As the struggle for a new minimum wage continues, experts are concerned that the N250,000 minimum wage request by Labour unions will have a long-lasting effect on Small and medium-sized enterprises (SMEs) in Nigeria.
Recall that Labour unions reduced their demand from N494,000 to N250,000 after the Federal Government increased its offer of a new national minimum wage to N62,000. According to the extant law on minimum wage, which is the National Minimum Wage Act 2019, the national minimum wage expires after five years.
SMEs have faced several challenges in Nigeria over the years, from lack of access to finance to insecurity, to regulatory environment, and economic instability. They have had to stay afloat, finding several ways to survive. With this new minimum wage demand, Christian Okoye, an economist, fears it could have negative effects “if other independent variables like exchange rates, etc., are very volatile and unstable, particularly in a shrinking economy like Nigeria.”
Providing a way out, Okoye suggested that providing subsidies or grants to SMEs in certain industries or sectors that are heavily affected by the minimum wage increase can offer targeted support where it is most needed.
“ A gradual implementation of the minimum wage increase over time will allow SMEs to adjust their budgets and operations. This phased approach can help mitigate the immediate financial strain on these businesses. Secondly, offering tax incentives such as breaks or reductions to SMEs that comply with the minimum wage law can help offset the increased labor costs. This financial relief can make it more feasible for businesses to adhere to the new regulations without sacrificing jobs.
“Additionally, providing subsidies or grants to SMEs in certain industries or sectors that are heavily affected by the minimum wage increase can offer targeted support where it is most needed. These financial aids can help cushion the impact on particularly vulnerable sectors,” he said.
According to him, another essential measure is the implementation of training and development programs. This he said can help SMEs improve productivity and efficiency, reducing the need for layoffs by making better use of their existing workforce.
“Improving access to finance is also crucial. Enhanced financing options, such as loans or credit facilities, can help SMEs cover the increased labor costs and continue their operations smoothly. Encouraging flexible work arrangements, such as part-time or flexible hours, can be another effective strategy. These arrangements can help SMEs manage their labor costs more efficiently while still complying with the new wage requirements,” he emphasized further.
He, however, expressed fear over the deliberate attempt of employers not to comply with the minimum wage if implemented, suggesting that the federal government should institute enforcement mechanisms, put monitoring systems in place, and engage in social dialogues.
“The FG should institute enforcement mechanisms to maintain the integrity and impact of minimum wage laws, which involves not only legislative frameworks but also developing institutional capacities for monitoring and enforcement. Establishing robust monitoring systems is essential; federal government agencies responsible for labor standards and wage regulations must be adequately equipped and empowered through training programs, updated technology for compliance monitoring, and penalties for non-compliance.
“Additionally, adopting social dialogue by engaging with stakeholders such as labor unions, employers’ associations, and civil society organizations is crucial for ensuring that workers receive a living wage through collaborative efforts,” he noted.