3 months ago
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Associations and operators of small businesses in Nigeria have declared that Small and Medium Enterprises across the country cannot pay the N70,000 minimum wage that was recently approved by the Federal Government.
President Bola Tinubu recently approved a new minimum wage of N70,000 for Nigerian workers and pledged to review the national minimum wage law every three years.
The President of the Senate, Senator Godswill Akpabio, had announced during the signing ceremony of the Minimum Wage Act (Amendment) Bill into law that the new national minimum wage applies to the entire nation, including to the Federal Government, states, Local Governments, private sector, and even individual employers.
The National Bureau of Statistics stated that at least, 39,654,385 micro, small, and medium enterprises were in operation in Nigeria as of December 2020 as against 41,543,028 million that were in existence in 2017.
Also, the 2023 Social Statistics Report by the National Bureau of Statistics, indicated that Nigeria has seen a significant decline in small-scale industrialists over the past two years due to economic challenges.
The report indicated that the number of small-scale industrialists dropped by 45 per cent, from 246,200 in 2020 to 170,098 in 2022. This decrease threatens Nigeria’s goal of becoming a trillion-dollar economy, as small-scale industries are essential for economic growth.
Operators said millions of small-scale businesses risk closure, and there is a high tendency to lay off workers because it will be difficult to pay the new minimum wage of N70,000, especially with the hostile economic situation nationwide.
The National Vice President of the Nigerian Association of Small-Scale Industrialists, Segun Kuti-George, said, “Business owners are already battling with the high cost of production, and this is serious especially when business owners are trying to do all that they can to reduce cost.
“The new minimum wage is a good step in the right direction which is what the labour unions have been clamouring for a long time, and we have nothing against it, but whether we as small businesses can pay or not is another major issue.
“If small businesses pay N70,000, it may lead to the downsizing of workers and closure of some companies, which will escalate the unemployment rate in the country.”
He noted that for small businesses, an increase in costs would become a significant burden.
“Over the past year and a half, raw material costs have risen by over 100 per cent. Raising product prices by the same amount isn’t feasible due to market alternatives. Higher wages would reduce profits, potentially leading to losses, and many businesses are already looking for ways to cut costs,” Kuti-George said.
He emphasised that while the new minimum wage benefits large companies and government agencies that can afford it, it is not realistic for small businesses in the current economic climate.
Also, the Head of Corporate Affairs Unit at the Small and Medium Enterprise Development Agency of Nigeria, Alhaji Moshood Lawal, said, “It is not feasible and unrealistic for small businesses to pay the new minimum wage of N70,000.”
He noted that there had been a debate on whether to implement a minimum wage or a standard salary for civil servants, stressing that the decision to enforce a minimum wage on small businesses would be a burden.
“Currently, small businesses face a dilemma: either lay off workers because they cannot afford to pay the N70,000, or automate their operations, thereby reducing the need for human labour to remain viable,” he added.
On his part, the General Secretary of the Federation of Informal Workers Organisation of Nigeria, Gbenga Komolafe, said, “Some private sector operators have never been able to pay the minimum wage.”
He pointed out that in other parts of the world, social protection programmes exist to address this reality.
“In some Western countries, if employers pay below the minimum wage, the government steps in to bridge the gap,” he added.
However, the Deputy Executive of the Nigeria Association of Small and Medium Enterprises, Samson Gbadamosi, noted that small businesses within NASME were part of the organised private sector.
Gbadamosi said, “The OPS actively participated in the minimum wage negotiations with labour unions and the Federal Government. Initially, the OPS proposed a minimum wage of N66,000. However, the government eventually agreed to a new minimum wage of N70,000.
“The OPS supported this final figure due to their involvement in the negotiation process. Consequently, small businesses will align with the OPS’s decision and implement the new minimum wage.”
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