The World Bank has said that the recent increase in Nigeria’s minimum wage will only benefit a limited segment of the population, impacting just 4.1% of working-age Nigerians.
Alex Sienaert, the World Bank’s lead economist for Nigeria, shared this during the launch of the Nigeria Development Update (NDU) report in Abuja on Thursday.
Sienaert explained that while the wage hike is significant, its direct influence will be minimal, as it primarily affects formal wage earners.
“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 needs more productive jobs
Sienaert emphasized that addressing poverty requires more than employment expansion, stressing the need for productive jobs that provide sustainable livelihoods.
The new report by the World Bank highlights that employment alone is not a guarantee of escaping poverty, noting, “Being employed, however, is no guarantee of being able to escape poverty. Many jobs are not productive and therefore remunerative enough to afford a life beyond poverty.”
It added that while creating jobs is essential for inclusive growth, those jobs must harness Nigeria’s growing population and tap into its potential “demographic dividend.”
The report further highlighted the limited reach of policies focused on formal wage earners, such as public sector workers and minimum wage legislation, noting that these policies often bypass the poorest workers.
It read: “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.”
It also noted enforcement challenges, with about one-third of private sector employees earning less than the official minimum wage, stating, “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 cautioned that increasing wages and public sector pay could strain government finances, suggesting that broader employment policies are needed to reduce poverty effectively.
What you should know
Nairametrics earlier reported that 84% of Nigeria’s working-class population is self-employed in the first quarter of 2024, reflecting a decrease from the 87.3% recorded in Q3 2023.
- The report indicates a decline of 3.3% points in the self-employment rate, highlighting a shift within the labour market.
- Also, Nigeria continues to grapple with a high rate of informal employment.
- According to the NBS report, 92.7% of the country’s employed population is engaged in informal work.
- Dr Tope Fasua, Special Adviser to the President of the Federal Republic of Nigeria on Economic Affairs, recently disclosed that a significant number of Nigerians work in unstructured environments.
- He noted that only about 7-8% of the working population in the country is under wage employment, which is controlled by the National Labour Congress (NLC).
- The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, earlier said that about 81% of Nigerians in the employment pool are not in any productive sector of the economy.
- An African Development Bank (AfDB) report noted that about 34.3% of Nigerian workers, aged 15 and older, are working poor, living below the poverty line despite being employed. According to the Nigeria Country Diagnostic Note (CDN) 2023, many workers in Nigeria are trapped in poverty due to low-skilled and low-wage jobs.
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