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HomeNewsWhat is the Minimum Wage in Nigeria.

What is the Minimum Wage in Nigeria.

By Izielen Agbon

In the Nigeria, I shall have the honour and privilege to lead from May 29, workers will have more than a minimum wage. You will have a living wage to have a decent life and provide for your families – President Bola Tinubu 2023.

 

In 2023, President Bola Tinubu made a promise he did not plan to keep. Like a tested politicians whose words means nothing, he promised to give Nigerian workers a living wage once he gets to Aso Rock. A living wage is a socially acceptable level of income that provides adequate coverage for basic necessities such as food, shelter, child services, education, healthcare, taxes, transportation, savings, investment, retirement benefits, and the purchase of capital assets, such as a home, that build generational wealth and ensure long-term financial stability and security. A minimum wage is less than a living wage. A minimum wage is the lowest amount of money an employer can pay a worker as mandated by law. It covers the barest minimum necessary to keep the worker alive and able to work such as accommodation, food, utilities, power, transport, medical, education, sanitation, and clothing. A minimum wage is not determined by how much government, or the private sector can pay. A minimum wage cannot be near zero because employers have no money. Workers are not slaves. Nigerian workers are fighting for a monthly minimum wage of N494000 ($329) and the Tinubu administration is offering N60000 ($40). There is an impasse which has led to a national strike. It is time that we pose the question. How is the minimum wage determined? How did NLC/TUC arrive at a monthly minimum wage demand of N615,000? How did the Federal government, State government and Private sector arrive at a minimum wage offer of N60,000? What is the true monthly minimum wage for Nigerian workers?
In its most basic form, we can calculate a minimum wage based on past minimum wages. For instance, in 1981, the monthly minimum wage in Nigeria was N125. The exchange rate was $1/N0.61. Thus, the monthly minimum wage of N125 was $205. At a constant real wage, $205 in 1981 is equivalent to $729 in 2024 because the average annual dollar inflation over this period was 2.99%. You will need $729 today to buy what $205 could buy in 1981. Therefore, the Nigerian 1981 monthly minimum wage of N125 is N1,093,500 today at the prevailing exchange rate of $1/N1500. Over the 43 years period between 1981 and 2024, the productivity of Nigerian workers have increased, therefore, the monthly minimum wage should be higher than $729 or N1,093,500. This is the true monthly minimum value of Nigerian labour. Operating in dollars is realistic because a lot of the means of subsistence in Nigeria are imported. Food inflation is at 40.5%. According to the NBS, the National average Cost of a Healthy Diet was N1,035 in April 2024 (without adding the cost of transportation and cooking). So, a family of 6 (Father, Mother and 4 children) will spend N1035*3*6*30 or N558,900 per month for food only to remain healthy.
Alternatively, we can use UN statistics to estimate a monthly minimum wage. The World bank International Poverty Line is now $2.15 per day per person for extreme poverty and $3.35 per day per person for the moderately poor. The UN defined extreme poverty as a person surviving on less than $2.15 per day or $64.5 per month. An extremely poor worker does not have enough money to buy food and clothes for his family. His family has no access to land to grow food, credit, schools, or hospitals. A working-class family of 6 (father, mother and 4 children) would require $387 or N580,500 per month at an exchange rate of $1/N1500 to survive. This gives a lower limit of N580,500 per month for a minimum wage. Yet, the NLC/TUC, in good faith, reduced their initial demand of N615,00 monthly minimum wage to N494,000. How did the NLC/TUC arrive at a monthly minimum wage of N615,000?
