BusinessDay

Does Nigeria’s economic situation call for minimum wage increase? (I)

The current economic situation in Nigeria has increased hardship and suffering among Nigerians. The unemployment rate is rising as companies and organisations are downsizing due to the high cost of operation. Inflation is on the rise, thereby increasing the poverty rate in the country.

Food inflation in Nigeria climbed by 15 percent from April 2021 to March 2022, putting upward pressure on the cost of living for salaried workers whose wages have not increased in nearly three years.

This rise in food prices can be attributed to several factors, including the insecurity in the food-producing areas in the country, poor transportation and storage facilities, and the removal of some food items from the list of imports eligible for foreign exchange through the Central Bank of Nigeria’s official windows, the depreciation of the naira, which led to increases in the prices of imported food, and border closure in 2019 that resulted in steep declines in food imports.

Furthermore, the Russian-Ukraine war also contributed to the macroeconomic problem in a country like ours that is highly dependent on imported products to sustain its meagre agricultural production.

Still, importation becomes difficult with the current exchange rate of N599 to a dollar, coupled with the crises faced in the aviation industry as a result of scarcity of aviation fuel.

Given the country’s growing prices of goods and services, unemployment, and insecurity, among others, is it then not expedient to increase the workers’ minimum wage?

Of course, it is not out of context to discuss whether or not an increase in minimum wage will boost the economy. To be precise, raising the minimum wage of workers has been long overdue. With the current economic situation, it is highly disheartening that some states are still being persuaded to pay workers the national minimum wage.

In January 2022, the president of the Nigeria Labour Congress, Ayuba Wabba, stated that seven states (Abia, Benue, Cross River, Imo, Taraba, and Zamfara) are yet to implement the N30,000 minimum wage signed into law by the federal government in 2019.

This is very disappointing to still hear that some states in the country are still not complying with the directives of the Federal Government, while there exists the mismanagement of resources in all sectors of the economy, to the detriment of workers.

In a report by Picodi.com reports and analytics on minimum wage around the world in 2022, they checked changes in the minimum wage in 64 countries across the world. Of these 64 countries, 10 countries’ minimum wage has not changed from the previous year’s wage. Nigeria is among the 10 countries whose minimum wage remains static for over four years.

The report also made a list of basic food (bread, cheese, milk, rice, egg, meats, fruits, and vegetables) required to meet the minimum nutrients by an average adult. The cost of this food as of January 2022 amounted to N40,980. The report ranked Nigeria as the 64th country when the minimum wage was compared to the price of food. It shows that a minimum wage of N30,000 is not enough to buy basic food for an average adult.

The fact that Nigerian workers have not organised food riots or mass protests in response to unacceptably high food costs suggests that they have discovered means to cope with food inflation.

Many wage earners have had to reduce the quality of their food purchases and replace household food basket items with more affordable options.

The overall result of all of these adjustments will be an increase in the consumption of less nutritious foods.

Salary earners are no longer able to save since they do not have enough money to live on. Those who have been diligent in saving have seen their savings eroded as the cost of food continues to rise.

Read also: Nigerians forgo staple food items as inflation bites

Nigerians get poorer and more unhealthy as food becomes more expensive. Also, the fact that the expense of transportation, energy, cooking fuel, and rent is also growing adds to the burden. School fees and textbook prices are also increasing.

Amidst all these, the workers’ salary remains static over the years, making it difficult for an average worker to eat three square meals in a day.

Workers on the minimum wage have been the hardest hurt. It is no surprise that poverty has been rising in Nigeria. According to a report, about 95 million Nigerians will live in poverty in 2022.

The report from the National Bureau of Statistics shows that 4 out of 10 Nigerians are living below the national poverty line.

With the current exchange rate of N595 per dollar, the Nigeria minimum wage amounts to about $1.68 per day, which is less than the international poverty line of $1.90 per day.

This implies that the Federal Government has been unjust in refusing to approve the N56,000 minimum wage proposed by the labour union.

A consideration of the total cost of living today shows that N56,000 is still highly insufficient for a family of four.

Busayo Aderounmu is an economist and researcher.

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