On Thursday 18 April, Nigeria’s [wiki]President Muhammadu Buhari[/wiki] signed into law the Minimum Wage Repeal and Enactment Act 2019. The Act will raise the country’s monthly minimum wage from 18,000 naira to 30,000 ($98). It takes immediate effects in both the public sectors (i.e. industries under direct government control) and private sectors (i.e. industries not under direct government control).
WHY WAS THIS ACT NECESSARY?
The Act is worth celebrating as a key victory for Nigerian workers. Nigeria has the largest economy in Africa, and its economy is largely dependent on the oil industry.
Although Nigeria’s economy is recovering from recession with the recent rise in the oil price, the country still struggles to improve the standard of living. According to the World Poverty Clock, Nigeria had 87 million people in extreme poverty (i.e. living on less than $1.9 a day) in 2018, the largest number in the world. Increasing the minimum wage will play a crucial part in combating poverty.
WHAT DOES THIS MEAN FOR WORKERS?
Though President Muhammadu Buhari’s effort is commendable, more can be done in the future. First, it is critical to ensure that the Act is actually well-enforced because this will affect whether the new law can realise its full potential in improving incomes. It requires the authorities to apply legal penalties, such as fines, on employers if they fail to meet the minimum wage.
There are also voices calling for a greater increase in the minimum wage. When trade unions went on strike last year, they initially demanded a rise of the minimum wage to 50,000 naira. Moreover, not all Nigerian workers can benefit from the Act because it does not apply to small businesses with fewer than 25 employees.
Raising the minimum wage alone is not enough. Another key driver of poverty in Nigeria is high unemployment rate. [wiki]Milton Friedman[/wiki], an American economist, argued that raising the minimum wage would increase unemployment rate because some firms cannot afford to pay all the workers.
Despite this, the new law is still worthwhile. After all, it can improve the standard of living of those in work and, more importantly, businesses will adjust themselves in the long run. Yet, it needs to work hand in hand with measures targeting unemployment. Developing non-oil sectors to diversify the economy (i.e. to develop a wider range of industries) is one possible way to create more job opportunities.
On a positive note, there is still much to look forward to. President Muhammadu Buhari has shown the political will to increase Nigerians’ income. Politicians like the Governor-elect [wiki]Ahmad Fintiri[/wiki] have promised to further raise the monthly minimum wage to 32,000 naira. Thus, it will be no surprise if the minimum wage is further increased or extended to employees of small businesses in the near future.
The new law provides a solid foundation for the implementation of other poverty reduction measures. Whilst Nigeria still has a long way to go before eliminating extreme poverty, so far there is no lack of reasons to remain optimistic.