In July 18 2024, the Federal Government of Nigeria, in agreement with organized labour, approved a new minimum wage of ₦70,000 for Nigerian workers. While this represents a significant nominal increase from previous ₦30,000, a deeper analysis reveals a concerning trend in the real purchasing power of Nigeria’s lowest-paid workers.
Historical Context
To understand the impact of this change, let’s examine the evolution of Nigeria’s minimum wage over the past decade:
– 2011: ₦18,000 (equivalent to $117 per month)
– 2019: ₦30,000 (equivalent to $98 per month)
– 2024: ₦70,000 (equivalent to $45 per month)
At first glance, the nominal value has nearly quadrupled since 2011. However, when converted to US dollars, we see a stark decline in value – from $117 in 2011 to just $45 in 2024. This simple comparison highlights the severe impact of inflation and currency devaluation on Nigerian workers’ earnings.
Purchasing Power: A Tale of Petrol and Rice
To illustrate the erosion of purchasing power, let’s consider two essential commodities: petrol and rice.
Petrol Purchasing Power
The number of liters of petrol the minimum wage could buy:
– 1999: 150 liters (₦3,000 wage)
– 2000: 250 liters (₦5,500 wage)
– 2004: 167 liters (₦7,500 wage)
– 2011: 277 liters (₦18,000 wage)
– 2019: 206 liters (₦30,000 wage)
– 2024: 93 liters (₦70,000 wage)
Despite the nominal wage increase, today’s minimum wage buys only a third of the petrol it could in 2011. This decline directly impacts transportation costs and overall living expenses for low-income families.
Rice Affordability
Perhaps even more telling is the comparison with a staple food item:
– 2004: ₦7,500 minimum wage could buy almost two 50kg bags of rice
– 2024: ₦70,000 minimum wage can buy only one 50kg bag of rice
In just 20 years, the purchasing power of the minimum wage relative to this essential food item has been cut in half, despite a nominal increase of over 800%.
The Real Value of the New Minimum Wage
When we consider official exchange rates, the picture becomes even clearer:
– Official Rate: $44.17
– BDC Rate: $47.56
– Black Market Rate: $43.15
Regardless of which rate we use, the new minimum wage translates to less than $50 per month. This places Nigeria’s minimum wage earners among the lowest-paid formal sector workers in Africa, despite the country’s status as the continent’s largest economy.
Implications and Outlook
The declining real value of the minimum wage has far-reaching consequences:
1. Poverty Trap: As wages fail to keep pace with inflation, more workers risk falling below the poverty line.
2. Widening Inequality: The gap between minimum wage earners and higher-income groups continues to grow.
3. Economic Pressure: Workers may seek multiple jobs or turn to the informal sector to make ends meet, potentially impacting productivity and tax revenues.
4. Social Unrest: Continued erosion of purchasing power could lead to increased labor disputes and social tension.
While the new minimum wage represents an attempt to improve workers’ conditions, it falls short of addressing the underlying economic challenges. For Nigeria to ensure a living wage for its workers, policymakers must tackle broader issues such as:
– Stabilizing the naira
– Controlling inflation
– Diversifying the economy to reduce reliance on oil exports
– Improving productivity across sectors
Without addressing these fundamental challenges, future minimum wage increases risk becoming a cyclical exercise in chasing a moving target, leaving workers perpetually struggling to keep up with the rising cost of living.
As Nigeria moves forward, the true measure of progress will not be found in nominal wage increases, but in the real purchasing power and quality of life improvements for its working class.
