What’s minimum wage, how’s it determined in Nigeria?
The recent increase in petrol pump prices has sparked conversations around Nigeria’s minimum wage, as citizens demand a review of the national wage to mitigate the economic challenges often associated with higher fuel prices.
During his inaugural address on May 29, 2023, President Bola Tinubu’s declaration that “fuel subsidy is gone” led to a significant increase of over 100% in petrol prices. Shortly after the speech, fuel stations experienced long queues. However, the subsidy payment was scheduled to end in June as the 2023 budget only accounted for subsidy provisions during the first six months of the year.
Although it remains uncertain how the funds saved from subsidy removal will be utilized, the impact on Nigerians, particularly those living below the poverty line of $1.9, is significant.
To address the potential consequences, Tinubu discussed the need for “arithmetic and soul-searching” regarding the minimum wage during a meeting with All Progressive Governors (APC) on June 2, 2023.
As Nigerians continue to deal with the harsh effect of the fuel subsidy removal, there have been calls for an upward review of the country’s minimum wage, and some governors have started taking action.
What is the Minimum Wage?
The minimum wage refers to the lowest wage rate that employers are legally obligated to pay their employees for their work. It is established by the government to ensure that workers receive fair and minimum compensation for their labor.
In Nigeria, the determination of the minimum wage involves a process that considers various factors. The National Minimum Wage Act establishes the legal framework for setting the minimum wage in the country. In 2019, the Tripartite Committee on National Minimum Wage was established, consisting of government representatives, organized labor unions, and private sectors. This committee reviewed and increased the minimum wage from ₦18,000 to ₦30,000.
According to Section 3(2) of the National Minimum Wage Act 2019, the national minimum wage is the total amount of money that an employer is required to pay the lowest-paid worker or employee on a monthly basis in their establishment.
History of Minimum Wage in Nigeria
Before the formation of the Nigeria Labour Congress (NLC) in 1978, there was no history of a structured national wage for workers. In 1981, Nigeria’s first elected President, Shehu Shagari, implemented the country’s first known minimum wage of N125 per month. At the exchange rate of $1 to N0.6, the national wage amounted to over $200, which is equivalent to $599 in today’s currency or N276,139 using Nigeria’s official exchange rate of ₦276,139.
Eight years later, Adams Oshiomhole, then the deputy president of the NLC, spearheaded discussions on behalf of the union, resulting in an increase of the minimum wage to N250 in 1989. During the administration of General Abdulsalami Abubakar between 1998 and 1999, the minimum wage was further raised to N3000 per month.
While the minimum pay for workers has seen incremental increases from ₦3000 to ₦5500, then ₦7500, and finally ₦18,000, which took effect in 2011, the value of the Nigerian naira continued to depreciate, making Nigeria’s minimum wage one of the lowest in the world. Several countries, including Congo with $154, Kenya with $140, Tunisia, Chad, and Ivory Coast with minimum wages over $100 per month, surpass Nigeria’s current minimum wage of N30,000 ($65).
The payment of the minimum wage to Nigerians is structured such that it represents the lowest acceptable remuneration for junior employees. However, certain businesses are exempted from complying with the minimum wage act of 2019. Establishments employing part-time workers or having a staff strength of fewer than 25 employees are not legally obligated to adopt the minimum wage.
