The real value of employees’ earnings fell sharply by about N2.79tn in 2024 to N25.48tn, indicating that workers became poorer as inflation wiped out gains from higher nominal pay, data from the Central Bank of Nigeria show.

According to the CBN’s Gross Domestic Product by Expenditure and Income data at 2010 constant purchasers’ prices, the real value of compensation of employees declined by 9.85 per cent to N25.48tn in 2024, from N28.27tn in 2023.

In contrast, GDP data at current purchasers’ prices show that compensation of employees rose nominally by 18.43 per cent to N75.59tn in 2024, from N63.83tn in 2023.

These figures mean that when adjusted for inflation, take-home pay for Nigerian workers decreased despite earning more naira, representing a significant loss in purchasing power during the year.

Compensation of employees covers salaries, wages, and other remuneration, including allowances. The CBN data did not specify whether the figures cover only public sector workers or include private sector employees.

Public finance stakeholders explained to The PUNCH that the divergence between real and nominal earnings reflects the impact of persistently high inflation on household welfare and living standards.

Nigeria’s headline inflation rate opened 2024 at 29.90 per cent and climbed to 34.80 per cent in December, one of the highest annual inflation rates recorded in the past decade.

A former President of the Chartered Institute of Bankers of Nigeria, Prof Segun Ajibola, said the real concern for workers was not nominal pay increases but the purchasing power of their income.

“What is important in terms of wages and salaries is the real value of your purchasing power, which is a function of your disposable income or take-home pay,” he said.

He noted that inflationary pressures, cost-push factors, and the depreciation of the naira had severely eroded workers’ purchasing power over the years.

“I’m even surprised that the decline is not more than the nine per cent you are talking about,” he said, adding that currency depreciation had worsened the situation in a highly dollarised economy.

Using the N70,000 minimum wage as an example, the economist explained that while nominal wages had increased, their real value had fallen sharply when adjusted for the naira’s depreciation.

“Nominally, you’ve earned more, but in real value, you’ve earned less, which literally means you are poorer,” he said.

He added that rising costs of rent, transportation, food, school fees, and other basic household needs had outpaced income growth, forcing many wage earners to struggle to make ends meet.

“The cost of living in the country is beyond the increases, if any, in nominal income. That has caused a serious erosion in the real value of income,” he said.

Ajibola noted that the situation is worse in the informal sector, where workers lack bargaining power and formal wage protections. “I’m aware that university graduates are earning N30,000 in factories and private schools just to keep the body going.”

He asserted that including the informal sector in the analysis would reveal “a very pathetic situation” regarding the welfare of the average Nigerian. Ajibola said the government now faced the challenge of ensuring that improvements in macroeconomic indicators translate into real benefits for citizens.

“It is even good that the Minister of Finance recently said attention will now be focused on how to translate nominal improvements to touch the lives of Nigerians,” he said. “If you improve nominal indicators and the man on the street is not feeling the impact, then it comes to nothing.”

Meanwhile, the President of the Association of Corporate Treasurers of Nigeria, Yinka Ogunnubi, said remuneration often lagged behind inflation but could eventually catch up.

“Usually, inflation starts, and remuneration tries to keep pace. It’s not always the case. Inflation gallops, and everybody is trying to keep up,” he said.

Ogunnubi noted that some employers had adjusted wages in response to rising costs, while others had not, saying, “There are some employers that have been very pragmatic and are doing the right thing. Some don’t.”

The ACTN chief stressed the role of trade unions and collective bargaining in ensuring that companies that raise prices also pass some of the gains to employees.

He said, “The pace of catching up is what needs to improve,” adding that without faster wage adjustments, rising costs would continue to undermine living standards.