The continued depreciation of the naira and persistent inflation has eroded the N13.72tn that workers’ salaries gained in the last four years.
This is as total workers’ salaries in the formal sector, in nominal terms, hit N52.33tn in 2022, a 35.54 per cent increase from the N38.61tn that it was in 2019.
This represents a N13.72tn increase in the period under review, although when adjusted for inflation, the National Bureau of Statistics 2020 data on employees’ compensation revealed a N3.89tn increase. In real terms (i.e., after inflation has been factored in), the total salaries of workers only increased by 19.83 per cent from N19.6tn in 2019 to N23.49tn in 2022.
According to economists, nominal GDP is the market value of goods and services produced at a particular period while Real GDP is gotten after inflation has been factored into nominal GDP. They state that real GDP is the true reflection of the economic status of a country.
Inflation rose to 21.34 per cent in December 2022 from 11.37 percent in January 2019, according to the NBS. The statistics body of the country defines compensation of employees as the total remuneration of employees in the formal sector, inclusive of their wages and salaries and benefits in kind (such as pensions).
Commenting on the third and fourth quarters of 2022, the body said, “In Q3 and Q4 of 2022, the Compensation of Employees grew by 4.28 per cent and 3.28 per cent respectively in real terms year-on-year.
“These growth rates were lower than the Q3 of 2021 and Q4 of 2021 rates recorded at 14.54 per cent and 11.79 per cent respectively. On a quarter-on-quarter basis, the CoE in real terms fell by 1.14 per cent in Q3 and grew by 12.32 per cent in Q4 of 2022.
“On an annual basis, growth was 4.41 per cent in 2022, lower than the growth of 2021. In nominal terms, the compensation of employees grew by 12.31 per cent and 13.43 per cent in Q3 and Q4 of 2022 respectively.”
In 2022, the NBS stated that naira depreciation was one of the factors fuelling inflation in the country. According to the World Bank Lead Economist for Nigeria, Alex Sienaert, cumulative inflation has risen by 55 per cent between 2019 and 2022.
During a 2022 presentation, the lead economist noted that Nigeria’s minimum wage has lost 35.48 per cent of its actual value between 2019 and 2022. While presenting the Nigeria Development Update report, he said, “The cumulative inflation between 2019 and 2022 was 55 per cent.”
According to Sienaert, rising inflation has led to a slump in the purchasing power of Nigerians, with the country’s consumer price inflation one of the highest in the world.
Commenting on the effect of inflation since 2019, the World Bank said, “High inflation has been persistent in Nigeria for the past two decades, but since 2019 inflation has increased substantially, driven by the multiple exchange rates and exchange rate depreciation in the parallel market, intensified trade restrictions, and the monetization of the public deficit by the Central Bank of Nigeria.”