Inflation erodes wages, deepens Nigeria’s real income crisis — CPPE

The Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, has warned that rising inflation is eroding wages and worsening Nigeria’s real income crisis, stressing that salary increases alone are insufficient to improve workers’ welfare. In a policy brief issued on Thursday, Yusuf said labour discourse in Nigeria […]

The Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, has warned that rising inflation is eroding wages and worsening Nigeria’s real income crisis, stressing that salary increases alone are insufficient to improve workers’ welfare.

In a policy brief issued on Thursday, Yusuf said labour discourse in Nigeria has been “largely dominated by wage negotiations,” but argued that this approach is inadequate given persistent inflation and structural economic challenges.

“While wage adjustments are necessary and often justified, they are clearly insufficient as a standalone strategy for improving workers’ welfare,” he said, adding, “In an economy characterised by persistent inflationary pressures, structural bottlenecks, and weak public service delivery, nominal wage increases are frequently eroded within a short period.”

Yusuf noted that inflation—driven largely by food, energy and transportation costs—has significantly weakened real incomes, particularly for low- and middle-income earners.

He stressed that “the central objective of labour welfare policy should be the protection of real incomes, not merely nominal wage growth.”

He identified rising food prices, transport fares and housing costs as “the most immediate threats to workers’ welfare,” calling for structural interventions to address these pressures. “Tackling these cost pressures will deliver more durable welfare gains than periodic wage increases,” he said.

On healthcare, Yusuf said “out-of-pocket healthcare expenditure remains excessively high,” exposing workers to financial risks. He called for expanded health insurance coverage and stricter enforcement of employer-provided schemes, adding that “improved health security is critical not only for welfare but also for productivity.”

He also highlighted concerns over pension insecurity, particularly in the informal sector.

“Labour advocacy should focus on ensuring stronger compliance with pension remittances… and enforcing sanctions against defaulting employers,” he said, noting that “a credible and efficient pension system is essential for long-term welfare sustainability.”

Yusuf warned that “the increasing prevalence of casualisation and contract employment has significantly weakened job security,” leaving many workers with unstable conditions and limited protections.

On energy, he said, “energy costs—covering both electricity tariffs and generator fuel—constitute a major burden on workers and households,” calling for improved power supply and reduced reliance on self-generation.

He further stressed the need for investment in mass transit systems, noting that Nigeria’s dependence on informal transport exposes workers to “high and volatile” commuting costs.

Addressing housing challenges, Yusuf said high rent-to-income ratios are worsening urban poverty and urged reforms to expand affordable housing and improve access to mortgage financing.

He also emphasised the importance of skills development, stating that “sustainable welfare improvements ultimately depend on enhanced earning capacity,” and called for stronger partnerships to boost vocational training and productivity.

Yusuf criticised Nigeria’s weak social protection framework, advocating for unemployment insurance and expanded safety nets. “Effective safety nets are essential to protect workers during economic shocks and periods of vulnerability,” he said.

On taxation, he noted that workers’ welfare depends on net income rather than gross wages and called for reforms to “enhance disposable income while reducing regressive burdens.”

He also proposed institutionalising wage indexation mechanisms such as cost-of-living adjustments, noting that “there is a strong case for inflation-linked wage adjustments and more transparent and predictable wage review frameworks.”

Yusuf urged a shift from a wage-centric to a welfare-centric approach, focusing on reducing living costs and improving access to essential services. 

“A broader and more strategic focus on cost-of-living reduction, social protection, job security, and improved public service delivery will yield more meaningful and sustainable welfare outcomes,” he said.