Workers’ pay increase won’t trigger inflation – Economists

Economists have stated that the Federal Government’s recent decision to increase pay for some federal workers will not trigger inflation, citing the relatively low wage levels in the public sector.

The government, through the Head of Service, announced that the pay rise affects workers under the Consolidated Public Service Salary Structure and the Consolidated Research and Allied Institutions Salary Structure, indicating a broad but still limited coverage within the public service.

Director of the Centre for Promotion of Private Enterprise, Dr Muda Yusuf, said the scale of the increase is too small to generate inflationary pressure.

“I don’t believe that this is significant enough to trigger inflationary pressure. Don’t forget the salary levels or the quantum of salaries, and the public service itself is not that fantastic. So, this increase we are talking about, first, I don’t think there are any major areas that it can significantly impact,” Yusuf said.

He added that inflation is typically driven by a substantial rise in money supply, which this adjustment does not represent.

“Second, the totality of the amount involved, I don’t think, is that significant. Because when we are talking about inflation, we are looking at something that can build a critical mass in terms of money supply pressure. Those are the things that can trigger inflation,” Yusuf noted.

Yusuf further stressed that the pay rise is limited in scope and does not cover the entire public workforce.

“But for this, I don’t think it can have any significance. Because when you compare that to it, it’s not something that is nationwide, for instance. It’s not about salaries for all civil servants. It’s only for a segment of the civil service,” Yusuf said.

He concluded that the adjustment lacks the financial weight to influence overall price levels.

“There cannot be any significant inflationary effects arising from this. Because the amounts we are talking about cannot provide that critical mass to move the needle as far as money supply is concerned,” the CPPE chief explained.

Also speaking, Chief Executive Officer of Economic Associates, Dr Ayo Teriba, said the increase may instead help ease poverty among public workers, given their existing low wages.

“It may not be a problem because public sector wages in Nigeria are too poor,” the economist observed. “They are too poor. So don’t even mention inflation. These are poverty pills already. So, it’s more likely to relieve poverty than cause inflation.”

However, Teriba cautioned against making permanent wage adjustments without clear justification, urging the government to clearly communicate the rationale behind such decisions.

“The government should not be making permanent changes. You should make no permanent changes because of a temporary problem,” Teriba said.

He warned that if the adjustment is linked to external shocks such as geopolitical tensions, it should be temporary.

“So, for this Iran-U.S. war, any response to it should be temporary. It should be dated. I’m giving you one month’s relief. I’m giving you three months’ relief. I’m giving you six months’ relief. You should not give open-ended relief,” Teriba said.

He also argued that if the intention is to improve workers’ welfare, the policy should be comprehensive and clearly framed: “If it is just to make sure that workers, you know, that their take-home pay can take them home, I will support it. But be clear why you are giving them relief.”

He noted that any wage policy should be applied broadly across sectors and anchored on transparent economic reasoning.