Nigeria’s Federal Government is bracing for a substantial increase in personnel and pension costs in 2025, driven largely by the implementation of a new minimum wage and related adjustments.
According to the 2025–2027 Medium-Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP), these expenses are projected to rise by 58.7%, jumping from N6.07 trillion in 2024 to N9.64 trillion in 2025.
This sharp escalation highlights the pressure on Nigeria’s fiscal management amidst economic uncertainties.
The MTEF/FSP document outlines that the N9.64 trillion allocation includes N1.02 trillion earmarked for Government-Owned Enterprises (GOEs). The increase, it states, results directly from the adjustments linked to the minimum wage implementation, impacting overall personnel compensation and pensions.
In a broader context, the government’s total recurrent (non-debt) expenditure is set to rise from N11.27 trillion in 2024 to N14.21 trillion in 2025, marking a 26% uptick.
This category, encompassing personnel, pension, and administrative costs, is forecasted to grow further to N14.38 trillion in 2026 and N14.59 trillion in 2027, reflecting the continuous financial weight of running government operations.
Breaking down the numbers, the personnel costs for Ministries, Departments, and Agencies (MDAs) are expected to increase from N4.79 trillion in 2024 to N7.17 trillion in 2025—a 49.7% rise.
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GOEs will see their personnel costs surge from N608 billion in 2024 to N1.02 trillion in 2025, translating to a 67.2% increase. Collectively, these expenses are projected to climb from N5.4 trillion in 2024 to N8.19 trillion in 2025, a 51.7% jump, before reaching N8.47 trillion in 2026 and N8.79 trillion in 2027.
The Federal Government’s analysis highlights the significant fiscal implications of these hikes. The report states, “The 2025 FGN personnel cost expenditure is expected to increase significantly to align with the updated National Minimum Wage.
For 2025, the personnel cost is projected to increase by about 60% due to adjustments in minimum wage and consequential adjustments, which will directly impact employees’ salaries.”
Pension costs are also forecasted to rise sharply, with expenses for pensions, gratuities, and retirees’ benefits nearly doubling from N673 billion in 2024 to N1.44 trillion in 2025.
Notably, this figure is expected to stabilize at N1.44 trillion in 2026 and 2027, underscoring that while personnel costs drive the majority of the increase, pension obligations remain a consistent financial burden.
The government’s revised pension rates, ranging from 20% to 28%, effective from June 2023, will shape the 2025 budget provisions.
The report emphasizes, “The reviewed pension rates for pensioners in the Service Wide Vote will be higher in FY2025. This ensures compliance with the updated rates for proper budgetary provision.”
Experts warn that the projected surge in expenditure may strain Nigeria’s fiscal sustainability. The World Bank has raised concerns about the minimal impact of the minimum wage increase on the broader population.
According to Alex Sienaert, the World Bank’s lead economist for Nigeria, only 4.1% of working-age Nigerians, primarily in formal employment, will benefit directly from the wage increase.
He noted during the Nigeria Development Update (NDU) launch, “Addressing poverty effectively requires more than wage adjustments; it demands creating productive, sustainable jobs.”
Economist Dr. Funmilayo Obaseki added, “The rising personnel and pension costs reflect deeper structural issues in Nigeria’s fiscal policy.
While increasing wages is a positive step, without a commensurate increase in revenue and economic growth, the government risks exacerbating its financial challenges.”
The projected financial landscape underscores the need for strategic planning. As the 2025 fiscal year approaches, experts suggest that balancing expenditure with sustainable revenue generation will be crucial to maintaining fiscal stability and addressing the country’s economic and social priorities.