Before a new minimum wage

THE Federal Government’s decision to begin consultations on a new national minimum wage is a development that Nigerian workers should welcome. After years of declining purchasing power and rising living costs, the prospect of an upward review of wages offers some relief to a workforce that has had to make difficult adjustments to survive. Food, transportation, rent, healthcare and education have all become increasingly expensive, while salaries have struggled to keep pace. For many households, the problem is no longer simply earning an income but making that income stretch far enough to meet basic needs. The confirmation by the Permanent Secretary, Federal Ministry of Labour and Employment, Dr Kamil Shoretire, that background discussions are already taking place is, therefore, encouraging. However, the government must ensure that the process produces a credible, sustainable and timely outcome. There is little doubt that the existing minimum wage has come under severe pressure from the changing economic circumstances. The ₦70,000 minimum wage introduced in 2024 was negotiated in a significantly different economic environment, and its purchasing power has since been affected by inflation and the rising cost of essential goods and services.

There is, nevertheless, a legitimate concern about the timing of the exercise. With the 2027 general election approaching, Nigerians will naturally be suspicious of any major policy that promises immediate financial relief to millions of voters. The government should not dismiss such concerns as political cynicism. Rather, it should address them through transparency and action. If the proposed wage review is genuinely motivated by the deterioration in workers’ purchasing power, the government should demonstrate this by announcing a clear timetable, making the negotiating process transparent and avoiding unnecessary delays. More importantly, it must avoid the mistake of treating the minimum wage as an isolated issue. Increasing the sum workers receive each month is useful only if the value of that income is protected. If wages rise by a substantial margin but food prices, transport fares, rents and other essential costs rise at an even faster rate, workers will once again find themselves back where they started. This is the fundamental weakness of a wage policy that is not supported by broader economic reforms. The government must therefore recognise that the real objective is to improve the purchasing power of workers. A higher salary that cannot buy significantly more food, pay for transportation or meet basic household expenses is not a meaningful improvement in living standards.

Inflation must occupy a central place in the discussion. It is difficult to maintain the real value of wages in an economy where prices continue to rise rapidly. The government must therefore see the minimum-wage review as part of a broader strategy for restoring economic stability. Improving domestic food production, reducing transportation and energy costs, strengthening the productive capacity of local industries and pursuing policies that support greater stability in the foreign-exchange market are all relevant to the wage question. The government cannot repeatedly increase wages while allowing the forces that erode those wages to continue unchecked. If that happens, every wage increase will eventually become another stretch of agony. The question of the naira is particularly important. Workers are paid in naira, and what matters to them is what that naira can purchase. A significant wage increase may provide immediate relief, but if the currency continues to lose purchasing power and businesses face rising costs of importing raw materials, machinery and other necessities, the resulting price increases will eventually affect consumers. The government must therefore pursue wage policy alongside policies that strengthen domestic production and reduce the economy’s vulnerability to external shocks.

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The states also have a major responsibility in this regard. The removal of fuel subsidy has significantly altered the revenue structure of the federation, with states benefiting from increased allocations in the period since the reform. Yet Nigerians are entitled to ask whether the additional resources are being translated into better public services and improved workers’ welfare. The public deserves greater transparency about how state governments are managing their resources, particularly when questions of workers’ salaries, infrastructure, healthcare and education arise. Governors explain their financial positions openly rather than simply declaring that they cannot afford higher wages. If a state genuinely lacks the capacity to meet its obligations, the public should be able to see the figures and understand the reasons. At the same time, governments that receive substantial public revenues should demonstrate that these resources are being used responsibly.

The private sector must also be taken seriously in the negotiations. A national minimum wage that is disconnected from the realities of businesses could produce consequences that ultimately hurt the same workers it is intended to protect. Small and medium-sized enterprises, in particular, face rising costs of energy, transportation, rent, finance and raw materials. If wage obligations rise without corresponding improvements in the business environment, some employers may reduce their workforce, increase prices or move further into the informal economy. None of these outcomes is desirable.

Nigeria should also begin thinking beyond the traditional cycle of minimum wage negotiations. At present, workers can experience several years of declining purchasing power before a formal review takes place. By the time negotiations begin, the gap between wages and the cost of living may already be substantial, and the process can quickly become confrontational. A more systematic approach is needed. Government should examine the possibility of establishing a transparent wage adjustment mechanism that takes into account indicators such as inflation, changes in the cost of living, productivity, economic growth and government revenue. Such a mechanism would not necessarily remove collective bargaining, but it would provide an objective basis for negotiations and reduce the likelihood of workers having to wait for a crisis before their wages are reconsidered. The government must also address the problem of implementation. It is not enough to announce a new minimum wage or pass the necessary legislation. Workers must actually receive the agreed sum.

At the same time, the government should remember that the minimum wage does not cover the entire Nigerian workforce. A large proportion of Nigerians earn their livelihoods in the informal sector, where incomes are not determined by statutory wage policy. Traders, artisans, farmers, casual workers and many small-scale entrepreneurs face the same inflationary pressures as salaried workers. For this reason, the new minimum wage should be accompanied by broader measures that reduce the cost of living. Affordable public transportation, improved healthcare, better access to housing, support for food production and policies that make small businesses more productive would benefit a much wider section of the population than a wage increase alone. The forthcoming negotiations therefore present an opportunity for the government to rethink how Nigeria approaches workers’ welfare. The immediate task is to agree on a realistic new minimum wage, but the longer-term objective should be to establish an economic environment in which workers do not continually lose purchasing power between wage reviews.