Even with the potential increase in the minimum wage of Nigerian workers, the economic challenges that have plagued the country since the era of former President Muhammadu Buhari may not be resolved in the near future.
A recent nationwide survey conducted by African Polling Institute (API) revealed that 84 per cent of respondents expressed sadness about the state of affairs in the country. The dialogue on the minimum wage must therefore be both pragmatic and inclusive to minimise unexpected consequences, while pressing forward on economic issues.
On the 3rd of June, Nigerians woke up to deserted roads and barricades, with flags of labour unions flying and members chanting solidarity songs. The Nigeria Labour Congress (NLC), the umbrella organisation of workers, had embarked on an industrial action to demand an increase in their minimum wage. The development was not completely surprising as the action took place after negotiations with the government broke down. The exercise disrupted economic activities, including the shutdown of all domestic and international flights, which resulted in thousands passengers being stranded across the country. The striking workers shut down the national grid for more than twenty-four hours, throwing the country into utter darkness and without electricity. Media reports indicate an estimated loss of N148.8 billion in just one day, while cargo agents alone insist they lost N7 billion due to the strike action.
Minimum Wage Versus Living Wage
The debate is whether Nigerian workers may get the government to pay them what can serve beyond the minimum as a living wage. The unions currently demand that their wages should be increased from N30,000 ($20) to N250,000 ($168) a month, which is about a 750 per cent increase. The government has already offered to pay at least N60,000 and later capped it at N62,000. The last time the minimum wage of workers was reviewed was in 2019. It was raised to N30,000 per month, equivalent to $83 as at that time. As part of the ongoing negotiations, while the Federal Government has conceded to paying workers N62,000, however the state governments and governors have opposed the offer, insisting it is too high and unsustainable for them to take on.
At the current exchange rate, $83 equals N124,000. Under the current economic realities in Nigeria, one should expect such an amount as the minimum wage. The removal of subsidies on fuel and electricity has increased the cost of living. Continuing insecurity, recurrent clashes between farmers and herders, banditry and kidnapping, have all made farmlands inaccessible. As a result, food inflation has risen to an all-time high figure.
The reason why workers are not paid well in Nigeria is not because of the lack of resources. The country is still Africa's second-largest oil producer, only next to Libya. With the removal of oil subsidies, government revenue has improved. Yet, most of the resources are lavished daily in funding the extravagant lifestyle of politicians and government appointees.
Government Profligacy Fuelling Discontent Among Workers
The reason why workers are not paid well in Nigeria is not because of the lack of resources. The country is still Africa's second-largest oil producer, only next to Libya. With the removal of oil subsidies, government revenue has improved. Yet, most of the resources are lavished daily in funding the extravagant lifestyle of politicians and government appointees. For instance, members of the Nigerian parliament work full-time and earn one of the highest salaries in the world.
Despite the harsh living conditions under which a majority of Nigerians are living, the 2024 budget allocated almost N10 billion ($6.6 million) for the domestic and international travels of the President and Vice President, while another N14 billion ($9.3 million) was allocated in the supplementary budget 2023 for the renovation of their official quarters. Nigeria's federal Constitution allows revenue from crude oil sales, the country's primary foreign exchange earner, to be collected centrally and distributed among federating units, according to an agreed formula. While many states like Lagos and Rivers may be able to pay improved wages to their workers, others like Imo and Kogi have been struggling to pay even what was agreed since 2019.
Downsizing in the Private Sector Will Increase Unemployment and Deepen Poverty
According to the International Labour Organization (ILO), private sector organisations create ninety per cent of the jobs in developing countries. In Nigeria, for instance, out of the estimated 60 million workers, only about four million belong to organised unions. This means that the remaining 56 million probably work with private sector organisations. As negotiations continue, the Nigeria Employers' Consultative Association (NECA) has urged the panel to focus more on job creation and job security, as a very high minimum wage may lead to the collapse of businesses. In the likely case of adopting an improved minimum wage, it will become a law applicable to every employer. This means that private sector operators must comply, including small and medium-scale enterprises.
Nigeria's apex bank increased the interest rate to 24.75 per cent, further accelerating inflation in the country. With a likely increment in their wage bill, these businesses will likely make decisions that will enable them to remain in business, including the retrenchment of staff in their payroll. This will increase unemployment and deepen poverty, creating more desperation and discontent in the polity.
After surviving the COVID-19 pandemic, many of these small firms have been limping to survive. Their situation worsened with the rising cost of doing business due to the removal of subsidies from fuel and electricity, alongside a volatile exchange rate regime. Nigeria's apex bank increased the interest rate to 24.75 per cent, further accelerating inflation in the country. With a likely increment in their wage bill, these businesses will likely make decisions that will enable them to remain in business, including the retrenchment of staff in their payroll. This will increase unemployment and deepen poverty, creating more desperation and discontent in the polity.
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End of Economic Woes Under Tinubu Not Yet In Sight
Even with the potential increase in the minimum wage of Nigerian workers, the economic challenges that have plagued the country since the era of former President Muhammadu Buhari may not be resolved in the near future. Under the current leadership of President Bola Tinubu, the situation has worsened, with a series of economic policies that have had harsher realities on ordinary people. There are potent fears of inflation and massive job cuts in the horizon. The deteriorating security and high cost of basic commodities, including food, have left a majority of citizens alarmed.
Between 2020 and 2022, 21.3 per cent of Nigeria's population experienced hunger. According to data from the World Food Program (WFP), about 26.5 million people across Nigeria are projected to face acute hunger in 2024. A recent nationwide survey conducted by African Polling Institute (API) revealed that 84 per cent of respondents expressed sadness about the state of affairs in the country. The dialogue on the minimum wage must therefore be both pragmatic and inclusive to minimise unexpected consequences, while pressing forward on economic issues.
Uche Igwe is senior political economy analyst and visiting fellow at Firoz Lalji Institute for Africa at the London School of Economics and Political Science(LSE). He can be reached at u.igwe@lse.ac.uk
