For Nigerian lowest paid worker to purchase, in March 2019, the same amount of goods and services bought in August 2011, the employee would need to earn at least N41,327.88 monthly, BusinessDay calculations have shown.
Nigerians heaved a sigh of relief when President Muhammadu Buhari signed the new National Minimum Wage Bill of N30,000 into law. However, although the N30,000 new minimum wage represents an increase of 67 percent from the previous N18,000, its real value remains lower compared to the N18,000 when the amount was approved in 2011.
As a result, Nigerian workers would not be able to purchase more goods and services today compared to the last time the national wage was hiked, no thanks to inflation that is fast diminishing the value of the workers’ pay and their purchasing power.
In August 2011, the President Goodluck Jonathan-led Federal Government agreed to pay a new minimum wage of N18,000 in nominal terms. At that time, the Consumer Price Index (CPI), which measures the composite changes in the prices of consumer goods and services purchased by households over a period, was 122.3.
If the effect of inflation was taken into consideration by dividing the nominal minimum wage by the CPI for the period and multiplying all by 100, the real income of Nigerian lowest paid worker, as at August 2011, would be N14,717.91.
The amount continued to fall as the nation’s CPI, a measure of inflation rate, sustained its upward trend over the years on a monthly basis.
Eight years after, figures obtained from the National Bureau of Statistics (NBS) show the CPI rose more than double to 280.8 as at March 2019, plunging the worth of Nigeria’s N18,000 minimum wage to N6,410.26 in real terms. But with the recent national wage hike, the inflation-adjusted value of the nation’s new minimum wage was bolstered to N10,683.76.
This shows that to maintain the August 2011 purchasing power despite the impact of high inflation, Nigerian lowest paid employee is expected to earn N41,327.88.
The amount, which indicates the real value of August 2011’s N18,000 in March 2019, was obtained by dividing the previous nominal wage by the corresponding CPI and multiplying all by the current month’s CPI figure.
Similarly, the new N30,000 minimum wage is lower in value when compared to the previous N18,000 in dollar terms as at August 2011.
Official exchange rate data obtained from the Central Bank of Nigeria (CBN) revealed that the average exchange rate of naira to the United States dollar in August 2011 was N150.2/USD, implying N18,000 was equivalent to $119.84.
Nigeria’s currency, however, fell in value against the US dollar in March 2019 as the average exchange rate of naira to the dollar for the month depreciated to N305.92/USD. Going by this, the new minimum wage represents only $98, more than 18 percent lower than employees’ salaries in 2011.
OLUWASEGUN OLAKOYENIKAN
