A minimum wage of N66,000 is the expected real minimum wage by May 2024, Dataphyte’s latest analysis informs.
The analysis also estimates a real living wage of N106,000 per individual in case the President really intends to keep his promise of providing a living wage for Nigerians.
An increase in minimum wage could lead to the redistribution of wealth, induce higher productivity, and make the poor less poor.
It could also lead to a demand-pull inflation and further strain the government revenue, especially that of low-income states.
To forestall another protracted strike by labour and its attendant loss to the lives and livelihoods, Dataphyte, as part of its core civic education and information literacy functions, takes another proactive step to moderate the stalemate between the private and public sector employees and their employers.
Dataphyte has monitored the minimum wage conversation since two days before President Tinubu’s inauguration as the President of the Federal Republic of Nigeria.
The President-elect promised in his speech then that he would provide all Nigerian workers a living wage and not just a minimum wage.
Dataphyte advised then that the President-elect may not achieve his promise unless the minimum wage law was reviewed to include all Nigerian workers. The piece also suggested global practices that prevent workers from being enslaved with unregulated and unadjusted wages.
We clarified then that 84% of Nigerian workers work in micro-enterprises, and that the Minimum Wage Act exempts these firms from paying the minimum wage. We also indicated that adjusting wages in 5-year intervals would rob workers of their real wages lost to year-on-year inflation.
Again, as soon as Nigeria’s organised labour, through the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC), proposed a new minimum wage of N615,000, Dataphyte advised the public on why that demand was not feasible.
We indicated a globally estimated living income range of N118,547 to N464,100, with a midpoint of N291,380. Upon this explainer on a living wage ceiling of N464,100, the organised labour shifted ground from N615,000 to N494,000 and the government moved from N30,000 to N60,000.
After the NLC and TUC’s strike was suspended last Tuesday, organised labour shifted again to N250,000, closer to Dataphyte’s Midpoint Living wage estimate of N291,380. However, the government only moved the needle by N2,000, with a proposal of N62,000 minimum wage.
Unfortunately, State Governments have distanced themselves from the Federal Government’s proposal, insisting they can’t pay beyond N60,000.
The third main party in the negotiations, the organised private sector (employers) have also said they cannot afford the wage bill of N250,000 that organised labour (employees) demands.
Employees hinge their demand for a wage review on the need to cushion the adverse effect of inflation on their nominal income. This is separate from the demand for a pay rise because of an employees’ increased productivity or promotion.
However, if organised labour’s main concern is the inflationary pressure on their incomes, this analysis helps in arriving at a minimum wage rate that cancels out the inflation rate on workers’ salaries, especially the current minimum wage of N30,000.
This analysis also estimates a real living wage based on the 2018 living wage of N43,200 to be an equivalent of N106,000 by May 2024.
Within the current 5-year minimum wage regime, the real value of the N30,000 minimum wage has depreciated to N11,708… The significant inflation over the past year has substantially eroded the purchasing power of the N30,000 ($20) minimum wage.
Poorer Employees
Within the current 5-year minimum wage regime, the real value of the N30,000 minimum wage has depreciated to N11,708.
The static minimum wage of N30,000 calculated against the year-on-year inflation from 2019 to April 2024 shows that the real minimum wage declined yearly.
The real minimum wage decreases yearly by a margin of over N3000. The highest decline was between 2020 and 2021, which coincided with the Covid-19 pandemic, while the lowest reduction was between 2019 and 2020.
The significant inflation over the past year has substantially eroded the purchasing power of the N30,000 ($20) minimum wage.
The Plight of Workers
The newly proposed minimum wage by the NLC, if implemented, may only reach 1.2% of Nigeria’s working population, specifically among the 12.7% in salaried employment.
This is unfortunate because 99% of Nigerian workers may never gain from ‘organised’ labour’s struggle to get an upward wage review. Instead, 99% of workers may have to share in the marginal inflationary pressure that the increase in the salaries of 1% of workers may add to the current cost-push inflation.
Indeed, a truly ‘organised labour’ may need to advocate that all employers of labour, at least in the formal sector, should pay a minimum wage of N65,580.
This figure is a projection of what N30,000 minimum wage in 2019 equates to, given the year-on-year inflation rate.
That is, no employer, whether in the formal or informal sector, should pay any full-time staff, whether a full-time private security guard or full-time domestic worker, less than N65,580 by May 2024.
Currently, the Nigerian worker who earned N30,000 in 2019 is robbed of 53,872 monthly due to inflation.
This monthly differential between the real minimum wage and the expected real minimum wage in Nigeria in 5 years coincides with the growing levels of poverty of workers.
“The poverty rate is estimated to have reached 38.9% in 2023, with an estimated 87 million Nigerians living below the poverty line — the world’s second-largest poor population after India.” according to the World Bank.
This implies that the number of people living below the poverty threshold of $2.15 or N3,163 a day has increased.
Meanwhile, the unemployment rate has continued to rise.
The current unemployment rate increased to 5% in 2023. This unemployment rate only covers those who are not in employment, actively searching and available (did nothing for profit or pay) according to NBS.
The proposed new minimum wage might further increase the unemployment rate, as companies might want to cut down on staff to meet up with the new minimum wage.
