As we approach the budgeting season for 2026, the dreaded question will soon be asked:
“What 2026 salary increase can we use for the Nigeria budget?”
Implementing a salary increase that is fair to all stakeholders in Nigeria has been a significant challenge in recent years. The primary reason has been the persistently high inflation rate. In 2024, the average inflation was 33.2%, and we forecast an average of 21.06% for 2025.
Clearly, most companies we not able to match inflation with equivalent salary increases. In response, we previously recommended that employers consider introducing an Inflation Allowance to help mitigate the impact on employees. (You can view that article by clicking here.)
Considering Real Salary Growth
In addition to inflation, it’s important to factor in real salary increases. Employees have experienced negative real wage growth in both 2024 and 2025. Unfortunately, we are only forecasting 3.9% GDP growth for 2026, which suggests limited room for aggressive salary increases without impacting company profitability.
Considering Real Salary Growth
There is cautious optimism that 2026 may be more manageable. The graph below illustrates historical inflation trends alongside our forecast for 2026:
- Average inflation forecast for 2026: 16.05%
- Expected inflation by end of 2026: 14.5%
While inflation in Nigeria remains difficult to predict, we are confident it will continue to decline throughout 2026. This view is supported by the Monetary Policy Committee (MPC), which stated at its 23 September meeting:
“Staff projections suggest a sustained disinflation over the coming months, driven by the lagged effects of previous rate hikes, continued stability in the foreign exchange market, and a decline in the price of PMS.”
Recommendation
Based on our analysis of inflation trends, economic growth, and employee welfare, we recommend a salary increase of 16.5% for 2026. This figure aims to balance affordability for employers with the need to restore purchasing power for employees.
We recently formulated our preliminary salary forecast for Ghana – another country which presented immense problems over the last two years – you can read that article by clicking here.
Ready to Finalise Your 2026 Budget?
Need assistance with your 2026 Nigeria payroll and budget planning? Contact us today to discuss how to implement a fair and affordable salary increase strategy.
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