- The Federal Government had projected a 60% increase in personnel costs for 2025, driven by the newly approved minimum wage for civil servants, totaling N6.56 trillion
- The salary increase from N30,000 to N70,000 will push the total personnel budget up by N2.46 trillion, contributing to a projected N13.08 trillion budget deficit
- The increase in personnel and pension costs, along with higher debt servicing, is expected to lead to a budget deficit of N13.08 trillion, with domestic borrowing planned to cover the gap
The Federal Government has disclosed that its expenditure on personnel costs will rise by at least 60 per cent in 2025, following the implementation of the newly approved national minimum wage and consequential salary adjustments for federal civil servants.
According to the newly released Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF), the government's personnel costs will increase by N2.46 trillion, bringing the total personnel budget to approximately N6.56 trillion for the 2025 fiscal year.
The increase is directly linked to President Bola Tinubu’s approval of a new minimum wage for Nigerian workers in July 2024, which raised the monthly pay from N30,000 to N70,000.
While federal employees have already started receiving the new wage, many state governments are still in the process of adopting the new minimum wage, with some even pledging to pay more than the federal benchmark.
As of August 2024, the government had disbursed N2.67 trillion, or 65 percent of the N4.1 trillion appropriated for personnel costs in the 2024 budget.
The government now projects a significant increase in personnel costs in 2025, due to the nationwide implementation of the higher wages and associated adjustments for all civil service cadres.
The MTEF report noted that personnel costs for 2025 are expected to soar by 60 percent. Specifically, the report highlighted that the 2025 personnel cost will increase from N3.83 trillion in 2023 to N6.56 trillion in 2025, driven by the impact of the minimum wage adjustment.
The report also pointed out that the government’s pension obligations and contributions to the National Health Insurance Scheme (NHIS) will also increase as part of the personnel cost adjustments.
"The 2025 Federal Government personnel cost expenditure is expected to increase significantly due to the updated National Minimum Wage and the consequential adjustments. This is expected to directly impact employees’ salaries, pension contributions, and NHIS deductions," the report stated.
N9.64tn for Personnel and Pension
In total, the government has allocated N9.64 trillion for personnel and pension costs in the 2025 budget, marking an increase of 58.7 percent over the 2024 allocation. This includes N1.02 trillion for government-owned enterprises (GOEs), which also fall under the personnel costs.
The MTEF document stressed that the sharp increase in these expenditures is largely due to the implementation of the new wage structure and related benefits.
The government's spending on personnel costs and the new minimum wage are significant factors contributing to a projected budget deficit of N13.08 trillion for 2025, which represents 3.87 percent of Nigeria's estimated Gross Domestic Product (GDP). This is a notable increase from the N9.18 trillion deficit anticipated in 2024.
The increase in the deficit is attributed to rising personnel and pension costs, as well as higher debt servicing obligations.
Given the limited scope for external financing, the government has outlined plans to manage the deficit through domestic borrowings.
“The budget deficit is primarily driven by the increased minimum wage, pension obligations, and other consequential salary adjustments, as well as escalating debt costs,” the MTEF report explained.
"The administration aims to reduce the deficit over the medium term in line with the Fiscal Responsibility Act (FRA) 2025."
The Federal Government’s decision to increase spending on personnel costs as a result of the new minimum wage will significantly impact the 2025 budget, contributing to a projected N13.08 trillion budget deficit.
Private companies stand risk of jail if they pay below minimum wage - Nigerian government warns
Meanwhile, TheRadar earlier reported that the Federal Government warned employers in the private sector to pay the new N70,000 minimum wage or risk imprisonment.
Nigerians reacted, some supported the government and others thought it was not possible to implement.
