The Federal Government anticipates a substantial increase in personnel and pension expenditures in 2025, driven by the implementation of the new minimum wage and related adjustments. This projection is outlined in the Medium-Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) for 2025-2027.
According to the document, personnel and pension costs are set to rise from ₦6.07 trillion in 2024 to ₦9.64 trillion in 2025, marking a significant 58.7% increase. The report attributes this surge to the financial impact of the new wage structure and consequential salary adjustments for government workers.
Rising Fiscal Pressure on Government Operations
The MTEF/FSP highlights an expected rise in Nigeria’s total recurrent (non-debt) expenditure from ₦11.27 trillion in 2024 to ₦14.21 trillion in 2025—a 26% growth. This category, which encompasses personnel costs, pensions, and administrative expenses, is forecasted to reach ₦14.59 trillion by 2027, reflecting the sustained financial burden of government operations.
Personnel costs for Ministries, Departments, and Agencies (MDAs) are projected to grow by 49.7%, from ₦4.79 trillion in 2024 to ₦7.17 trillion in 2025. Government-Owned Enterprises (GOEs) will see an even sharper rise of 67.2%, with personnel costs increasing from ₦608 billion in 2024 to ₦1.02 trillion in 2025. Combined personnel expenses will climb from ₦5.4 trillion in 2024 to ₦8.19 trillion in 2025, a 51.7% rise, and are expected to continue growing through 2027.
Pensions and Benefits Also on the Rise
Pension obligations are expected to nearly double, from ₦673 billion in 2024 to ₦1.44 trillion in 2025. This figure is projected to remain stable through 2026 and 2027. The document highlights that revised pension rates, effective since June 2023, have increased by 20% to 28% for eligible pensioners. These adjustments will be reflected in the 2025 budget to ensure compliance with updated rates.
Implications for Fiscal Sustainability
The sharp rise in personnel and pension costs raises concerns about Nigeria’s fiscal sustainability, particularly as the country grapples with revenue challenges and competing development needs. The World Bank has also weighed in on the issue, noting that the new minimum wage will have a limited impact, benefiting only 4.1% of the working-age population, primarily in the formal sector.
Alex Sienaert, the World Bank’s lead economist for Nigeria, emphasizes that while the wage increase is important, addressing poverty requires broader measures, such as creating productive jobs that provide sustainable livelihoods.
Looking Ahead
As Nigeria adjusts to the financial implications of the new wage policy, the Federal Government faces mounting pressure to balance employee compensation with other critical expenditures. The projected surge in costs underscores the need for strategic fiscal management to maintain sustainability while addressing the economic challenges facing the country.