The NLC/TUC based its initial demand for a monthly minimum wage of N615,000 on the minimum basic needs required for a worker’s family of 6 (father, mother and 4 children) to barely survive and work. The estimated monthly costs included Housing and accommodation costs (N40,000), Electricity and Power (N20,000), Utility and Water (N10,000), Kerosene and Gas (N35,000), Food (N9,000/day) or N270,000, Medical (N50,000), Clothing (N20,000), Education (N50,000), Sanitation (N10,000) and Transportation (N110,000). This gave a monthly minimum of N615,000. It is not clear what the worker and his family would have to do to survive on N494,000 a month. The worker’s family might have to eat less and give up medicine, clothing and sanitation. The Federal Government, State governments and private sector have not given a breakdown on how they arrived at their monthly minimum wage offer of N60,000 or N2,000 per day for a worker’s family of 6. It would cost far more than N2,000 per day to feed 6 slaves. It seems that for the Nigerian ruling class, the Nigerian worker is a mere inhuman labour unit whose marginal cost is zero and his wife and children are superfluous appendages. Hence, the FG offer of N60,000 was based on the monthly minimum wage that would help the ruling class members maintain their conspicuous consumption lifestyles.
Unlike in Nigeria, a mathematical formula is used to determine minimum wages in some countries like Brazil, Costa Rica, Malaysia and France. This makes wage costs predictable and eliminates political factors and hostile annual discussions between labour and government in minimum wage determination. In Brazil, the formula for adjusting the minimum wage is ∆ MWt = ∆ CPI t-1 + ∆ GDP t-2 where ∆ MWt is the change in minimum wage at time t, ∆ CPI t-1 is the change in CPI at time t-1 and ∆ GDP t-2 is the change in GDP at time t-2. The law establishing this formula was adopted in 2008 and is renewed every 4 years. In Costa Rica, the minimum wage formula is ∆ MW = expected ∆ CPI (+correction factor) + (20%-40%) * ∆ GDP per capita. A minimum wage tripartite commission of stakeholders negotiates the components. Negotiations can also be triggered by extraordinary conditions such an unemployment rate greater than 8%, a 15% change in the exchange rate or negative economic growth for the previous four successive quarters. This formula was established by law in 2012. In France, the annual change in minimum wages is determine by the formula ∆ MWt = ∆ CPI Nov t-2/Nov t-1 + 0.50 * ∆ Blue collar hourly wage Sep t-2/Sep t-1 where ∆ CPI Nov t-2/Nov t-1 is the change in CPI over 12 months (November t-2 to November t-1) and ∆ Blue collar hourly wage Sep t-2/Sep t-1 is the change in the hourly basic rate of blue collar wages (from September t-2 to September t-1). The minimum wage is also adjusted every time the price index increases by 2% or more. Since 2009, a commission of independent experts recommends if there is a space for an additional increase (coup de pouce), given the economic conditions existing in France.
We can derive a basic monthly minimum wage formula for Nigeria. Such a formula would capture the prevailing cost of living, food inflation rate and the exchange rate effective in the markets where workers buy their food and other means of subsistence. The monthly minimum wage would be renewable annually. The formula would be MWt = UNPLt-1*MERt-1*(1+FAIRt-1)*(1+GDPt-1)*6*30 where MW is the Monthly Minimum Wage (Niara) in year t , UNPL is the UN poverty line ($2.15/day/person in the prevoius year t-1), MERt-1 is the average annual Exchange Rate in the previous year (t-1), FAIRt-1 is the average food annual Inflation rate for the previous year and GDPt-1 is the average GDP for the previous year. The minimum wage can be adjusted with this formula in June of every year. For June 2024 to June 2025, the monthly minimum wage would be (2.15*1300*1.33*1.023*6*30) = N684,513. This amount is near the initial demand of NLC/TUC. This is the barest minimum required for the survival by a worker’s family of 6 in Nigeria based on the UN extreme poverty line.
Considering the above methodologies of determining the minimum wage, it is obvious that the Federal government, State government and private sector are not serious about negotiating a monthly minimum wage. They called the last negotiation meeting with no definite offer to labour other than a promise to offer 1 kobo more than their previous offer of N60,000. They have no methodology for determining their offer of N60,000 and 1 kobo as minimum wage. Their only goal is to stop the national strike and force labour to accept slave conditions. Therefore, It is imperative that the strike continues and intensify. NLC/TUC will do a great disservice to Nigerian workers if they accept one kobo less than their last offer of N494000 in the upcoming negociation. Civil society groups, students, market women, farmers, youths and the unemployed should support the ongoing national strike with daily solidarity marches and rallies. History teaches that this is the path to victory for Nigerian workers and the Nigerian grassroots.

Izielen Agbon
izielenagbon@yahoo.com
Twitter:@izielenagbon

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