N500,000 minimum wage demand unrealistic now, says economist

An economist, Paul Alaje, has described Nigerian workers’ demand for a N500,000 minimum wage as unrealistic under current economic conditions, warning that such an increase could trigger further inflation.

Mr Alaje, the chief economist at SPM Professionals, however, said the current N70,000 minimum wage was inadequate and could not provide workers with a decent standard of living.

He spoke on Arise Television’s News Night on Friday amid a three-day warning strike by public sector workers under the aegis of the Joint National Public Service Negotiating Council (JNPSNC) from 2 to 4 October.

The workers are demanding a new minimum wage, an immediate increase in salaries and a reduction in the price of petrol to N500 per litre.

The demands were contained in a letter the council sent to President Bola Tinubu on 21 September. The strike notice was signed by the council’s National Secretary, Olowoyo Gbenga.

N500,000 wage demand

Mr Alaje said raising the minimum wage to N500,000 immediately could worsen inflation by increasing the amount of money circulating in the economy without a corresponding increase in production.

“If you raise salary to N500,000 today, it’s going to cause inflation to shoot up,” he said.

He said inflation remained a major challenge and that increasing workers’ nominal salaries without addressing the underlying cost of goods and services would not necessarily improve their living standards.

The economist said the debate should therefore focus less on the size of a worker’s salary and more on what that salary can actually buy.

What can N70,000 buy?

Mr Alaje said workers were right to be dissatisfied with the current minimum wage, recalling that he had warned labour representatives against settling for N70,000 when the wage was being negotiated in 2024.

“I told labour, when they were about to settle for N70,000, that in two or three years they’d regret it,” he said.

He said the purchasing power of the wage should be the central consideration in wage negotiations.

“Asking for more money has never solved our problem. The real question is: what can the money in your pocket buy?”

He asked whether a worker earning N70,000 could comfortably pay rent, feed a family or send children to school in major Nigerian cities.

“Are you able to send your children to school with N70,000? Are you able to pay rent in Lagos, Abuja, Port Harcourt, Kano, or Kaduna? Are you able to feed yourself?” he asked.

“What labour should be asking for is real value, not just a bigger number.”

Mr Alaje estimated that a wage of between N125,000 and N150,000 would be more appropriate under current conditions if adjusted for inflation.

He also advocated greater access to affordable healthcare and primary education, arguing that reducing the cost of essential services would increase workers’ real disposable income.

Why petrol remains expensive

Mr Alaje also addressed the sharp increase in petrol prices since the removal of the fuel subsidy in 2023.

Before the subsidy was removed, petrol sold for below N200 per litre in many parts of the country. Prices have since risen substantially, reaching around N1,450 per litre at the time of his remarks.

He said the increase should not be attributed solely to the removal of the subsidy, arguing that exchange-rate depreciation, inflation and global economic pressures had also significantly increased the cost of petrol.

“Subsidy’s gone, and we’re paying far more, not less,” he said.

“The exchange rate, inflation, and the war affecting major oil-producing regions — they’ve all pushed the cost onto us.”

According to Mr Alaje, the government’s economic strategy should move the country through four stages – crisis, stability, growth and prosperity.

He said some improvement had been recorded in the foreign exchange market, with the naira becoming relatively more stable.

“You’re not seeing as much shaking in the exchange rate anymore, it has settled around N1,330 to N1,350,” he said.

“But what matters is what that means for ordinary people, not just the numbers.”

‘Electricity is in recession’

Mr Alaje identified the power sector as one of the major constraints to Nigeria’s economic growth.

He said increased electricity supply would reduce production costs for businesses and improve the country’s productive capacity.

“One of the things that can transform this is energy,” he said. “Electricity is in recession.”

He argued that sustainable wage increases would be difficult to achieve without corresponding improvements in productivity.

N500 petrol: subsidy or intervention?

On the workers’ demand for petrol to be sold at N500 per litre, Mr Alaje said the outcome would depend largely on how the government implemented such a policy.

He distinguished between the former petrol subsidy regime and measures aimed at supporting domestic production.

“What made the old subsidy bad was that we were importing fuel — the money was leaving the country,” he said.

He argued that government support should instead focus on strengthening local production and manufacturers.

“The question now is: what can be done to support local manufacturers without taking money out of the government’s pocket?”

He cited South Korea, India and China as examples of countries that used investment in domestic production and manufacturing to move from economic crisis towards sustained growth.

Mr Alaje also questioned whether Nigeria’s recent economic growth was translating into improved living standards.

He said the economy had grown by around 3 to 4 per cent, compared with roughly 1 to 2 per cent under the previous administration.

But, he argued, growth figures alone do not tell the full story.

“The question is: what is happening to employment? Is poverty reducing or increasing?” he asked.

He cited World Bank figures which, according to him, show that more than 60 per cent of Nigerians live in poverty.

The argument highlights the difference between macroeconomic growth and household welfare.

An economy can record positive growth while households continue to struggle if rising prices, unemployment and weak purchasing power outpace increases in income.

Workers’ demands

The JNPSNC warning strike began at midnight on 2 October and is to run through to 4 October, with workers across the federal, state and local government levels directed to participate.

The council had earlier written to the presidency on 21 September, setting out its demands and warning of industrial action if the government failed to respond.

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Nigeria’s current minimum wage of N70,000 was approved in 2024 following negotiations between the government, labour and other stakeholders.

The wage was introduced after the removal of the petrol subsidy in May 2023, a policy the federal government said was necessary to reduce waste and redirect public resources towards development.

Since then, the sharp increase in the cost of petrol and other essential goods has intensified the debate over whether the current minimum wage is sufficient to meet workers’ basic needs.

Mr Alaje’s position presents the central dilemma in that debate: increasing wages without increasing production could fuel inflation, but leaving wages unchanged while prices continue to rise would further erode workers’ purchasing power.

The challenge for policymakers is therefore not simply how high to set the minimum wage, but how to increase workers’ real incomes without creating another round of price increases.