 of 2022 respectively.”

In 2022, the NBS stated that naira depreciation was one of the factors fuelling inflation in the country. Alex Sienaert - the World Bank Lead Economist for Nigeria - said cumulative inflation has risen by 55 per cent between 2019 and 2022.

During a 2022 Nigeria Development Update report presentation, Mr Sienaert stated that Nigeria’s minimum wage has lost 35.48 per cent of its actual value between 2019 and 2022. He added, “The cumulative inflation between 2019 and 2022 was 55 per cent.”

According to Mr Sienaert, rising inflation has led to a slump in the purchasing power of Nigerians and the country’s consumer price inflation is one of the highest in the world.

Addressing the effect of inflation since 2019, the World Bank reportedly said, “High inflation has been persistent in Nigeria for the past two decades, but since 2019 inflation has increased substantially, driven by the multiple exchange rates and exchange rate depreciation in the parallel market, intensified trade restrictions, and the monetization of the public deficit by the Central Bank of Nigeria.”

Source: Punch

(Quotes via original reporting)