Addressing Nigeria’s Cost of Living Crisis: Why N30,000 or N70,000 Minimum Wage Won’t Fix the Real Problem – Uche Ezekwueme

The tragic deaths of approximately 60 people, including children caused by stampedes at different events promising food and cash handouts during 2024 ember months alone, reveal the severity of hardship experienced across the nation. The Nigerian Labour Congress (NLC) cites the government’s insensitivity to the worsening cost of living crisis.

Since the emergence of President Bola Ahmed Tinubu as the elected leader of the country in 2023, there has been an unprecedented shakeup in the economy. With the introduction of unexpected economic policies—including fuel subsidy removal, foreign exchange market reforms, power sector reforms, and yet-to-be-implemented tax reforms, among other financial measures aimed at stabilising the economy in the long run—the Nigerian people have been bearing the brunt of these discomforting changes.

The Cost of Living Concerning Nigeria: Are Nigerians Living or Surviving?

The continual increase in the cost of living for Nigerians is a significant cause for concern. The pressure of rising living costs has been immense, as the majority of Nigerians can hardly afford to meet their basic needs, such as food, transportation, healthcare, and housing. According to the National Bureau of Statistics (NBS), inflation in Nigeria reached an all-time high of 33.2 per cent in March 2024.

Food inflation, according to the agency’s report, reached a soaring 40 per cent. This uncontrolled rise in food prices has left many families in despair. As it stands today, a 50kg bag of rice—a staple food for Nigerian households—now sells for ₦105,000, up from ₦25,000 in 2022. The same trend applies to other staple foods. These combined pressures are pushing millions of Nigerians further into poverty and food insecurity, underscoring the urgent need for targeted interventions and sustainable solutions to stabilise food prices and ensure access to nutritious food for all.

The removal of fuel subsidies in 2023 has had a devastating impact, particularly on transportation. Petrol prices surged from ₦185 to over ₦1,000 per litre, effectively doubling transportation costs. For many Lagos residents, this means spending more than half of their income just to get around, leaving little for other necessities. These challenges are exacerbating food shortages and driving prices even higher, underscoring the urgent need for comprehensive solutions that address the root causes of this crisis.

These policies, though necessary, have unfortunately positioned Nigeria as the country with the second-largest impoverished population in the world, behind India. This implies that the purchasing power of the average Nigerian has declined significantly since the introduction of these economic reset policies. According to the National Bureau of Statistics, an estimated 133 million Nigerians are multidimensionally poor. This is a far cry from the Multidimensional Poverty Index of 2017, which reported that 82.9 million Nigerians were living below the poverty line.

Is the Nigerian Minimum Wage of N70,000 Enough to Combat the Rising Cost of Living?

As required by law, the Nigerian federal government, through the National Wages Act 2024, agreed to ₦70,000 as the new minimum wage for Nigerian workers after months of intense negotiation between the federal government, its agencies, the private sector, the Nigerian Labour Congress, and other stakeholders. This represents a 133% increase from the ₦30,000 wage implemented in 2019. Although labour unions insisted on a ₦100,000 wage, arguing that higher wages are essential for workers to cope with the rising cost of basic goods and services, the federal government, including the states, maintains that they cannot afford to pay more than the proposed rate.

Despite the implementation of this wage increase in July 2024, intended to mitigate the adverse effects of government policies and help Nigerians cope with the ever-increasing cost of living, its impact has been insignificant. This is because wage increases primarily benefit formally employed workers in the government or private sector, while self-employed individuals, the underemployed, and entrepreneurs bear the brunt of the harsh economic conditions. The majority of Nigerians work in the informal sector.

Furthermore, the new minimum wage is unimpressive due to the naira’s depreciation against the dollar in recent years. The ₦70,000 minimum wage (approximately $43.19) is significantly less valuable than the ₦30,000 implemented in 2019 when compared with the respective exchange rates. Moreover, Nigeria’s minimum wage is undesirable compared to some other African economies. For instance, the minimum wage in Kenya and Egypt is approximately $115 and $125 per month, respectively.

What Needs To Be Done To Solve the Cost of Living Crisis

To combat Nigeria’s cost of living crisis, the government and stakeholders must implement sustainable, long-term solutions addressing root causes. Economic diversification is crucial. Nigeria’s over-reliance on oil exports has created a vulnerable economy with limited job creation. Investing in agriculture, manufacturing, and technology will create jobs, boost local production, and reduce import dependence. Revitalising agriculture through modern techniques, better credit access, and improved infrastructure can combat food inflation and enhance food security. Supporting manufacturing SMEs will increase domestic production, stabilise prices, and generate employment.

Strengthening the naira and addressing the foreign exchange crisis is also vital. The CBN should attract foreign investment, increase export earnings (especially non-oil exports), build foreign reserves, and curb capital flight. Infrastructure improvements are essential for reducing business costs and enhancing productivity. Reliable electricity, efficient transportation, and clean water are fundamental for businesses and households.

Why Data is Important in Solving This Cost of Living Crisis

To find short and long-term solutions to Nigeria’s cost of living crisis, data is essential. Data can be used to identify the most vulnerable segments of the Nigerian population based on their income distribution, poverty levels, and spending patterns. This allows for targeted social support programs and financial assistance. Moreover, data can help identify key price drivers and inform appropriate responses.

Since the supply chain of essential products significantly influences their prices, data can help deduce important information that can improve the production, distribution, and transportation of these products, thereby helping to remove bottlenecks that can cause inflation. Additionally, ordinary citizens can be empowered by data-powered tools that help them make better buying decisions and provide information on local food sources and affordable options.

One reason why government policies on social safety nets, job creation and skills development, progressive taxation, and other policies aimed at ensuring a sustainable economy often fail is that they are frequently implemented without adequate data-driven analysis. With comprehensive data to understand critical areas of the economy that require attention, more effective and targeted policies can be developed.

To this end, the Nigerian government must prioritize the use of data to tackle this crisis. Governments at all levels and the private sector must prioritize long-term economic planning, projects, and policies that are informed by real-time data.