The new minimum wage signed into law by President Bola Tinubu has come with mixed feelings for Nigerian workers, with many describing it as a double-edged sword.
The President signed the bill at the State House in Abuja on Monday, 29th July, shortly after the National Assembly approved the Minimum Wage Act, 2024, raising the National Minimum Wage from ₦30,000 to ₦70,000.
A delegation from the National Assembly, headed by Senate President Godswill Akpabio, along with some members of the House of Representatives, attended the historic event.
The Special Adviser to the President on Senate Matters, Basheer Lado, said the signing of the wage bill into law represented a fulfilled promise.
“The signing of the Minimum Wage Bill into law by His Excellency, President Bola Ahmed Tinubu, is both a promise fulfilled and a demonstration of his people-centric governance model,” Lado said in a statement. “Tinubu promised to pay a living wage to Nigerian workers during his election campaigns, and he has kept that promise.”
The signing of the Minimum Wage Bill concluded months of negotiations between government officials, Labour unions, and the private sector.
Labour unions had insisted on a new minimum wage following the removal of the fuel subsidy and the floating of the naira, which caused a significant rise in the cost of goods and services, including food.
Labour unions had initially proposed N650,000 as the new minimum wage, and later ₦494,000, but after a series of negotiations, the workers demanded ₦250,000, while the government offered ₦60,000, and later increased its offer to N62,000. However, on July 18, the Federal Government and the unions agreed on ₦70,000 as the minimum wage.
The minimum wage in Nigeria has been revised a number of times but has not kept pace with the cost of living. It was N250 in 1991, then moved to N5,500 in 2000, N18,900 in 2011, and N30,000 in 2019.
Not all workers will benefit from the new minimum wage
The raising of the national minimum wage to N70,000 per month, aimed at addressing the economic challenges faced by workers amidst persistent inflation and rising living costs, has sparked a complex and multifaceted impact across the nation’s economic landscape.
For many Nigerian workers, the new minimum wage has been nothing short of a blessing. This significant boost in income has rippled through households across the country, lifting financial burdens and improving quality of life. Markets and shops have seen an uptick in sales as workers, now with more disposable income, are spending more on goods and services. The vibrant buzz in local markets is a testament to this newfound economic activity.
But not all workers will benefit from the increment. Reports state that the Tripartite Committee on the New National Minimum Wage, before it concluded its work on June 5, 2024, recommended the categories of workers who are not eligible to receive the minimum wage.
A 10-member sub-committee of the Tripartite Committee, which included the Minister of State for Labour and Employment, Nkiruka Onyejeocha, Governor Mohammed Bago of Niger State, Labour leaders, private sector representatives, and four officials from the National Salaries, Incomes, and Wages Commission, among others, recommended in a report that employers with a minimum of 10 employees be included, as opposed to the 25 employees stipulated in the now-repealed 2018 Minimum Wage Act.
This recommendation also covers other categories of workers exempted from the national minimum wage. Instead of exemptions based on the capacity to employ, exemptions should be determined by revenue or net income, either quarterly or annually. Enforcement mechanisms should have the ability to access employer organizations’ accounts to verify compliance.
“Rather than primarily focusing on monthly salaries, which apply mainly to government and organized private sector employment, an hourly, daily, and weekly minimum wage should be introduced for establishments or businesses that pay after work or those opting to pay weekly, in addition to the monthly payment common in the organized private sector and government sectors. This will address the needs of part-time and piece-rate employees,” the committee recommended.
It also suggested introducing flexibility to exemptions, allowing organizations to apply for exemption. To support startups and entrepreneurship, the number of years since the business was established could be considered.
In the opinion of the committee, to qualify for exemption from the mandatory payment of minimum wage, a business must fall under certain criteria for exemption. These criteria include being a nano business (an enterprise managed by 1-3 individuals with capital below N50,000) or a micro business enterprise, having 10 or fewer employees, being a startup business, having legal or statutory exemption, or operating under a commission.
Additionally, exemptions include establishments with less than N50 million in quarterly revenue or N200 million in annual revenue, organizations with fewer than 10 employees, businesses that have existed for no more than three years, industries with staff remuneration and compensation regulated by other Acts of the National Assembly, or any business that the Minister of Labour and Employment or the Executive Chairman of the National Salaries, Incomes and Wages Commission deems reasonably justified for a waiver or exemption.
Such waivers shall only be granted based on evidence of lower revenue, insolvency, debt crisis, or other justifications threatening the establishment’s existence, and shall not apply to governments or their ministries, departments, and agencies.
Before making its recommendations, the committee considered the exemption of workers in seasonal employment, such as those in agricultural farmlands, and the exemption of individuals working on vessels or aircraft governed by laws regulating merchant shipping or civil aviation.
The committee also noted the wage pattern in the formal sector, including governments, corporate organizations, and other organized private sector businesses, where salaries are typically paid monthly. Workers and their employers in this category are usually the focus of national minimum wage laws.
However, there is a significant challenge regarding coverage or compliance with the national minimum wage even among this category of employers.
Consequently, it is challenging to obtain an accurate assessment of the pattern, either because some establishments strategically avoid the threshold to shortchange workers, or, in the case of state governments, refuse to comply with the law.
It highlighted “the wage pattern in the informal sector, where workers lack a consistent earning standard, with wages being varied and multi-dimensional”.
“Compensation and remuneration in this sector range from commission-based payments to piece-rate work. Some workers are paid daily after business hours, depending on daily sales. Others are employed as apprentices, working and learning while contributing to the business’s growth, with an agreement to receive a share of the business, become partners, or receive settlements after a certain number of years,” the committee said.
The sub-committee considered the rationale, justification, and objective for excluding organizations from mandatory compliance with the national minimum wage laws based on their number of employees.
In its justification for exemption, the sub-committee noted that many organizations with relatively small workforces generate multi-billion naira in annual revenue, yet do not voluntarily compensate their junior staff with amounts exceeding the minimum wage standard.
The sub-committee also found that this concept of exemption is even discouraged by the International Labour Organisation, labeling it as unfair to the lowest earners in society
The sub-committee contended that even if this type of exemption becomes necessary, using 25 employees as the baseline for such an exemption is unjust and impractical.
