The implementation of the new minimum wage will push the personnel cost of the federal government by N3.56tn to N9.64tn in the 2025 fiscal period.
The figure is contained in the Medium-Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) document for 2025-2027.
The MTEF povides the basis for annual budget planning and consists of a macroeconomic framework that indicates fiscal targets, estimates, revenues and expenditure, including government financial obligations in the medium term.
The document, prepared by the Ministry of Budget and National Planning, also sets out the underlying assumptions for these projections, provides an evaluation and analysis of the previous budget and presents an overview of consolidated debt and potential fiscal risks.
An analysis of the document showed that the federal government is estimating an increase in personnel and pension costs in 2025, attributed to the implementation of the minimum wage hike.
The N9.64tn projection for 2025 is an increase of 58.7 per cent rise when compared with the N6.07tn provided in the 2024 fiscal period.
In July 2024, President Bola Tinubu approved an increase in the minimum wage for Nigerian workers from N30,000 to N70,000.
However, the implementation across states has been gradual, with some still yet to adopt the new minimum wage
The document read: “N9.64tn (including N1.02tn for GOEs) is provided for personnel and pension costs. This is an increase of N3.56tn or 58.7 per cent over the 2024 provision and is mainly due to the implementation of the new minimum wage and its consequential adjustments.”
Personnel costs for Ministries, Departments, and Agencies (MDAs) are projected to rise significantly, rising from N4.79tn in 2024 to N7.17tn in 2025, a 49.7 per cent increase.
Regarding the increase in personnel costs, the document read, “The 2025 FGN personnel cost expenditure is expected to increase significantly to align with the updated National Minimum Wage. The personnel cost for FY2023 was N3.83tn.
“As of July, the figure for FY2024 is N2.67tn, 65 per cent of the N4.10tn appropriated in the 2024 Budget. For 2025, the personnel cost is projected to increase by about 60 per cent 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.
“The reviewed pension rates for pensioners in the Service Wide Vote will be higher in FY2025. Following the minimum wage adjustments, the employee and employer contributions to pension and NHIS will be affected as part of the personnel cost.
“Also, the FGN has reviewed the pension rate of pensioners between 20 per cent and 28 per cent. This revised rate is effective 1st June 2023. The 2025 budget will make provisions based on the revised pension rates for eligible pensioners.”
The personnel budget constitutes a large portion of Nigeria’s recurrent expenditure, often leaving little room for capital investment in infrastructure and development projects. For instance, personnel costs frequently exceed 70% of the national budget, limiting fiscal flexibility.
Nigeria’s over-reliance on oil revenue, coupled with inconsistent tax collection and a narrow revenue base, creates significant challenges in funding the personnel budget.
The government’s increasing reliance on domestic and international borrowing to fund recurrent expenses, including personnel costs, raises sustainability concerns.