Minimum Wage: Why Nigerian Workers Can’t Achieve 2019 Living Standards

In the span of five years from 2019 to 2024, Nigeria has witnessed an alarming surge in inflation, skyrocketing to a staggering 700 percent. The country’s inflation trajectory has been pronounced, with the average rate at 11.4 percent in 2019, escalating to over 33.69 percent by April 2024. This dramatic increase has put immense pressure on the purchasing power of Nigerians, especially those reliant on the minimum wage.

The minimum wage was N30,000 In 2019 and to restore its purchasing power to the 2019 levels, it would need to get to N210,000, reflecting the 700 per cent inflation surge. However, the Nigeria Labour Union is pushing for an even higher minimum wage, demanding a staggering N494,000. The feasibility of such demands raises pertinent questions about the government’s financial capacity and the broader economic implications.

The removal of fuel subsidies purportedly saved the federal government approximately N1.45 trillion between June and September, as revealed by FAAC allocation documents. This windfall, projected to reach around N6 trillion by the end of May, was intended to bridge infrastructure gaps and bolster social services. These savings were highlighted in documents from the Nigeria Governors’ Forum (NGF) and the National Bureau of Statistics, (NBS) showing that the funds remitted monthly to the Non-Oil Revenue (Savings) account of the government were N696.93 billion in June, N389.7 billion in July, N71 billion in August, and N289 billion in September.

Subsidy removal is intended to bridge the infrastructure gap and invest in social services such as health and education. With the federal civil service strength of 720,000, Lagos State having a little over 100,000, and Rivers State with 57,000, Nigeria’s federal and state civil service is more than 1.7 million strong. This figure excludes the nearly four million local government employees from the 774 local governments dependent on FAAC.

An economist and former Vice-Chancellor of the University of Uyo, Prof Akpan Ekpo, estimates that about 10 to 15 per cent of Nigeria’s working population are civil servants. This would constitute between 8 and 12 million of Nigeria’s 85 million workforce, excluding the military and the police. InsideBusinessNG reckons that with a civil service strength of at least 4 million, a minimum wage increase to N210,000 would consume almost all of the federal government’s savings from subsidy removal. On the other hand, a national minimum wage of N494,000 would vitiate the purpose of subsidy removal and plunge the country deep into debt, which would be grossly unsustainable. Essentially, such a policy would defeat the entire purpose of subsidy removal.

Furthermore, a significant increase in the minimum wage would strain small and medium-scale enterprises (SMEs), which would invariably suffer the pressure of meeting wage demands. Nigeria’s civil service makes up a small percentage of the country’s entire labour force. Besides, economists posit that a minimum wage increase at such a level would plunge the economy into hyperinflation. Nigeria’s current year-on-year inflation rate was 33.69 percent as of April 2024.

Commenting on the minimum wage for the labour force, the chief executive of Anthill Concepts Limited, Emeka Okongwu, noted that the concept of minimum wage is archaic and should be jettisoned. He argued that Nigerians should focus on a living wage with the government, stressing that information and accurate data are crucial to getting a proper and acceptable living wage. He highlighted issues to consider including what the government can afford, the prevailing rate of inflation, access to healthcare and education, potable water, transportation, and sanitation. He suggested subsidies for these services by the government.

“When all the stakeholders come to the table and reach a mutual understanding, the process will proceed smoothly, and everyone will be satisfied. Then there will be a cooling of inflation,” he said.

Moses Izah, a director in the Nigerian Civil Service, agreed, noting that a living wage is the minimum income necessary for a worker to meet their basic needs, including food, shelter, clothing, healthcare, and other essential expenses, while also allowing for some degree of financial security and dignity. Unlike the minimum wage, which is often set by legislation and may not adequately cover the cost of living, a living wage is calculated based on the expenses required to sustain a decent standard of living in a particular region or country.

Izah stressed that Nigeria, paying its labour force a living wage is not only a moral imperative but also a practical necessity. Nigeria contends with high levels of poverty, with a significant portion of the population living below the poverty line. “Paying a living wage to workers would help alleviate poverty by providing them the means to meet their basic needs and improve their quality of life. By lifting workers out of poverty, Nigeria can create a more inclusive and equitable society,” he noted.

Professor Tayo Bello, a dean at Adeleke University, stated that individuals deserve to be treated with dignity and respect, including fair compensation for their labour. He said paying a living wage acknowledges the inherent value of workers and ensures that they can maintain their dignity by providing for themselves and their families without undue hardship or deprivation. Bello continued, “Inadequate wages can lead to social unrest, labour strikes, and protests as workers demand better compensation and improved working conditions. By paying a living wage, Nigeria can promote social stability and harmony and foster a sense of social justice and fairness.

“Paying a living wage injects money directly into the economy, as workers are more likely to spend their earnings on goods and services, thereby stimulating demand and driving economic growth. This increased consumer spending can benefit businesses, create jobs, and contribute to overall economic prosperity,” he said. He added that fair compensation motivates workers to perform their jobs more effectively and efficiently, leading to increased productivity and higher-quality output. “By investing in its labour force through living wages, Nigeria can enhance the competitiveness of its industries and drive sustainable economic development.”

The chief executive of the Center for the Promotion of Private Enterprise, Muda Yusuf, stated that policymakers must consider the cost of living in various parts of the country to come up with an acceptable figure. He noted that N100,000 in an economy like Nigeria’s can hardly cater to the needs of a family, considering food, shelter, clothes, water, sanitation, and transportation, to name a few. He also cautioned that the government cannot pay what would be acceptable to all.

Yusuf stressed that the government at all three tiers has bloated staff, which has become a major challenge to its capacity to pay acceptable wages. Commenting on inflation, Yusuf said there is a need for empirical analysis by policymakers. He noted that there have been increases in salaries and wages since the removal of fuel subsidies, especially in the private sector, and, that has not seriously impacted inflation. “What is good for the goose is good for the gander. I don’t think increasing wages would impact inflation seriously,” he said.

A financial economist at Auchi Polytechnic, Zakari Mohammed, contends that Nigerians will benefit from a decent living wage only when the country improves productivity. “Otherwise, much of the money meant to improve the living standards of the people will be used to enrich the citizens of the countries we import from. Such benefits would only be short-term for our people,” he stated.

The push for a higher minimum wage in Nigeria must be balanced against the country’s economic realities. While the removal of fuel subsidies has provided some financial relief, the inflationary environment has eroded the purchasing power of workers. A shift from the minimum wage to a living wage model might address some of these challenges by ensuring that wages are aligned with the actual cost of living. However, such changes must be accompanied by improvements in productivity, efficient use of resources, and strategic economic policies to avoid further financial instability and hyperinflation. By adopting a comprehensive and realistic approach, Nigeria can move towards a more equitable and sustainable economic future.