For instance, the Director-General of the Manufacturing Association of Nigeria, Ajayi Kadri, complains that, “This is not the most appropriate time for organised labor to negotiate a new minimum wage. The private sector is constrained by microeconomic, infrastructure, and security challenges. So, we are also constrained to pay.”
The Minister of Labour and Employment also informed that “when ₦18,000 minimum wage was agreed upon, certain states couldn’t pay. After that, ₦30,000 minimum wage, some states cannot pay as we speak.”
It is easy to see why only a few groups of workers may benefit from any upward review of the minimum wage, and why the Nigerian worker’s suffering and struggles may continue.
The unemployed labour force is even worse off as the government has no social security programs to ensure they enjoy the barest standard of living.
84% of Nigerian workers work in micro-enterprises, and the Minimum Wage Act exempts these firms from paying the minimum wage.
NLC Strikes
This debate for the minimum wage increase is coming at a time when the Nigerian economy is facing issues of increasing price instability (galloping inflation), unemployment, and increased living costs.
Both the government and organised private sector (employers) have indicated that current conditions may not be conducive for negotiating a minimum wage increase.
However, the prevailing macroeconomic circumstances suggest that this is an opportune time to implement an increase in the minimum wage for workers to reduce their suffering.
The proposed increase is not without its effect on the national budget. There is no sign yet that the Federal and State Governments are willing or able to reallocate current revenues to pay the minimum wage without incurring more debts.
On the private sector front, the fears are for unemployment and underemployment.
NLC Misses
NLC’s strike may miss the mark for 99 in every 100 workers in Nigeria.
Only 1% of the working population have a chance to benefit directly from any marginal or major increase in salaries the NLC and TUC clamour for nationwide.
According to the latest NBS data, 92.7% of the working population work in the informal sector.
All these may not benefit from the minimum wage increase currently advocated by the NLC.
Why?
“The Informal Sector comprises any economic activity or source of income that is not fully regulated by the government and other public authorities.
“This includes enterprises that are not officially registered and do not maintain a complete set of accounts, and workers who hold jobs lacking basic social or legal protection and employment benefits,” according to Nigeria’s Bank of Industry (BOI).
Among the remaining 7.3% of workers who work in organisations that the government recognises or that fall under full labour regulation, at least 6.1% (or 84% of the 7.3%) work in micro-enterprises, which employ less than 10 people.
All these employees of micro-enterprises and those employed in small enterprises with less than 25 workers are not eligible by law to the new minimum wage increment championed by the NLC.
According to the Minimum Wage Act, the provisions of section 4 (1) of the Act shall not apply to:
- Establishment in which less than 25 workers are employed
- An establishment in which workers are employed on a part-time basis
- An establishment in which workers are paid on a commission or piece rate basis
- Workers in seasonal employment such as agriculture
- Any person employed in a vessel or aircraft to which the laws regulating merchant shipping or civil aviation apply.
Thus, less than 1.2% of the Nigerian labour force will benefit from any minimum wage regulation or upward review.
Dataphyte predicted in an earlier report that President Tinubu’s government may not fulfil his promise of a living wage for Nigerian workers unless Nigeria’s minimum wage law incorporates every worker in its provisions.
“Under Nigeria’s current minimum wage law, persons working in Micro enterprises would not be eligible for any minimum wage increase, because Micro Enterprises employ less than 10 persons,” according to the National Bureau of Statistics (NBS) classifications.
Also, about half of those working in small enterprises would not be legally qualified for a minimum wage increase, because they work for companies that employ 10 to 24 persons. The upper range of small enterprises employs 25-49 persons.
The BOI clarifies that “informal employment workers include street traders, subsistence farmers, small-scale manufacturers, service providers (e.g. hairdressers, private taxi drivers, and carpenters), etc.”
Besides, a substantial majority, 87.3% of the Nigerian workforce is self-employed. So, the current struggle for minimum wage increase is for the 12.7% who work as paid employees.
As earlier deduced, of these 12.7% who work as paid employees, only 1.2% are privileged by law to benefit from any upward minimum wage review.
The question is: Will employers of this 1.2% of Nigeria’s labour force pay them any agreed minimum wage?
The Part of Employers
There are measures put in place to punish defaulting states or private institutions that fail to pay their workers the minimum wage, but there have been no reports of states prosecuted for defaulting.
Although data indicates that compliance with fundamental labour laws in Nigeria has marginally improved over the past six years, the level remains insufficient to significantly improve the conditions of workers in the country.
The compliance score improved from 3.5 out of 10 in 2015 to 3.1 out of 10 in 2021 (where 0 = the best compliance score and 10 = the worst).
Consequently, there is likelihood that more employers in public and private organisations will pay an upward review of salaries than in the past, when organised labour, the federal and state governments, and the organised private sector eventually agree.
The President’s Unforced Promise
Going by the N43,200 living wage as of 2018, and factoring the inflation rate of 12.1% in that year, the living wage by 2019 ought to be N48,427.
Considering year-on-year inflation between 2019 and April 2024, the real minimum living wage in Nigeria now is N105,862.
The question is: Will Nigeria’s Civil Service pay a minimum living wage of N106,000 or a minimum wage of N66,000?
Will the Private sector pay this to their full-time employees?
Will organised labour accept this pay for 1% of employees their advocacy currently covers?
Will they demand this for the 99 of the 100 that are not covered by their current advocacy? (Dataphyte)
