“Even as the inflation rate saw a slight decrease from 34.19 percent to 33.40 percent, largely due to a reduction in food inflation from 40.87 percent to 39.53 percent, the impact on the cost of living remains severe.”
For millions of Nigerians, the announcement of a new minimum wage was initially met with optimism. The previous wage of ₦30,000 had long been inadequate, barely covering the rising costs of basic necessities.
As food prices soared, transportation costs surged, and utility bills climbed higher, ₦30,000 could no longer stretch to meet the needs of most households. The government’s decision to raise the minimum wage to ₦70,000 seemed like a long-awaited lifeline, promising to ease the financial burden on workers and their families.
On July 18th, 2024, President Bola Tinubu approved the increase to ₦70,000 and committed to reviewing the national minimum wage law every three years, a move designed to offer much-needed relief.
However, an inflation adjustment by BusinessDay revealed a harsh reality: the real value of the new wage, after accounting for inflation, is only ₦52,473.76—a staggering 25.04 percent less than its nominal value.
This adjustment was made by considering the current inflation rate of 33.40 percent, according to NBS. The calculation is straightforward: you divide the original amount, ₦70,000, by 1 plus the inflation rate, which is 1.334.
This gives you approximately ₦52,473.76. This figure reflects what the ₦70,000 wage is actually worth in today’s economy, stripped of its nominal gains by the relentless rise in prices.
Even as the inflation rate saw a slight decrease from 34.19 percent to 33.40 percent, largely due to a reduction in food inflation from 40.87 percent to 39.53 percent, the impact on the cost of living remains severe.
Essential goods are still out of reach for many Nigerians. According to a recent survey by BusinessDay, prices in major Lagos markets have surged alarmingly: a bag of rice now costs ₦80,000, beans remain at ₦140,000, and staples like yam and bread are priced at ₦5,500 and ₦1,700, respectively.
Protein sources have also seen sharp increases, with a crate of eggs now costing ₦5,000, a kilo of chicken at ₦5,500, and turkey at ₦8,000. Fish prices have spiked as well, with Sharwa fish at ₦2,500 per kilo and titus fish at ₦5,500. Other staples are similarly affected, with garri priced at ₦3,500 per paint, palm oil at ₦5,500 for 5 litres, and groundnut oil at ₦9,000 for 5 litres.
Inflation acts as an invisible thief, quietly eroding the purchasing power of workers. While the government’s wage increase to ₦70,000 was meant to alleviate financial stress, the persistent inflation rate means that this amount does not stretch as far as intended.
The real value of ₦70,000 is closer to ₦52,473.76, meaning that the increase has been largely negated by the rising cost of living. Workers who were already struggling now find that, despite the pay rise, their financial situation has scarcely improved.
To put this into perspective, consider what ₦52,473.76 can actually buy in today’s Nigeria. Despite food inflation dropping slightly to 39.53 percent from 40.87 percent, the cost of essentials remains high, partly due to some sellers still having old stock.
For an average Nigerian family of five, as reported by the NBS in 2022, ₦52,473.76 is barely enough to cover food expenses for a month. With food inflation at 33.95 percent, approximately₦39,335.65 would be spent on food alone, leaving only about₦13,138.11 for rent, transportation, healthcare, or school fees.
This forces families to make tough choices between cutting back on meals, delaying rent payments, or forgoing necessary medications.
In this context, the situation for female-headed households, which make up approximately 18.8 percent of all households in Nigeria—with a higher share in urban areas (21.4 percent) compared to rural areas (17.1 percent), according to NBS—is particularly challenging.
Aisha, a single mother of three living in Lagos, represents this struggle. Initially hopeful about the wage increase to ₦70,000, Aisha, a cleaner earning the minimum wage, found that her financial relief was short-lived as prices continued to rise unabated.
“It feels like we’re going backward,” Aisha laments. “Even when the money comes in, it can’t sustain us for a month considering the cost of food.”
Then there’s Mr Johnson, a retired civil servant living on a pension. Though the wage increase does not directly affect him, the inflation rate does. His pension, already meagre, has lost much of its value.
“I’ve worked hard all my life,” he says, “and now, in my old age, I can’t afford the basics. It’s hard to see the point of all those years of service when the money I get isn’t enough to live on.”
Despite these challenges, Nigerians are known for their resilience. Many have developed coping strategies to manage economic pressures, though these often come at a cost to their quality of life.
One common strategy is cutting back on non-essential spending. Families are reducing the number of meals they eat each day, skipping medical check-ups, and postponing purchases of clothing or household items, as shown by a BusinessDay survey. While these measures help stretch incomes, they also lead to malnutrition, untreated illnesses, and a lower standard of living.
In some cases, Nigerians rely on their extended families, pooling resources where those who are better off help those who are struggling. This family support is a source of strength but also places a heavy burden on those who are asked to help.
The current economic situation highlights the need for more substantial measures to protect the purchasing power of Nigerian workers. While the minimum wage increase was a step in the right direction, it is insufficient on its own. Without effective measures to control inflation, the wage hike does little to improve living standards.
One potential intervention is implementing price controls on essential goods, particularly food. By capping prices, the government could help prevent runaway inflation in these areas. Additionally, subsidies on essential goods could make them more affordable for low-income families.
Most importantly, tackling insecurity that disrupts the supply chain by preventing farmers from working is crucial. Without addressing this issue, any other measures will only provide temporary relief.
The shrinking value of Nigeria’s new minimum wage, after adjusting for inflation, underscores the urgent need for more comprehensive measures to truly enhance the well-being of Nigerians. While the wage increase was a step in the right direction, it is insufficient on its own to improve the lives of Nigerian workers.
The government must take decisive action to control inflation, protect purchasing power, and ensure that the benefits of economic growth reach everyone.
However, there is a silver lining: inflation has begun to drop after nearly two years of persistent increases. Kudos to Cardoso and his team at the CBN for this progress. If the government can sustain and build on the mechanisms that have reduced inflation, Nigerians might finally see a meaningful improvement in their wages.
Moreover, a stable exchange rate would enable manufacturers to secure or import raw materials without passing on additional costs to consumers.
Without consistent and effective policy interventions, the hope that came with the new minimum wage will remain just that—hope, with little chance of becoming reality. It’s time for the government to step up and take the necessary actions to secure a better future for Nigeria’s working population.
Oluwatobi Ojabello, senior economic analyst at BusinessDay, holds a BSc and an MSc in Economics as well as a PhD (in view) in Economics (Covenant, Ota).
