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Analysing Nigeria’s new minimum wage: What it means for workers, govt and businesses

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Analysing Nigeria’s new minimum wage: What it means for workers, govt and businesses

First a short background: In 2018, the Nigerian Labor Congress (NLC) embarked on a nationwide strike to pressurize governments at all levels to increase the minimum wage from N18,000 to N56,000. The Federal Government subsequently set up a committee to review the existing salary structure and other issues raised by the NLC and its members. That committee recommended a national minimum wage of N30,000.

Fast forward to April 18th 2019, President Muhammadu Buhari signed the bill approving N30,000 as the new national minimum wage following passage by both chambers of the National Assembly.

The details of this 67 percent increase (from N18,000 to N30,000) are not as straightforward.

  • Not everyone gets the 67 percent increase in wages. It is true that everyone from the least grade level of 4 to grade level 16 gets an increase, however there is a percentage decrease as the grade levels increases. This begs the question: If the least paid worker gets an increase of 67 percent then why does the same percentage increase not affect every other worker? Shouldn’t sauce for the goose also be sauce for the gander?
  • An officer grade level 01/04 (Level 4 is the minimum grade for federal government MDAs) gets an increase of 67 percent while grade level 16 gets only a 5 percent increase.
  • MDAs already earning above the minimum wage will not enjoy any increase whatsoever. There are even unverified reports of plans to cut down the pay of certain ‘overpaid’ MDAs.

How the minimum wage affects the private sector

The new Minimum Wage Act stipulates that employers with staff strength below 25 are exempted from complying with the law. The law empowers any employee  who is paid less than N30,000 naira to take his/her employer to court.

Two questions arise here:

  • How many private sector establishments have staff strength of over 25? A chunk of Nigerian businesses are micro or small businesses which are unable to hire up to that figure. By excluding them, it means millions of Nigerian workers will not benefit from the new minimum wage
  • Another negative outcome which may arise from this is that employers with work forces slightly above 25 may try downsizing so as to enjoy exemption from the new minimum wage implementation. This means a certain number of Nigerians will inevitably lose their jobs.
  • In the private sector, does the minimum wage apply only to those earning less than N30,000 or would there be increases (in varying percentages) just as in the government MDAs?

The minimum wage and the states

A good number of state governments owe workers several months of unpaid salaries. Clearly a showdown looms between the states and their workers/unions if they are unable to pay the new minimum wage as expected. The chairman of the Nigerian Governors forum, Abdulhaziz Yari of Zamfara, has already expressed their unwillingness to subscribe to the new act due to their lack of capacity to pay.

According to Yari, governors would be willing to implement the new minimum wage if labor agrees to downsizing of the workforce or the federal government agrees to a new revenue sharing formula that will raise the revenue base of the state governments. “The issue is the ability to pay,” Gov. Yari said. “I don’t know how we can get a solution to the issue. Today it is N18,000. In 2015 when the president assumed office, 27 states were not able to pay, not that they chose not to pay. Now you say N30,000, how many of us can pay? We will be bankrupt.

A useful comparison: Not all workers will benefit from the N30,000 minimum wage as we have discussed earlier. But let’s even attempt to estimate what N30,000 comes down to as an hourly rate, which is the global standard. Let’s say a worker earning the minimum wage works from 9a.m. to 5p.m. or 8a.m. to 4p.m. both of which are 8 hours daily. Multiplying the number of hours (8) by the number of working days in the month (about 20) gives 160 hours of work monthly. That comes to about N187 per hour (N30,000 divided by 160 hours). Going by the dollar rate of 361 naira to a dollar we can say 187 naira is barely half a dollar (50 cents).

A Nigerian worker earning the country’s minimum wage would be earning half a dollar per hour. It’s ironic that while workers pay cannot compare with that of the highest earning countries in the world like Australia with an hourly minimum pay of 14 U.S. dollars or the United States itself with an hourly wage of 7 to 13 dollars depending on the state, the pay received by our lawmakers on the other hand is comparable/exceeds those of their counterparts in those countries for doing far less work.

Go Deeper: Will Buhari’s N30,000 minimum wage increase make your life better? TheScoop Explains

Micheal Angou is a public servant. He writes on politics, new media and technology.

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