The Federal government’s answer to a skyrocketing cost of living is a ₦70,000 minimum wage after months of campaigning for better, but could this truly be enough?
The buzz is everywhere and many are wondering why the naira is even being compared to the dollar since federal workers who initially earned the previous minimum wage of ₦30,000 are seemingly overjoyed.
But before you query further, look at today’s Nigeria, where the dollar plays an outsized role, affecting everything from the price of bread to rent.
In 2014, Nigeria was Africa’s largest economy with a GDP of $568.5 billion. South Africa followed with $381.2 billion, Egypt with $321.6 billion, Algeria with $238.9 billion, and Angola with $145.7 billion.
By 2023, Egypt rose to the top with $393.9 billion, South Africa maintained a close second with $377.7 billion, and Nigeria dropped to third with $374.9 billion. Algeria and Ethiopia followed with $244.7 billion and $159.7 billion, respectively.
For 2024 estimates, South Africa’s economy became number one with $373.2 billion, Egypt at $347.6 billion, Algeria at $266.8 billion, Nigeria at $252.7 billion, and Ethiopia at $205.1 billion. This is according to data from StatiSense.
Also, the purchasing power of Nigeria’s minimum wage in terms of petrol (PMS) has seen a severe decline over the years. In 1999, a minimum wage of ₦3,000 could buy 150 litres of petrol. By 2000, an increased wage of ₦7,500 could purchase 341 litres. In 2011, with a wage of ₦18,000, workers could afford 277 litres.
However, in 2019, despite a wage rise to ₦30,000, the purchasing capacity fell to 206 litres. In 2024, the new minimum wage of ₦70,000 only buys 93 litres of petrol, reflecting the huge impact of inflation and rising fuel prices on the real value of wages. What’s really happening?
The answer isn’t so simple. This new wage stacks up against the ever-rising cost of living, impacting businesses and the economy at large, and how Nigeria compares with other African countries.
There are complexities of wages and the never-ending issue of a better life in Nigeria, still, the dollar feels like gold.
In the midst of all this, Aliko Dangote has halted his steel production plans following monopoly accusations from President Tinubu. We’ll get to that later.
Striking a Balance: Navigating Nigeria’s Minimum Wage Debate for Economic Prosperity, Social Equity
Looking at Nigeria’s previous minimum wage, set at ₦30,000 per month, was established in 2019. At that time, the economy was facing low growth rates, high unemployment, and inflation, but not at a level as high as today. Inflation then was 11.40%, but today, it stands at 34.19%.
The primary objective of the wage increase was to enhance the purchasing power of workers, reduce poverty, and stimulate economic activity, but things have gotten worse ever since.
The current agreement, according to the Nigeria Labour Congress (NLC), comprises a commitment to review the minimum wage every three years rather than every five years.
This means the President will now adjust wages more frequently to keep up with inflation and economic conditions.
Cost of Living Analysis
To understand the impact of the new minimum wage, it’s essential to analyse the cost of essential goods and services before and after its implementation:
The price of foods such as rice, beans, and bread has greatly increased. For instance, as of July 18, 2024, a 50kg bag of high-quality rice costs ₦87,000 in Abuja, while it ranged between ₦78,000 to ₦85,000 in Lagos, Jos, Ilorin, Ibadan and Port Harcourt, among other states.
This is a huge difference to earlier prices in 2019 where a 50kg bag of rice cost around ₦21,000. Even a loaf of bread is now as high as ₦2,000.
Rent prices have surged, particularly in urban areas. A one-bedroom apartment that rented for ₦200,000 annually in 2019 now ranges between about ₦500,000 to ₦1.5 million in Lagos State depending on the location.
Public transportation fares have doubled due to higher fuel costs. A bus ride that used to cost ₦100 now demands ₦300 and above.
The cost of healthcare services and medications has also risen sharply, making it more challenging for low-income earners to afford necessary treatments.
These increases show a big gap between wage growth and the rising cost of living, leading us to wonder about the real value of the new minimum wage.
Purchasing Power Comparison
Adjusting for inflation and the devaluation of the naira, the real value of the new minimum wage reveals its purchasing power.
