The age-old saying “two wrongs don’t make a right” resonates strongly in the face of Nigeria’s recent attempt to introduce a new minimum wage. While the need to ensure a livable wage for workers is commendable, the policy’s timing and implementation approach may have far-reaching and devastating consequences for an already fragile economy.

Although it’s undoubtedly concerning that Nigerian senators earn and spend extravagant amounts, the question remains: Do we perpetuate harmful practices to exacerbate our economic woes, or do we strive to find viable solutions to our economic challenges? This critical question should be at the topmost of every Nigerian’s mind. 

At the heart of the matter lies a pressing concern: income disparity. The stark contrast between a senator’s monthly basic salary of ₦2,484,245, regardless of education level, and a professor’s maximum earnings of ₦416,000 highlights the wide gap between the elite and the average Nigerian. This stark contrast between the senators’ extravagant lifestyle and the common man’s struggles fuels social unrest, highlighting the urgent need for a more equitable and just system. 

While a higher minimum wage may seem like a solution, implementing it without a comprehensive strategy to boost productivity and economic growth is akin to building on shaky ground — doomed to crumble. 

Let us examine the intricacies. 

A significant increase in the minimum wage will mean more money for people to spend. This will increase the amount of money in circulation, potentially leading to a spike in the inflation rate. In 2000, inflation rose 23 per cent, and after that, President Obasanjo increased the minimum wage. Increased wages trigger an increased demand for goods and services, which, if not matched with increased supply, will cause a rise in the prices of goods and services. This will lead to inflationary pressures that will erode the purchasing power of the very workers the wage increase was meant to help. This is counter-productive.  

Moreover, small and medium enterprises (SMEs), which form the backbone of Nigeria’s economy, will struggle to meet these new wage demands. To meet up, some of these businesses may be forced to lay off a large portion of their staff, thus contributing to the existing problem of unemployment. In addition, with Nigeria’s current revenue generation challenge and dwindling oil proceeds, can the government afford to pay workers their salaries consistently? 

According to research by the National Bureau of Economic Research, increases in minimum wage often result in reduced employment opportunities for low-skilled workers, a scenario that Nigeria cannot afford.  Consequently, the policy, intended to alleviate poverty, might lead more families into financial instability.

Crucially, about 15 states are yet to pay the existing minimum wage as of November 2023. According to Jane Eze, a teacher in Anambra State, ‘’the state government has not implemented the ₦30,000 minimum wage ever since the  bill was signed, now how will they pay this one they are demanding?’’  

Furthermore, the impact of the proposed minimum wage increase on the government’s finances cannot be ignored. Currently, Nigeria’s debt crisis is a pressing concern, with the latest figures from the National Bureau of Statistics (NBS) revealing a staggering total external debt of ₦38.22 trillion (US$42.50 billion) in the last quarter of 2023, complemented by a total domestic debt of ₦59.12 trillion (US$65.73 billion). 

The International Monetary Fund has repeatedly warned about the dangers of Nigeria’s growing debt profile, emphasising the need for fiscal prudence. However, this alarming debt burden will worsen if the government attempts to sustain the proposed minimum wage, as it would necessitate more borrowing, further plunging the economy into chaos and instability. Also, with a burgeoning wage bill, the government might be forced to cut down on essential services, leading to long-term negative implications.

It is also important to state that the Nigeria Labour Congress (NLC) is fighting for only a minute portion of Nigeria’s working population, less than one per cent of its workforce. Yet, all Nigerians will feel the negative impact of its actions. In 2010, the NLC requested a 600% increase, followed by a 211% increase in 2016 and a 66.67% increase in 2019. Now, the group is requesting a staggering 1545% wage increase. This will harm the economy. 

Rather than a blanket increase in the minimum wage, a more proper approach is needed. The government needs to contemplate elevating workers’ salaries to balance with inflation levels to effectively uphold living standards. Policymakers should adopt a flexible wage policy that responds to inflation fluctuations, enabling workers to sustain their purchasing power amidst economic shifts. 

Moreover, the government should consider removing import duties on food and enhancing vocational training and skill acquisition programs to empower more Nigerians to be self-employed and entrepreneurial, thus reducing the dependency on formal employment. This approach addresses the immediate need for higher incomes and lays the groundwork for sustainable economic development.

Additionally, tackling corruption and wasteful spending is crucial. The public outcry against the high earnings of Nigerian senators is a call for accountability and transparency in governance. Reducing the cost of governance can free up resources invested in critical sectors such as health and transportation infrastructure that directly benefit the people. 

In conclusion, while the intent behind the new minimum wage is commendable, its implementation method poses a risk to the Nigerian economy. It’s high time Nigerian leaders made tough but necessary decisions that address the root causes of the country’s economic challenges rather than opting for short-term fixes that could lead to long-term harm. 

Instead of further crumbling the economy, the focus should be on working towards sustainable solutions that uplift all Nigerians. This means prioritising economic policies that promote ease of trade, job creation, and equitable distribution of resources. Only by addressing these fundamental issues can we hope to create a prosperous and inclusive Nigeria.

Onyekwelu is an analyst with SBM Intelligence