Beyond the paycheck: From minimum wage to maximum impact
By Michael Onuoha
The issue of the national minimum wage in Nigeria has once again taken centre stage, sparking widespread debate and gross discontent among Nigerian workers. Few weeks ago, the NLC led out its members on a nation-wide strike that grounded public services such as electricity supply. The workers are demanding a substantial increase to counteract the skyrocketing and damning cost of living and runaway inflation in the country.
Needless to say, the demand by Nigerian workers for a new and appreciably higher national minimum wage at this time is quite legitimate and understandable. The past nine years had seen Nigeria’s economy spinning on its head endlessly. If the economy was bad enough in the eight years of Buhari’s administration, the President Tinubu government has taken the very bad economic situation many notches higher since its one year of existence. Indices of how deeply south the national economy had been driven to in the last one year include unprecedented headline and food inflation rates of 33.69% and 40.66%, respectively; forex rate of upwards of N1,495/USD currently (having reached close to N2,000/USD) some months ago, soaring electricity tariffs, fuel pump price of N650/litre in most filling stations and so many more. A recent report released by the Central Bank of Nigeria (CBN) showed that total consumer credit obtained by Nigerians stood at a huge N3.82 trillion as at January 2024, a further testament to how hard Nigerians have been hit by the worsening economic situation in the country.
Nigeria’s struggle with the minimum wage is not new. Over the years, there have been several wage increments aimed at improving the standard of living for Nigerian workers and to keep pace with prevailing cost of living. The first national minimum wage law was in 1981, under the late President Shehu Shagari. The law put the national minimum wage at N125 per month. Since then, the minimum wage had moved several times: 2000 (N5,500); 2011 (N18,000) and 2019 (N30,000).
But while the plight of Nigerian workers and the demand for higher minimum wage is understandable, it is imperative to consider whether continuously increasing the minimum wage is a sustainable solution to improving Nigerians’ standard of living and to solve the country’s economic problems. It is worthy of note that each increment in minimum wage over the years was greeted with relief and optimism, but the positive effects were short-lived. The economy continued to grapple with inflation, and within months, the purchasing power of the new wage was significantly eroded, leading to renewed demands for another hike.
This pattern has developed into a vicious cycle. As soon as the minimum wage is increased, inflation seems to surge, quickly outpacing the new wage level. This is largely due to the fact that wage increases are often not matched by corresponding improvements in productivity or economic stability. Consequently, businesses, especially small and medium enterprises (SMEs), struggle to cope with higher wage bills, often passing the costs onto consumers through higher prices. The result is a continuous spiral of wage hikes followed by inflation, which ultimately nullifies any gains workers might have experienced.
Developed countries like the United States have taken a different approach. Rather than relying solely on wage increases, they’ve focused on creating a strong economy, fostering innovation, and promoting good governance. The result? A higher standard of living, even with relatively lower minimum wages. Occasionally, they experience economic turbulence due to global events such as the Russian-Ukraine War that tend to impact their economic stability in a marginal way but overall, they have succeeded in building strong and resilient economies that guarantees a good standard of living for their citizens no matter what they earn.
In contrast, Nigeria’s frequent minimum wage adjustments are symptomatic of deeper systemic issues. Developed countries invest significantly in infrastructure, education, healthcare, and technology. These investments drive productivity and economic growth, which in turn improve the standard of living without the need for constant wage adjustments.
To truly improve the standard of living of Nigerians, there needs to be a fundamental shift in focus, taking the following into consideration:
One, good governance. This is at the heart of this transformation. Building transparency, accountability, and effective leadership into the ethic of governance at all levels is a must-do. They should be the guiding principles of public administration.
Two, reining in corruption. Corruption, for long the bane of Nigeria’s development, must be addressed decisively. Through corruption, funds meant for public services and infrastructure development are diverted into private pockets, leading to substandard services and dilapidated infrastructure. It’s not a secret that loads of corrupt politicians and public servants are walking free on the street and being bad examples to others. By reining in corruption, the government can ensure that funds are used for their intended purposes, such as building roads, schools, and hospitals, which would significantly improve living conditions. When corruption is minimized, resources can be more effectively allocated to critical sectors that directly impact the quality of life of Nigerians. Enough of lip service to the fight against corruption.
Three, broad-based economic reforms. This includes diversifying the economy away from an over-reliance on oil, fostering entrepreneurship, and creating an enabling environment for businesses to thrive. When businesses grow, they create jobs, drive innovation, and contribute to economic stability. An economy where leading manufacturing lights such as Guinness Nigeria, and others are leaving the country should call for a serious change of direction.
Four, improving infrastructure. Investing in infrastructure is crucial. Good roads, reliable power supply, and efficient transportation systems reduce the cost of doing business, attract foreign investment, and improve the overall quality of life. When infrastructure is robust, the cost of goods and services decreases, making life more affordable for everyone.
Five, enhancing education and healthcare. Quality education and healthcare are foundational to a prosperous society. An educated populace is more productive and innovative, while good healthcare ensures a healthy workforce. By prioritizing these sectors, the government can equip citizens with the tools they need to improve their own lives.
Lastly, providing social safety nets. Implementing programmes to support the most vulnerable segments of society is very fundamental. So far what the government has put in place are mere interventions and lack transparency. More sustainable, transparent and impactful programmes need to be established.
In summary, Nigeria’s approach to developing the economy in a way that emphasises making maximum economic impact and makes focus on minimum wage irrelevant requires a paradigm shift. While wage increases may provide temporary relief, they do not address the root causes of economic hardship. Good governance, will-driven anti-corruption measures, comprehensive economic reforms, and investments in infrastructure, education, and healthcare are the sustainable solutions that will lead to long-term improvements in the standard of living of citizens. By focusing on these areas, Nigeria can break free from the vicious cycle of wage increases and inflation. A stable and prosperous economy will naturally lead to better wages and living conditions, without the need for perpetual strikes and negotiations. It is time for the government to embrace these reforms and steer the nation towards a brighter, more sustainable future.
- Mr. Onuoha is a public affairs commentator and writes from Lagos.