Who Will Earn the New Minimum Wage of 70,000 Naira?

Who Will Earn the New Minimum Wage of 70,000 Naira?

With the recent passage of the National Minimum Wage Act 2024, Nigerian lawmakers have set a new benchmark for salaries in the country. As approved by President Bola Tinubu, all employers must now pay their lowest-ranking employees at least 70,000 naira ($43) monthly. This is a significant increase from the previous minimum wage of 30,000 naira ($18), a figure that has remained unchanged for the past five years despite the devaluation of the naira and rising living costs.

 

For many Nigerian workers, this increase is a welcome relief. The harsh economic situation has rendered the old take-home pay insufficient to meet their daily needs and maintain their lifestyles. Originally set at 30,000 naira per month in 2019, the minimum wage has seen its value diminish drastically due to the devaluation of the naira, making it imperative for an upward revision to align with the current economic realities.

 

Last Thursday, President Tinubu, along with the organized labor union, agreed on the new minimum wage, which has since been ratified by federal lawmakers and incorporated into the law through the Minimum Wage Act 2024. This new wage structure takes effect immediately, impacting both the public and private sectors.

 

Public Sector Adjustments

 

In the public sector, the government will adjust civil servants’ salaries based on their job positions, ensuring that the approved wages reflect their responsibilities and contributions. This change aims to provide better financial security and motivation for government employees, aligning their compensation with the increased cost of living.

 

Implications for the Private Sector

 

The private sector, however, faces unique challenges with the new wage law. Businesses, always striving for profitability, will have to integrate the increased labor costs into their pricing structures. This likely means higher prices for goods and services as business owners seek to balance their books while complying with the new wage mandate.

 

Senate President Godswill Akpabio emphasized that the new minimum wage serves as a universal benchmark applicable to all workers in both public and private sectors, including domestic and low-ranking staff. “If you are a private employer and you hire a nanny or a driver, you must pay them the new minimum wage of 70,000 naira,” Akpabio stated during a plenary session. He added that this standard applies across the board, regardless of the type of employment or the size of the business. “If you are a tailor and you employ additional hands, you cannot pay them below 70,000 naira. If you are a mother with a newborn and you want to hire a housemaid to look after your child, you cannot pay them below the approved minimum wage. It is not a maximum wage. It applies to all.”

 

Akpabio also highlighted that this law is a significant achievement, reducing the negotiation period from five years to three years in response to food inflation and other economic pressures. “I congratulate the Nigeria Labour Congress, all Nigerians, and the National Assembly for this epoch-making legislation, which has significantly reduced the term of negotiation from five years to three years in view of the food inflation.”

 

Impact on Low-Income Earners

Nigeria’s inflation rate, which rose from 33.95% to 34.19% between May and June 2024, has severely impacted the prices of food and other essential items, making it difficult for many low-income Nigerians to afford basic necessities. The new minimum wage is expected to provide some relief to these individuals.

 

When the BBC interviewed some young Nigerians participating in the National Youth Service Corps (NYSC), they expressed optimism about the wage increase. Many of them have been struggling to make ends meet due to the high cost of living. Braimoh-Igbo Ibrahim, a corps member in Lagos, remarked, “It is fair that the government has increased the minimum wage because things are difficult for low-income earners. We also need to survive.”

 

Ibrahim noted that the previous minimum wage of 33,000 naira could barely cover basic needs such as food and transportation. Another corps member from Lagos, Taiwo Obisanya, expressed uncertainty about whether the government would include them in the new minimum wage scheme. “If the government includes corps members in the minimum wage increase, it would be beneficial because 33,000 naira is not enough for us. The money we spend on transport to our Places of Primary Assignment (PPA) and Community Development Service (CDS) activities often exceeds our salary.”

 

Obisanya expressed hope that the new wage policy would extend to corps members. “I am hopeful that we will receive 70,000 naira. If it happens, it will greatly benefit me and my fellow corps members,” she said.

 

Challenges for Private Employers

 

While many are pleased with the wage increase, the future remains uncertain for private job employers in Nigeria. The private sector, already grappling with high operating costs due to the devaluation of the naira, removal of fuel subsidies, and increased electricity tariffs, may struggle to comply with the new wage mandate. Many businesses might resort to cutting jobs to manage the additional financial burden.

 

The Broader Economic Context

 

The Nigerian economy has been under significant strain in recent years. Inflation, devaluation of the currency, and the removal of fuel subsidies have all contributed to rising living costs. For businesses, these factors have led to increased operational costs, making it challenging to maintain profitability. The introduction of the 70,000 naira minimum wage adds another layer of financial pressure, particularly for small and medium-sized enterprises (SMEs) that operate on tight margins.

 

Some industry experts have raised concerns that the new wage law could lead to job cuts as businesses seek to reduce costs. However, others argue that the increased wages could stimulate economic activity by boosting consumer spending. When workers have more disposable income, they are likely to spend more on goods and services, potentially driving demand and economic growth.

 

Policy Considerations and Future Outlook

 

For the new minimum wage policy to be effective and sustainable, it is crucial for the government to consider complementary measures. This could include providing support to businesses, especially SMEs, to help them adjust to the new wage structure without resorting to layoffs. Additionally, addressing the broader economic challenges, such as inflation and currency devaluation, will be essential to ensure that the benefits of the wage increase are not eroded by rising living costs.

 

The government could also explore initiatives to improve productivity and competitiveness in the Nigerian economy. By investing in infrastructure, education, and technology, the government can create an environment that supports business growth and innovation. This, in turn, could lead to higher wages and better job opportunities for Nigerian workers.

 

 

 

The implementation of the 70,000 naira minimum wage marks a significant milestone in Nigeria’s labor policy. It reflects a recognition of the need to adjust wages to match the rising cost of living and to ensure that workers can maintain a decent standard of living. While the new wage policy presents challenges for private employers, it also offers an opportunity to improve the economic well-being of many Nigerians.

 

As the country navigates the complexities of implementing the new minimum wage, it will be important for the government, businesses, and labor unions to work together. Collaborative efforts will be key to addressing the challenges and maximizing the benefits of the wage increase. By supporting businesses in their transition and tackling broader economic issues, Nigeria can create a more prosperous and equitable future for all its citizens.