Nigeria reviews minimum wage as economic pressure mounts
February 13, 2024
With Nigeria's current minimum wage set to expire in April, a federal panel consisting of state governors, trade unionists and private sector and labor leaders is reviewing by how much the minimum wage should increase. Currently, the minimum monthly wage stands at 30,000 naira ($20, €19).
Economic reforms introduced after Nigerian President Bola Tinubu's inauguration nine months ago have left ordinary Nigerians battling to keep their heads above water amid soaring living costs.
"The cost of everything has gone up: food items, rent, school fees, tariffs, water, electricity, transport," says Benson Upah, spokesman for the union platform Nigerian Labour Congress.
Lawan Jafar Tahir, an associate professor of History and Security Studies at Yobe State University, is also not convinced the panel's final outcome will have any effect.
"The problem of federal Nigerian government is the issue of sincerity. The panel may come out with a very good decision, but the problem is implementation," he told DW, citing complications and clashes between the federal and state governments.
"The state government probably cannot afford to pay the minimum wage the federal government approved or agreed with the labor unions, and will be forced to come down to the state level early," Tahir explained.
Tinubu's reforms caused hardship
Tinubu's reforms included the elimination of fuel subsidies and tight currency control of the naira. As a result, fuel prices tripled, and the cost of living spiked as Nigeria's currency slid against the US dollar.
"With the massive devaluation of the naira and the removal of the so-called subsidy, the quality of life for the average Nigerian has gone down considerably," Upah said.
Tinubu's government argued that the policy changes were needed to boost economic investment in Nigeria and save money for state coffers. Analysts broadly agreed that the reforms were necessary but warned against price shocks in the short term.
Soaring inflation
In December, inflation soared by almost 29% and the cost of food by 34%, according to the Nigerian Bureau of Statistics (NBS). Before the reforms, the naira was trading at around 450 to the dollar. In February it was trading at 1,400 to the US dollar, according to the country's central bank.
An immediate result of the weakened naira was the price increase for imported goods.
"Nigeria is a country that is based on consumption economy. Many industries are shutting down. The only source of revenue for the country are taxes and customs and excise duties. The revenue from oil is mortgaged to debt servicing," chartered accountant Geoffrey Okeke told DW.
Analysts like Okeke wonder how Nigeria's economy can grow if it is burdened with guaranteeing a higher minimum wage. Increasing the minimum wage without corresponding increases in productivity could lead to higher costs for businesses, potentially resulting in layoffs or reduced hiring, thereby exacerbating unemployment and further straining the economy.
Worse still, the record inflation, limited access to hard currency and weak financial structure in Nigeria have made foreign companies wary of investing in the country. Long-established firms, like the South African supermarket chain Shoprite, are shutting down some operations in Nigeria.
According to the Nigerian Bureau of Statistics (NBS), foreign direct investment fell from $1.15 billion in the third quarter of 2022 to $654 million in the third quarter of 2023, representing a decline of about 44%.
It makes for grim reading and Lawan Jafar Tahir says the government's economic policies from here on will be geared towards damage control.
"What we are perceiving now the current administration is not making an adequate arrangement for the improvement of the economy. They are talking now about palliatives," he told DW.
More needs to be done to help those in need
Last year, Tinubu announced a $650 million package aimed at cushioning the impact of the country’s biggest economic reforms in decades. The government approved a total of 180 billion naira ($234.55 million) for its 36 states to buy rice and maize to counter food shortages across the country. Mass transit buses and cheap loans for farmers followed. Budgets were allocated to help poor households cope with the rising costs by offsetting the consequences of the high cost of living. Amid all this, Nigeria’s Socio-Economic Rights and Accountability Project (SERAP) accused the Ministry of Humanitarian Affairs and Poverty Alleviation of misusing public money, with funds being transferred to private bank accounts.
Meanwhile, rising prices have caused many working people to fall into poverty. The World Bank warned that the share of Nigerians living below the international poverty line is expected to peak in 2024 at 38.8%.
"People say there is no middle class in Nigeria anymore," Abuja resident Claire Ohunayo told DW.
Even the highly qualified are having a bad time. "A bag of rice now costs N50,000! Things are very difficult. Salaries hardly last a month," Audu Garba Zali, chairman of the Nigerian Union of Teachers, told DW.
Edited by: Cristina Krippahl