Economists dismiss inflation fears over FG pay adjustment

By: Amarachi Okonkwo 

Economists have downplayed concerns that the Federal Government’s recent decision to increase pay for a segment of federal workers could trigger inflation, arguing that the adjustment lacks the scale and breadth required to significantly impact price levels.

The government, through the Office of the Head of Service, recently announced a pay rise affecting workers under the

While the move covers a broad category of employees, analysts say it remains limited in scope relative to the size of Nigeria’s overall workforce.

Director of the Centre for the Promotion of Private Enterprise, Muda Yusuf, said the increase is too modest to generate inflationary pressure, particularly given the relatively low wage levels in the public sector.

“I don’t believe that this is significant enough to trigger inflationary pressure,” Yusuf said. “When you consider the quantum of salaries in the public service, the increase is not substantial enough to have any major macroeconomic impact.”

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He explained that inflation is typically driven by a considerable expansion in money supply or aggregate demand conditions he believes are not met by the current wage adjustment.

“When we are talking about inflation, we are looking at developments that can build a critical mass in terms of money supply pressure. The totality of the amount involved here is not significant enough to move the needle,” he added.

Yusuf also noted that the pay rise does not extend across the entire public workforce, further limiting its potential economic impact.

“This is not a nationwide salary adjustment for all civil servants. It applies only to a segment of the workforce, which further reduces the likelihood of any broad-based inflationary effect,” he said.

Similarly, Chief Executive Officer of Economic Associates, Ayo Teriba, argued that the increase could have a more immediate social benefit by alleviating poverty among public sector workers rather than fueling inflation.

“Public sector wages in Nigeria are extremely low. This adjustment is more likely to provide some relief to workers than to create inflationary pressure,” Teriba said.

He described the wage increase as a necessary intervention to improve living conditions, noting that many public workers struggle with real income erosion amid persistently high inflation.

However, Teriba cautioned against institutionalising such wage adjustments without clear economic justification. According to him, policy responses to temporary shocks should themselves be time-bound to avoid long-term fiscal distortions.

“The government should avoid making permanent changes in response to temporary challenges,” he said. “If the adjustment is tied to external shocks such as geopolitical tensions it should be clearly defined as a short-term relief measure.”

He stressed the importance of transparency in policy design, urging the government to clearly articulate the rationale behind the wage increase.

“If the goal is to improve workers’ welfare, then the policy should be comprehensive and well-communicated. Clarity is essential to ensure credibility and effectiveness,” Teriba added.

The economists’ positions come amid ongoing concerns about inflationary pressures in Nigeria, where policymakers have been balancing fiscal interventions with efforts to stabilise prices and support economic recovery.

While the wage increase may offer short-term relief to affected workers, analysts broadly agree that its limited fiscal size and targeted coverage make it unlikely to materially alter inflation dynamics in the near term.