The Federal Government has projected a significant 60 per cent increase in personnel costs for 2025 due to the implementation of the new national minimum wage and consequential salary adjustments for all cadres of the federal civil service.
According to the 2025–2027 Medium Term Expenditure Framework and Fiscal Strategy Paper approved by the Federal Executive Council last Thursday and obtained on Sunday, the government’s personnel expenditure is set to rise from the N4.1 trillion budgeted in 2024 to an estimated N6.56 trillion in 2025.
New Minimum Wage Drives Increased Spending
In July 2024, President Bola Tinubu approved an increase in the national minimum wage from N30,000 to N70,000. Federal workers have begun receiving the adjusted salaries, but state-level implementation has been inconsistent. While more than 20 states have pledged compliance, others are still lagging.
The Nigeria Labour Congress recently issued a December 1, 2024, ultimatum for non-compliant states to implement the new wage. Some states have even committed to paying above the federal mandate.
Breakdown of Personnel Cost Projections
The MTEF report reveals a steady rise in personnel costs over recent years. It states:
– Personnel expenditure for 2023 was N3.83 trillion.
– By July 2024, N2.67 trillion, representing 65% of the N4.1 trillion appropriated for the year, had been disbursed.
– For 2025, personnel costs are expected to increase by 60%, directly influenced by the minimum wage adjustments and their ripple effects on pensions and National Health Insurance Scheme contributions.
The report highlights, “The 2025 FGN personnel cost expenditure is expected to increase significantly to align with the updated National Minimum Wage… For 2025, the personnel cost is projected to increase by about 60% due to adjustments in minimum wage and consequential adjustments, which will directly impact employees’ salaries. Also, the employee and employer contributions to pension and NHIS will be affected as part of the personnel cost.”
Pension and Personnel Costs Allocation
The government has earmarked a total of N9.64 trillion for personnel and pension costs in 2025, including N1.02 trillion for Government-Owned Enterprises. This represents an increase of 58.7% compared to the 2024 budget allocation of N6.08 trillion.
“N9.64tn (including N1.02tn for GOEs) is provided for personnel and pension costs. This is an increase of N3.56tn or 58.7% over the 2024 provision and is mainly due to the implementation of the new minimum wage and its consequential adjustments,” the report states.
Budget Deficit Concerns
The increased personnel costs, along with rising debt servicing obligations, have contributed to a projected budget deficit of N13.08 trillion for 2025, up from N9.18 trillion in 2024. The deficit is estimated to represent 3.87% of the Gross Domestic Product and 38% of the government’s total revenue.
The report explains, “The deficit is due to the increased new minimum wage, pension obligation, and other consequential adjustments, and increased debt costs. The administration aims to lower the deficit levels to the threshold stipulated in the FRA 2025 within the medium term. The deficit will largely be financed by domestic borrowings, considering the narrow window for external financing.”
