Should the Minimum Wage in Nigeria Be Increased to Reflect the Current Cost of Living?

The word “minimum wage” is peculiar to every country. It is an issue that draws a lot of controversies in any sphere of governance and Nigeria is no exception. Nigeria has experienced her own share of issues relating to minimum wage increment.

But before delving deeper, what is minimum wage? How does minimum wage affect the cost of living? Has the increment of minimum wage been able to reflect in the cost of living of Nigerians?

Table of Contents

What is Minimum Wage?

Minimum wage refers to the lowest monetary compensation that an employer can pay his/her employees’ for services rendered. For example, in Nigeria currently, there’s a negotiation between the government and Labour Union regarding a new minimum wage.

The agitation for an increment became imperative because the current thirty thousand naira (#30,000) lowest wage holds little value when compared to the high cost of living caused by high inflation. This has drastically reduced the purchasing power of the Nigeria naira (#).

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What is the Cost of Living?

This is a kind of figure in numeric that reflects in monetary terms the amount that is needed to ensure basic necessities of life are provided. Basic necessities such as housing, clothing, food, healthcare, etc. For instance, before an individual applies for a job, it is necessary to ascertain the remuneration for service rendered and if the salary can cater for basic needs.

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How Minimum Wage Affects the Cost of Living

It is no new news that the cost of living in Nigeria has skyrocketed to over 300%. For instance, a derica of local cassava flake (Garri) that usually goes for #200 some couple of years ago, now goes for #1200 to #1500. Likewise beans that was initially #650 now goes for #3,500 and is still increasing.

All items from food, clothing, electronics, housing (rent/leasing), electricity to fuel, diesel, gas, etc, are all on the increase on a daily basis. Thus, it is only normal for the country’s minimum wage to be increased to sustain productivity by ensuring her workforce can afford the cost of living.

To further buttress on how cost of living can be affected by minimum wage, it should be noted that most Nigerians are not directly affected by increase in the minimum wage due to the fact that in relation to statistics, “92.3% of the Nigerian workforce are in the informal settings like the traders, farmers, and service providers.” This literally means the public and private sectors are mostly directly affected by changes in minimum wage.

But to better grasp how minimum wage can affect the cost of living, below are a few illustrations.

An individual income

The earning of a person (real income) determines if the individual will live above or below poverty level. Poverty level is also determined by the cost of living in relation to earning/purchasing power of the naira. These factors can be drawn out from the inflation level, decline in oil revenues and other economic imbalances in the country.

For instance, in Nigeria, there has been a steady decline in the value of the naira, from 46.90% in 2018 to 15.20% in recent times. Truth be told, the minimum wage has always been below an affordable standard of living. Only individuals who earn far above the minimum wage could afford a decent living condition.

Prices of goods and commodities

In a country like Nigeria, the minimum wage can be calculated based on the cost of living within its sphere (living cost), eg, cost of housing, food, clothing, transportation, electricity, gas, etc. This way, individuals, especially those on the lowest earning, will have and can afford basic necessities.

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Inflation

This is one aspect that if not well managed can spiral in the ripple effect of poverty on a country’s economy. Though an increase in minimum wage (based on actual living cost), can help reduce the disparity in accessibility to basic necessities, it can also lead to increase in prices of goods and commodities, thereby devaluing the naira (#).

Therefore, it is important to increase the minimum wage with other aspects of the economy being well regulated.

Should the Minimum Wage in Nigeria Be Increased to Reflect the Current Cost of Living?

The two questions ‘should the minimum wage be increased?’ and ‘should it reflect the cost of living?’ are themes on two parallel lines. From the inception of the introduction of increasing wages as adopted from the recommendation of the Udoji Commission, in 1974, the minimum wage has never equaled the cost of living.

In 1991, it was increased to #250, #5,500 in year 2000, #18,900 in 2011 and in 2019, it became #30,000. Presently, there is an ongoing negotiation between the government and the Labour Union.

The following can happen when there is a commendable increase in minimum wage that is in pace with the cost of living:

The increase in minimum wage can help families and individuals living below the poverty line to achieve a fair living condition that ensures their basic needs like food, shelter, etc, are met. This can guarantee them financial security.

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An increase in minimum wage can help bridge the gap between low and high income earners in terms of having equal access to health care, food, shelter, etc. For instance, if a banker can afford to eat egg, a low income earner like an office cleaner can also eat it.
Besides, the government would have been able to strike a balance between low and high income earners in accessing basic necessities if the minimum wage is increased. This propels a balanced wealth distribution necessary for productivity and economic growth.

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Conclusion

Increasing the minimum wage is not the only bone of contention at the moment as it relates to cost of living. Ensuring the minimum wage is a living wage is the real deal. Increasing only the minimum wage cannot and will not reflect the cost of living, if it is just a negotiated agreement, and not calculated based on the actual cost of living in Nigeria.

With a population of over a hundred million, about 70% of Nigerians still struggle and grapple with untold hardship and poverty. It is very imperative for the government and stakeholders including Labour Union advocates, to sit and draft out a practical mechanism to improve the lives of the suffering Nigerians.