In 2011, the minimum wage was ₦18,000, equivalent to $117. By 2019, the wage had increased to ₦30,000, but due to currency devaluation, it was worth $98. Currently, the ₦70,000 wage, using the Central Bank of Nigeria’s exchange rate of ₦1,584 per US dollar, amounts to approximately $44.2. This figure is lower than expected, particularly considering the high cost of living in Nigeria.
For context, the price of a tuber of yam in the South East ranges from ₦7,000 to ₦12,000, depending on its size. The devaluation of the naira has unfortunately diminished the purchasing power of the new minimum wage.
An analysis of the Nigeria Foreign Exchange Market (NFEM) reveals a decline in the naira’s value, making it difficult for workers to afford basic necessities despite the increased minimum wage.
Seeking individuals’ views, Lade, a single mother of two, works as a cleaner in Lagos. Despite the wage increase, she finds it hard to cover basic expenses. “The rent alone takes up more than half of my salary. After paying for food and school fees, there’s nothing left for emergencies. The new wage will help, but just a little, because everything has tripled currently.”
Emeka, a factory worker also says the new wage helps a bit, “but with the cost of everything going up, it feels like I’m running in place. It’s hard to save or plan for the future.”
Despite the wage hike, the price hike is unchanging.
Nigeria’s Inflation Rate Up 34.19 % Amid Rising Cost of Living
International Comparison
Comparing Nigeria’s new minimum wage with those of similar countries gives us more insights. For instance, in South Africa, the minimum wage is about $248 per month, adjusted for purchasing power parity. In Ivory Coast, the wage is $125, in Togo it is $87, in Benin Republic, it stands at $86, Senegal at $75, Kenya at $116, Cameroon at $70, Morocco at $286, and in Seychelles, the highest, at $464.
Can you see that the purchasing power in Nigeria remains insufficient?
For businesses, higher wages mean increased operating costs, which could lead to higher prices for goods and services. This, in turn, might contribute to inflationary pressures.
From an employment perspective, some businesses may struggle to absorb the increased labour costs, potentially leading to layoffs or reduced hiring.
On the positive side, higher wages could boost consumer spending, driving economic growth and potentially creating more jobs in the long run.
But without corresponding productivity gains and economic reforms, the benefits may be short-lived.
For How Long Shall This Continue?
Robert Nesta Marley, the Jamaican social-political prophet, in his evergreen album “Redemption Song” released in 1980, must have thought about the prevailing ills of his time when he released a strong lyric that goes, “How long shall we kill our prophets while we stand aside and look?” With the accuracy of a Jewish prophet, Marley advanced the cause for redemption as indicated by the song’s title.
In the context of religion, a prophet sees ahead, predicts, and prescribes solutions. In business and entrepreneurial parlance, we believe “prophets” find solutions to pending situations, create opportunities when there are none, and subsequently ameliorate challenges for the people.
Africa and Nigeria have been blessed with many such individuals, and it would be right to assert that Alhaji Aliko Dangote falls within this class by virtue of his investments and entrepreneurial wizardry.
The controversies that have surrounded the Dangote refinery, from scepticism and impossibilities envisioned by some armchair theorists and self-acclaimed social analysts, reflect this.
Dubbed the eighth wonder of the world, with a production capacity of 650,000 barrels per day, the Dangote Refinery should prompt every serious person of African descent to interrogate what exactly our problems are and what we want as a people, despite campaigns of calumny from certain quarters.
Before the Dangote Refinery began operations, the Dangote Group was the highest employer of labour in Nigeria outside the federal government. It is a conglomerate with diverse interests in sectors such as cement, petrochemicals, sugar, flour, and salt production.
The company employs over 50,000 workers across its different subsidiaries, and this is expected to increase with the Dangote Refinery, the largest in sub-Saharan Africa.
According to information released six days ago, the $19 billion Dangote Refinery, reputed to be the largest in Africa and Europe, employs over 3,000 people. The fertilizer plant alone employs close to 1,500 directly and another 5,000 indirectly.
