2016 was not a stellar year for the economy in Nigeria. Estimates from the International Monetary Fund indicate negative GDP growth of -16%, while inflation increased from 9% in 2015 to an estimated 15.4% by the end of last year.
The Naira devaluated against the US dollar by about 58% in August, closing the year at about 315 Naira per US dollar.
The outlook for 2017 forecasts inflation at about 17% and essentially zero economic growth, while global oil prices continue to be pressured.
What does this mean for Employers? What about Salaries?
Birches Group conducted a Pulse Survey of Nigerian employers in October, 2016, to ascertain if the market was reacting to the devaluation with salary actions. We found little evidence of a response in the market. One employer implemented an extra pay increase, and a few said they were considering special measures in the the future.
Not one employer has adopted hard currency salaries as an alternative to the local currency.
During times of economic volatility, we recommend employers make use of a “Special Measures” Policy to guide their actions. Such an approach often improves the timeliness of the employer response during a crisis. It is interesting to note, however, that the currency in Nigeria has been relatively stable since August, and inflation, while high by global standards, has also been steady. Are such conditions worthy of special measures treatment? We don’t think so, and the Pulse Survey results confirm this:
The situation in Nigeria continues to be volatile. Some experts believe the currency is still being artificially held at a level which could be too low, which may result in another currency devaluation in 2017. Employers are advised to follow these developments closely, and of course, refer to market surveys on a current basis to ensure competitive wage increases are implemented while maintaining the desired strategic position in the market.
Our Trends™ projection for Nigeria forecasts market movement at the end of 2017 at 5.7% for professional roles and 6.8% for support staff. Employers can use these to help budget for salary movement during 2017.
Birches Group conducts both multi-sector and NGO-specific surveys in Nigeria. Both surveys are updated three times a year, in April, July and October. We welcome new subscribers to our surveys in Nigeria and elsewhere across the developing world.