To address the escalating inflationary pressures in the nation, companies implemented an 18.35% salary increase, totaling N29.45 trillion, during the initial six months of 2023, as reported by the National Bureau of Statistics (NBS) in its ‘Nigerian Gross Domestic Product Report (Expenditure and Income Approach): Q1, Q2.’
The compensation of employees, encompassing total remuneration in cash or kind from employers to employees for their work, surged from N24.88 trillion in the first half of 2022 to N29.45 trillion in the corresponding period of 2023. This salary hike aligns with the challenging economic conditions, where workers grapple with elevated prices and an increased cost of living.
The NBS highlighted that in Q1 and Q2 of 2023, the Compensation of Employees experienced year-on-year growth rates of 15.08% and 19.41%, respectively, in real terms, surpassing the rates recorded in the same periods of 2022. On a quarter-on-quarter basis, there was a 3.33% decline in Q1, followed by an 11.25% growth in Q2 of 2023. In nominal terms, compensation of employees rose by 16.03% in Q1 and 20.50% in Q2 of 2023.
The NBS defined compensation of employees as the total remuneration, including cash or in-kind payments, direct social transfers, and benefits, provided by employers to their employees.
During the review period, firms, including SMEs, expanded their operating surplus to N67.56 trillion, marking an 11.93% increase from the N60.36 trillion recorded in the first half of 2022. Operating surplus, defined as the profit remaining for firms after covering costs, saw a notable uptick.
The persistently high inflation and the removal of fuel subsidies have eroded the purchasing power of Nigerians, exacerbating poverty. By the end of the review period, inflation had surged to 22.79% (now at 27.33% as of October), 4.19 percentage points higher than the June 2022 figure.
In 2022, the World Bank warned that Nigeria’s escalating inflation had diminished the value of the N30,000 minimum wage by 55%, leading to an increase in poverty levels. Chief Economist at World Bank Nigeria, Alex Sienaert, emphasized the impact on purchasing power and highlighted that the minimum wage had dropped to $26 in 2022 from $82 in 2019.
In 2023, four million Nigerians were pushed into poverty between January and May, with an additional 2.8 million expected to fall into poverty by the year-end, according to the World Bank. The erosion of purchasing power due to high inflation has been a major factor, affecting the livelihoods of individuals across the country.
Leave a comment