By: Joshua Fagbemi
Conversations about the living conditions of Nigerians have intensified since the removal of the fuel subsidy. The economic hardship that followed is exacerbated by the consistent devaluation of the naira, inflation, increasing taxes and tariffs, and food insecurity, all of which submerge millions of Nigerians into extreme and multidimensional poverty. Recent calls for an increase in the minimum wage have portrayed it as a panacea to the pervasive economic hardship in the country. After months of industrial actions and long-hours meetings, Labour conceded to N70,000, a 133 percent increase from the current N30,000 approved in April 2019.
An average Nigerian believes the increase in the national minimum wage would increase their purchasing power, but considering the value of the naira against the dollar ranging between N1,511 and N1,627 to $1 over the past one month coupled with the inflation rate at 34.19%, it is necessary to ponder if the new minimum wage can make an average Nigerian better-off.
Firstly, a comparative look at the dollar vis-a-vis the Nigeria minimum wage yearly shows that the 2019 minimum wage (N30,000) equals $88, 2020 – $79, 2021 – $63, 2022 – $61, 2023 – $65 and newly approved N70,000 at $45.
To an effect resulting from the declining naira value indicates that the newly approved minimum wage is about $20 less than N30,000 of January, 2023. Also, it points out that an average Nigerian with the N70,000 minimum wage will still live below that of January, 2023.
For a country with enormous importation in 2023 and beyond (even though Q1 2024 recorded a trade surplus of N6.5 trillion), N70,000 as minimum wage is a two-step backwards.
Practically, a rise in wages and salaries has a parallel effect on inflation, leading to the rise in price of consumable goods. It’s like a train movement from the increase in the minimum wage to high production costs and a hike in prices of goods and services. With the existing inflationary rate ravaging the country which has made living unbearable for millions of Nigerians, it promises to scale up in the next set of months. For a nation currently experiencing increased inflation over the past 20 months, a minimum wage increase that further adds to the damage is not a solution measure.
Also, the new minimum wage calls for the need to be concerned of states’ adherence to this policy. Perhaps we should also consider if they can afford to pay this fee. A report by BudgIT Nigeria on October 17, 2023 revealed that about 15 states are yet to implement the N30,000 minimum wage approved in 2019. Recent reactions from state governors on the minimum wage based on each state’s capacity further raises doubt. They (state governors) are of the opinion that paying the minimum wage is tantamount to allocating states’ entire resources to salaries, leaving no resources for other projects which leads to increased debt. In the same post by BudgIT Nigeria, the total debt of all states between 2018 – 2023 from N4.97trn increased by 45.89%. With these propositions, the total compliance of all states is not guaranteed.
As much as there is doubt about State governors meeting up to the minimum wage as a result of fiscal limitations, the chances of private organizations sticking to this new wage is also slim. Large percentage of private organizations seem to act out of interest in respect to minimum wage. They tend to make excuses on running into loss or lay-off workers after an increase in salary. The Federal Government might have increased the minimum wage which will not be applicable in a large part of the country taking stride from past occurrences.
Realistically, minimum wage in Nigeria implies that only a part of the population are beneficiaries ranging from workers under the Federal Government to states and few private organizations that comply. Amidst this development, inflation, which is a resulting effect of increase in minimum wage, hits on the entire population. When it becomes unbearable for an average Nigerian who is or not a beneficiary of the minimum wage, he falls below the poverty line.
From varying illustrations, the new minimum wage does not make an average Nigerian better-off. In fact, it holds the power to make him worse off than previous months. That the N70,000 minimum wage does not even reflect the true worth of the current naira value which has depressively fallen in the Global market. Likewise, the N70,000 will only be enjoyed by a few percent of the population while others will be left to suffer from the resulting inflationary effect and possibly unemployment.
Policies such as price regulation would have been an effective measure to combat the inflationary figures. With much liberty placed on sellers, companies and industries to sell at independent prices, increased inflation is inevitable. In a country like Nigeria, a new minimum wage is like a time bomb ticking to escalate. It doesn’t solve the economic crisis but only adds to the spoils.
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