The age-old saying “two wrongs don’t make a right” resonates strongly in the face of Nigeria’s recent attempt to introduce a new minimum wage. While the need to ensure a livable wage for workers is commendable, the policy’s timing and implementation approach may have far-reaching and devastating consequences for an already fragile economy.
Although it’s undoubtedly concerning that Nigerian senators earn and spend extravagant amounts, the question remains: Do we perpetuate harmful practices to exacerbate our economic woes, or do we strive to find viable solutions to our economic challenges? This critical question should be at the topmost of every Nigerian’s mind.
At the heart of the matter lies a pressing concern: income disparity. The stark contrast between a senator’s monthly basic salary of ₦2,484,245, regardless of education level, and a professor’s maximum earnings of ₦416,000 highlights the wide gap between the elite and the average Nigerian. This stark contrast between the senators’ extravagant lifestyle and the common man’s struggles fuels social unrest, highlighting the urgent need for a more equitable and just system.
While a higher minimum wage may seem like a solution, implementing it without a comprehensive strategy to boost productivity and economic growth is akin to building on shaky ground — doomed to crumble.
Let us examine the intricacies.
A significant increase in the minimum wage will mean more money for people to spend. This will increase the amount of money in circulation, potentially leading to a spike in the inflation rate. In 2000, inflation rose 23 per cent, and after that, President Obasanjo increased the minimum wage. Increased wages trigger an increased demand for goods and services, which, if not matched with increased supply, will cause a rise in the prices of goods and services. This will lead to inflationary pressures that will erode the purchasing power of the very workers the wage increase was meant to help. This is counter-productive.
Moreover, small and medium enterprises (SMEs), which form the backbone of Nigeria’s economy, will struggle to meet these new wage demands. To meet up, some of these businesses may be forced to lay off a large portion of their staff, thus contributing to the existing problem of unemployment. In addition, with Nigeria’s current revenue generation challenge and dwindling oil proceeds, can the government afford to pay workers their salaries consistently?
According to research by the National Bureau of Economic Research, increases in minimum wage often result in reduced employment opportunities for low-skilled workers, a scenario that Nigeria cannot afford. Consequently, the policy, intended to alleviate poverty, might lead more families into financial instability.
Crucially, about 15 states are yet to pay the existing minimum wage as of November 2023. According to Jane Eze, a teacher in Anambra State, ‘’the state government has not implemented the ₦30,000 minimum wage ever since the bill was signed, now how will they pay this one they are demanding?’’
Furthermore, the impact of the proposed minimum wage increase on the government’s finances cannot be ignored. Currently, Nigeria’s debt crisis is a pressing concern, with the latest figures from the National Bureau of Statistics (NBS) revealing a staggering total external debt of ₦38.22 trillion (US$42.50 billion) in the last quarter of 2023, complemented by a total domestic debt of ₦59.12 trillion (US$65.73 billion).
The International Monetary Fund has repeatedly warned about the dangers of Nigeria’s growing debt profile, emphasising the need for fiscal prudence. However, this alarming debt burden will worsen if the government attempts to sustain the proposed minimum wage, as it would necessitate more borrowing, further plunging the economy into chaos and