While the politics surrounding the Dangote Refinery remain unclear, what is crystal clear is that it has generated employment opportunities and put food on the table for many, despite Nigeria’s hostile operating environment.
In the same vein, it is my firm belief that the proposed steel production, which was called off on the grounds of monopolising every aspect of the economy, after expressing readiness about a month ago, calls for serious soul-searching questions.
There is no doubt that steel plays a vital role in the modern world. It is one of the most important materials for building and infrastructure, enabling a wide range of manufacturing activities and creating opportunities for innovative solutions in other sectors. It is also indispensable in research and development projects worldwide.
Furthermore, a functional steel industry will serve as the backbone of Nigeria’s industrialisation if all the necessary parameters are put in place. The benefits of having a functional steel industry will translate to a functional country.
The steel industry will contribute to all facets of the economy, including the important role it plays in economic development and growth, its multiplier effects in the development and sustenance of agriculture, healthcare, and virtually every other sector.
Are there records of remarkable breakthroughs in Nigeria’s steel industry yet?
About eight months ago, the Federal Government of Nigeria allocated N4.45 billion to the moribund Ajaokuta Steel Company in the 2024 budget, seeking N35 billion from funding institutions to revive the light steel mill in the Ajaokuta Steel Plant, which has been dormant for over 42 years.
It is significant to note that N4.45 billion for 2024 is higher than the N3.71 billion allocated to the company in 2023. However, juxtaposing the expenditure wasted by the federal government over the years with the trivial gains accrued from the industry, one could have envisioned that proposed steel production by Africa’s richest man would have brought succour or engineered a good start for private investors and entrepreneurs alike. But alas, the African billionaire has called off the initiative on the basis of being called a monopolist.
Much More than the Monopolist Claim
According to the Indian Economic Times, a monopoly market structure is characterised by a single seller selling a unique product in the market.
In a monopoly market, the seller faces no competition, as he is the sole seller of goods with no close substitute. Factors like government licenses, ownership of resources, copyrights and patents, and high starting costs make an entity a single seller of goods.
All these factors restrict the entry of other sellers into the market. Monopolies also possess some information that is not known to other sellers.
But the last time we checked, the government has not given anyone an exclusive right to venture into the steel industry. It seems to be like the Yoruba saying, “eni to ba la ya ko wa wo,” translated to English: “If you have the grit and expertise, you can venture.”
Could it be that the constant frustration meted out by international oil companies and the supposed internal conspiracies experienced at the Dangote Refinery were covered up with something else?
Minus investment in the steel industry, plus the ₦70,000 new minimum wage, all you have is suffering and smiling.
Let’s say the monopoly justification adduced by Alhaji Dangote is something to go by. We are convinced that investment in the sector would have boosted employment opportunities for the teeming unemployed citizens in Nigeria.
The question is, having witnessed the mass exodus of multinationals—up to the tune of 800 companies, with several others without clear records—are we supposed to have frustrated the good gesture of the entrepreneur?
Like Microsoft, Apple, and Nvidia of this world, ours can start by providing a soft landing for the takeoff of conglomerates, not discouraging them in any way.
As a matter of fact, entrepreneurs in Nigeria are the real VIPs and should be treated as such. While we may be tempted to toe the line of the African billionaire on the basis of the monopoly alibi, we are sure that the birth of a steel industry would have at least paid more than the much-celebrated increase to N70,000 minimum wage.
Whether the recipients of the minimum wage can lead a good life is still a long discussion, and we may need to wait and see how it pans out.
If you can’t eat rice alone, the Iyaloja market already indicates that a big basket of tomatoes goes for ₦120,000. I will leave you with the prices of meat, fish, red oil, and a standard apartment in Nigeria. Then the question arises: how far can the minimum wage go?
Therefore, in line with the thought of Alhaji Aliko Dangote, we wish other daring African entrepreneurs who wish to venture into the steel industry the very best.
Rounding off this piece, news just came in indicating Dangote’s interest in selling off the refinery, still on the basis of being dubbed a monopolist. We wait earnestly as events begin to unfold in the forthcoming days.
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