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Nigeria’s Minimum Wage: A False Promise That Keeps Workers in Poverty

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Sulaimon Popoola

The labor movement in Nigeria has made wages their primary focus, seeking an upward review of the N30,000 national minimum wage in response to the increasing cost of living.

In 1974, the Nigerian government heeded the Udoji Commission’s recommendations and boosted public sector workers’ wages, but private sector employees largely missed out. It took until 1981 for Nigeria to introduce its first minimum wage law, which excluded seasonal workers and those employed in enterprises with fewer than 50 workers. The law aimed to guarantee a minimum standard of living for full-time workers across the country, but its scope was still limited compared to the needs of many Nigerians.

The Nigerian Labour Congress (NLC), led by Hassan Sunmonu, relentlessly pushed for a minimum wage as a necessary step to improve workers’ well-being. The NLC’s persistent demands and threats of strikes put pressure on the newly elected President Shehu Shagari to act. With the specter of widespread labor unrest hanging over the Shagari administration, the government eventually conceded and established a minimum wage to avoid a nationwide strike that would have been detrimental to the country’s stability and economic development.

The initial minimum wage in Nigeria, set at 125 naira per month in 1981, was roughly equivalent to US$204 at the time. However, adjusting for inflation and currency fluctuations, that same minimum wage would be worth about 265,000 naira or US$204 today, representing a massive eightfold decrease in purchasing power over the past four decades.

The minimum wage in Nigeria has been revised several times, but these increases have failed to match the steadily increasing cost of living. In 1991, the minimum wage was doubled to 250 naira, then increased to 5,500 naira in 2000 and 18,900 naira in 2011. However, even the current 30,000 naira, introduced in 2019, remains significantly below the minimum wage’s 1981 purchasing power.

This trend of inadequate wage increases highlights the plight of Nigerian workers, many of whom must juggle multiple jobs or rely on additional sources of income to survive.

The Nigerian labor market is essentially bifurcated, with public-sector workers experiencing the most direct impact of minimum wage increases. The government, as an employer, must adhere to the minimum wage law, which means that public-sector workers, nearly all of whom are unionized, are guaranteed to receive wage hikes.

By contrast, private-sector workers, who are less likely to be unionized, are more susceptible to wage stagnation and underemployment, as their employers are less constrained by the minimum wage law and often prioritize profit over workers’ welfare.

Despite efforts to establish a minimum wage or the demand for it, the reality is that the majority of Nigerian workers are not directly impacted by changes in the wage floor. According to data, a staggering 92.3% of working age individuals are employed in the informal sector, engaged in agriculture, trade, or various service-based professions. These workers are not covered by the minimum wage law, rendering their livelihoods even more precarious and dependent on the volatile market conditions. Consequently, for most Nigerians, the existence of a minimum wage is more symbolic than substantive.

Despite the positive intent of the minimum wage, its impact is limited to a mere 8% of the Nigerian workforce. Out of a population of 200 million, only 16 million Nigerians are fortunate enough to work in the public or high-end private sectors where the minimum wage is respected.

For skilled workers in major corporations, changes in the minimum wage often have little to no direct impact. Their salaries are usually set above the minimum wage based on the specific expertise and experience they bring to the company, making them largely indifferent to minimum wage hikes. However, to avoid pay compression and maintain internal wage equity, corporations may sometimes make upward adjustments to these skilled workers’ wages after minimum wage increases are implemented.

The minimum wage often directly impacts workers in small and medium-sized businesses, which make up a significant portion of the 16 million Nigerians covered by the wage law. Notably, many of these workers, especially those employed by family-owned companies, may still find themselves earning less than the minimum wage, owing to the difficulties of enforcing labor laws in such establishments.

The enforcement of minimum wage laws in Nigeria is lax at best, with many private sector workers, particularly in services, hospitality, small private clinics, and non-profit organizations, receiving wages below the mandated floor. These workers, who are often unrepresented by unions and lack the bargaining power to demand fair compensation, continue to be exploited by their employers, who are not held accountable for flouting the wage laws.

Despite the well-intended purpose of the minimum wage, it fails to provide a meaningful safeguard against poverty for many Nigerian workers. When assessed using a more comprehensive measure of poverty that considers income as well as access to vital services like health, education, sanitation, drinking water, electricity, and housing, the minimum wage is clearly inadequate.

Alarmingly, nearly half of the population was already deemed multidimensionally poor in 2021, and the situation has likely deteriorated significantly since then, as a result of soaring inflation and the removal of fuel subsidies.

The current minimum wage in Nigeria is simply insufficient to lift workers out of multidimensional poverty. If increased, a monthly wage of N150,000 may appear reasonable when viewed through the narrow lens of income, but when considering the full spectrum of basic necessities and services needed for a decent standard of living, it falls far short of what is required.

Nigeria’s minimum wage structure, which does not fully reflect the rising cost of living or incorporate the critical importance of social services, has only exacerbated the country’s poverty epidemic. Over the past eight years, poverty has been on a steady upward trajectory, and this trend is expected to persist as long as the minimum wage fails to address the multifaceted issues contributing to poverty.

To meaningfully combat poverty in Nigeria, a comprehensive overhaul of the minimum wage system is necessary, one that not only considers income but also guarantees workers access to vital services like health, education, and housing.

The failure to adjust the minimum wage for inflation is another factor contributing to the ineffectiveness of the policy in alleviating poverty in Nigeria. As the cost of living increases at a faster rate than wage growth, the real purchasing power of workers has been steadily eroded, meaning that their wages can no longer afford the same level of goods and services as they once did. Since 2008, inflation has more than doubled, from 11% to 25%, while the minimum wage has remained stagnant.

Another key to overcoming poverty and ensuring economic success in the global economy lies in equipping Nigerians with the skills and capabilities needed for future-oriented industries. These cutting-edge fields, including information and communication technologies, artificial intelligence, data analytics, biotechnology, bioinformatics, industrial design, 3D printing, digital imaging, design and animation, will define the future of work and will require a highly skilled workforce. By investing in the development of these skills, Nigeria can empower its people to succeed in the fast-changing global economy and enhance its own economic competitiveness.

Nigeria’s struggle to equip its workforce with 21st century skills is compounded by government inefficiencies. The shortage of skilled labor highlights not only the need for a more robust educational system, but also the government’s failure to align educational outcomes with labor market demands. The ineffective coordination between educational institutions and employers has resulted in a skills gap that hinders both individual economic mobility and national productivity.

In conclusion, while the minimum wage may appear to be a benevolent policy, its failure to adjust for inflation, its inability to protect workers from poverty, and its weak enforcement have combined to undermine its purpose. As Nigeria’s labor market continues to evolve, it is essential for the government to prioritize skill development, address inefficiencies, and ensure that workers can live with dignity. Until then, the minimum wage will remain a false promise that traps workers in a cycle of poverty and hardship.

Culled from Takeitbackglobal.com

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