By Victor Ogiemwonyi
A living wage is more than a budgetary consideration. While it may appear as an expenditure from one end, it is also a receipt to be spent within the same economy on the other. The debate over whether to increase wages often focuses on cost and inflationary risks, but rarely on the spending impact of those who receive wage increases.
Government Concerns vs. Workers’ Realities
Government is burdened with multiple responsibilities, and finding resources to meet them is always a challenge. Inflationary effects of wage increases are also a legitimate concern. Yet, balancing these two competing propositions should be the real focus.
Workers, on the other hand, face precarious economic pressures from reforms that have offered little support.
A living wage is essential to ensure they share in the benefits of reforms, however modest. In Nigeria, where public infrastructure such as mass transportation, electricity, and healthcare is almost nonexistent, wage increases are not just desirable, they are necessary.
Inflation and Wage Adjustments
Critics argue that doubling wages could fuel inflation. However, evidence suggests otherwise. The last wage increase, from ₦35,000 to ₦70,000, did not produce runaway inflation. Prices rose briefly but moderated, with inflation falling from over 30% to around 16%.
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Despite this adjustment, the current minimum wage has not achieved its intended purpose. Rents remain unaffordable, food prices continue to rise, and food inflation persists as a core metric. Doubling wages again is necessary to restore purchasing power, at least for the next two years, before another adjustment. In many countries, wages are indexed to inflation to ensure they remain “living wages.”
Everyday Realities of Rising Costs
The case for wage increases becomes clearer when everyday consumer spending is considered:
• Petrol has risen from ₦200 per litre to an average of ₦1,500.
• Airfares for Lagos–Abuja round trips have jumped from ₦150,000 to ₦400,000.
• Electricity tariffs (Band A–C) average, have increased from ₦7/kWh to ₦21/kWh.
• Rents in urban areas have doubled.
• Food prices remain out of reach for many households.
These realities underscore the urgency of doubling wages to match the economic environment.
Wages as Economic Stimulus
Beyond alleviating hardship, wage increases can stimulate growth. Higher wages boost consumer spending, which modern economists recognize as a key driver of national economic growth. Expanding economic activity through wage increases is the ingredient Nigeria needs to lift people out of poverty.
This presents a “chicken and egg” dilemma: do we stimulate the economy with wage increases, or do we control wage costs and inflation first?
My position is clear, double wages now, stimulate the economy, and let inflation filter through.
Inflation as Growth Potential
I have long argued that inflation reflects an economy’s aspirational growth rate. Nigeria’s current inflation of 16% represents the growth rate needed to eliminate poverty. We must tolerate some inflation to accelerate growth. The Asian economic miracle of the 1980s did exactly this, growing rapidly out of inflation and high interest rates before stabilizing into sustained growth.
Funding Wage Increases
The question of funding wage increases often arises. The answer lies in curtailing government waste, which is visible everywhere. The severe erosion of purchasing power demands urgent action. Doubling wages will allow workers to afford basic necessities food, housing, transport, and healthcare, and prevent them from falling deeper into poverty.
Social Stability and Professional Retention
Wage increases also have broader social benefits. They can slow the mass exodus of healthcare workers and other professionals, while reducing insecurity linked to youth unemployment. Poverty fuels instability, and doubling wages offers an immediate solution.
Role of States in Wage Reform
Structural challenges of states being unable to pay salaries have been addressed by reforms. States now receive larger allocations from FAAC. Forward-thinking governors need not wait for federal action to initiate this, they can declare wage increases in their states. Resources exist, but are often wasted on questionable projects. Redirecting funds to wages would stimulate growth more effectively.
Complementary Reforms: Healthcare and NHIS
Other reforms can amplify the impact of wage increases. Expanding enrollment in the National Health Insurance Scheme (NHIS) by having states pay premiums would strengthen healthcare institutions and create a healthier, more productive population.
Nigeria’s circumstances demand bold action. Doubling wages now will stimulate growth, reduce poverty, and strengthen social stability.
It is not socialism, it is pragmatic economics.
Advanced economies practice similar measures, as seen during COVID-19 when governments provided direct support to citizens.
Nigeria faces comparable circumstances today. A living wage is not optional, it is essential.
Victor Ogiemwonyi is a retired Investment Banker and writes from Ikoyi Lagos.
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