Nigeria’s new minimum wage hike will only help a small portion of the population, according to the World Bank, affecting only 4.1% of Nigerians of working age.
Alex Sienaert, World Bank senior economist for Nigeria
This was disclosed by World Bank senior economist for Nigeria Alex Sienaert on Thursday in Abuja at the release of the Nigeria Development Update (NDU) report.
Sienaert clarified that although the pay increase is substantial, it would have little immediate impact because it mainly impacts those who get formal wages.
“The Federal Government of Nigeria increased the minimum wage, which will affect only a small share of the population. Raising the minimum wage directly affects only 4.1% of working-age Nigerians,” he said.
Nigeria Requires Improved Employment.
Sienaert underlined the necessity for productive occupations that offer stable livelihoods, emphasizing that combating poverty calls for more than just increasing employment.
The World Bank’s recent report emphasizes that employment alone is not a guarantee of leaving poverty, writing, “Being employed, however, is no guarantee of being able to overcome poverty. Many jobs are not productive and so pay enough to support life beyond poverty.”
While generating jobs is crucial for equitable growth, it also stated that these jobs must take advantage of Nigeria’s expanding population and its potential “demographic dividend.”
The research also emphasized the narrow scope of laws aimed at formal wage earners, such as minimum wage laws and public sector employees, adding that these laws frequently ignore the lowest people.
It said: “Policy initiatives that cover only highly-formalized wage jobs – including policies focused on public sector workers and minimum wage legislation – may not reach many of Nigeria’s poorest workers directly.”
“While increasing the demand for wage workers is a key policy priority, the vast majority of employed Nigerians – especially from poorer households – do not currently hold such jobs. This limits the direct effects that policies focusing on subsets of wage workers can have on poverty.”
“In particular, public sector wage jobs are not only rare and disproportionately occupied by comparatively better off Nigerians; they also pay significantly more than private sector and other types of wage jobs, even after taking individual characteristics into account, suggesting there are additional barriers to entry into public sector jobs, which may lock out the poor and economically insecure.”
“Similarly, minimum wage legislation may not directly reach the poorest workers because they do not hold wage jobs and around a third of private sector wage earners receive less than minimum wage anyway, demonstrating that enforcement is imperfect,” the report added, pointing out that approximately one-third of private sector employees make less than the official minimum wage.
In order to successfully eliminate poverty, the research warned that raising wages and public sector compensation could put a strain on government finances and suggested that more comprehensive employment policies are required.
What To Note
In the first quarter of 2024, 84% of Nigeria’s working-class population is self-employed, according to a previous Nairametrics analysis. This represents a decline from the 87.3% reported in the third quarter of 2023.
According to the research, the self-employment rate has decreased by 3.3% points, indicating a change in the labor market.
Nigeria is still struggling with a high percentage of informal employment.
Informally employed people makeup 92.7% of the nation’s working population, according to the NBS study.
According to recent revelations by Dr. Tope Fasua, Special Advisor to the President of the Federal Republic of Nigeria on Economic Affairs, a sizable portion of Nigerians operate in unstructured settings.
He pointed out that the National Labour Congress (NLC) controls wage employment, which employs only roughly 7-8% of the nation’s working population.
Approximately 81% of Nigerians in the labour pool do not work in any productive sector of the economy, according to Taiwo Oyedele, the chairman of the Presidential Committee on Fiscal Policy and Tax Reforms.
According to a survey by the African Development Bank (AfDB), around 34.3% of Nigerian workers who are 15 years of age or older live below the poverty line even though they are employed. The Nigeria Country Diagnostic Note (CDN) 2023 states that low-skilled and low-paying occupations have left many Nigerian workers impoverished.
