The Federal Government of Nigeria is set to experience a significant rise in personnel and pension costs in 2025, driven by the implementation of a new minimum wage. According to the Medium-Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) for 2025-2027, these expenses are projected to climb from N6.07 trillion in 2024 to N9.64 trillion in 2025, marking a sharp 58.7% increase.
The report attributes the rise to adjustments stemming from the updated minimum wage policy, which impacts salaries and contributions to pensions and health insurance schemes. Personnel costs for Ministries, Departments, and Agencies (MDAs) are forecasted to increase by 49.7%, reaching N7.17 trillion, while costs for Government-Owned Enterprises (GOEs) will jump by 67.2%, hitting N1.02 trillion. Combined personnel costs are expected to rise by 51.7%, totaling N8.19 trillion in 2025.
Escalating Recurrent Expenditure
The nation’s recurrent non-debt expenditure, which includes salaries, pensions, and administrative costs, is projected to rise from N11.27 trillion in 2024 to N14.21 trillion in 2025—a 26% increase. By 2027, this figure is expected to grow to N14.59 trillion, underscoring the mounting fiscal burden of government operations.
Pension costs will also see substantial growth, nearly doubling from N673 billion in 2024 to N1.44 trillion in 2025, and remaining steady through 2027. These increases are linked to revised pension rates, adjusted by 20-28% in line with the minimum wage update.
Fiscal Sustainability Concerns
The dramatic rise in personnel and pension costs raises questions about Nigeria’s fiscal sustainability. As revenue generation faces ongoing challenges, the added financial strain could hinder other developmental priorities.
Experts have also highlighted the limited impact of the minimum wage hike, with the World Bank noting that only 4.1% of Nigeria’s working-age population will directly benefit, primarily those in formal employment. Despite its significant implications for government spending, the wage adjustment’s broader economic effects remain limited.
This development signals the need for careful fiscal management to balance rising costs with sustainable revenue generation strategies.
