Companies in Nigeria increased the salaries of their employees by 18.35% to N29.45 trillion in the first half of 2023 to combat rising inflation in the country. This information is based on data from the National Bureau of Statistics’ “Nigerian Gross Domestic Product Report (Expenditure and Income Approach): Q1, Q2.” The compensation of employees, which includes total remuneration payable by employers to employees for their work, rose from N24.88 trillion in the first half of 2022 to N29.45 trillion in the first half of 2023.
Key Points:
- To address the impact of rising inflation, companies in Nigeria increased employee salaries by 18.35% to N29.45 trillion in the first half of 2023.
- The compensation of employees includes total remuneration in cash or in kind payable by employers to employees for their work.
- The National Bureau of Statistics (NBS) reported a growth of 15.08% and 19.41% in the Compensation of Employees during Q1 and Q2 of 2023, respectively, in real terms year-on-year.
- Operating surplus for firms, including SMEs, also grew to N67.56 trillion, an 11.93% increase from the N60.36 trillion recorded in the first half of 2022.
- Operating surplus represents the profit that remains for firms after costs have been covered.
- Inflation in Nigeria rose to 22.79% by the end of the period under review, further weakening the purchasing power of Nigerians.
- The World Bank had warned that inflation growth in Nigeria had eroded the minimum wage by 55%, pushing more people into poverty.
Analysis: The increase in employee salaries by companies reflects a response to the economic challenges posed by high inflation in Nigeria. With inflation eroding purchasing power and causing an increase in the cost of living, companies are adjusting compensation to help employees cope with the impact. This move aligns with efforts to address the widening poverty net and the erosion of the minimum wage’s real value.
The growth in operating surplus for firms, including SMEs, suggests that businesses are adapting to the economic environment, possibly by optimizing operations and managing costs. However, despite these adjustments, inflation remains a significant concern, and its effects on the real minimum wage and overall poverty levels continue to be substantial.
Conclusion: The compensation adjustments made by companies in Nigeria underscore the challenges posed by inflation and the efforts to alleviate its impact on employees. As economic conditions evolve, businesses are navigating the complexities to maintain operational efficiency. The relationship between compensation adjustments, inflation, and overall economic well-being highlights the need for comprehensive measures to address inflationary pressures and promote sustainable economic growth in Nigeria.