The World Bank has revealed that Nigeria’s recent increase in minimum wage will directly benefit only 4.1% of working-age Nigerians, impacting a limited segment of the population. Alex Sienaert, the World Bank’s lead economist for Nigeria, made this statement during the launch of the Nigeria Development Update (NDU) report in Abuja on Thursday.
Sienaert highlighted that while the wage hike is a notable step, its direct influence remains minimal as it primarily affects formal wage earners. He stated, “The Federal Government of Nigeria increased the minimum wage, which will affect only a small share of the population.”
Sienaert stressed the necessity of creating productive jobs to combat poverty, emphasizing that merely increasing employment is insufficient. The report pointed out that being employed does not guarantee an escape from poverty, noting, “Many jobs are not productive and therefore remunerative enough to afford a life beyond poverty.”
The World Bank’s report underscores the importance of harnessing Nigeria’s growing population to unlock its potential “demographic dividend” for inclusive economic growth. It warns that policies targeting formal wage earners, such as minimum wage legislation, often overlook the poorest workers.
The report highlighted that “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.” It further elaborated that the majority of employed Nigerians, particularly those from poorer households, do not hold formal wage jobs, which limits the effectiveness of such policies in addressing poverty.
Sienaert pointed out that public sector wage jobs, which tend to pay significantly more than private sector positions, are rare and primarily occupied by individuals from comparatively better-off backgrounds. This creates additional barriers to entry for the economically insecure.
The report also addressed enforcement challenges, noting that about one-third of private sector employees earn less than the official minimum wage. It stated, “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.”
In conclusion, the report cautioned that increasing wages and public sector pay could strain government finances, advocating for broader employment policies to effectively reduce poverty in Nigeria.
