ubscriber,<\/em><\/p>\nMore pay, less goods<\/strong><\/p>\n(Baba Tolu walks in after a long day to meet Iya Tolu dancing excitedly in the kitchen)<\/em><\/p>\nIya Tolu<\/strong>: Thank God my husband has been paid, owo ti wa o! Finally! Now we can buy that new freezer, stock up on food, and even get some asoebi for the wedding next month!<\/p>\nBaba Tolu: <\/strong>Asoebi? freezer? Iya Tolu, what the hell are you talking about?<\/p>\nIya Tolu<\/strong>: Didn\u2019t they pay you the new minimum wage? N70,000 plus arrears since July! We\u2019re rich now!<\/p>\nBaba Tolu<\/strong>: Arrears? Can you arrears away the price of petrol? Is it arrears that will bring down the price of yam, tomatoes, or even Maggi cubes? The only arrears I see are the arrears of debt I now owe. What\u2019s the point of N70,000 if everything costs N100,000?<\/p>\nIya Tolu<\/strong>: But\u2026 they gave you more money.<\/p>\nBaba Tolu<\/strong>: More money? Inflation took double! It\u2019s as if we\u2019re just running in place.<\/p>\nIya Tolu<\/strong>: So, no freezer?<\/p>\nBaba Tolu<\/strong>: Freezer ke? Maybe we should buy fresh air while it\u2019s still free.<\/p>\nIya Tolu<\/strong>: Ah, minimum wage, maximum suffering.<\/p>\nBaba Tolu<\/strong>: You\u2019ve said it all, Iya Tolu.<\/p>\n(They both sit quietly, the excitement from earlier completely drained away.)<\/em><\/p>\n(Tolu walks in)<\/em><\/p>\nTolu<\/em><\/strong>:<\/strong> Daddy, guess what! NYSC has increased our allowance to N77,000! No more N33,000 suffering.<\/p>\nBaba Tolu<\/strong>: Ah, good! So, you won\u2019t disturb me for money again. You can now take care of your own needs, abi?<\/p>\nTolu<\/strong>: (grumbling)<\/em> Well, about that\u2026 You know my transport from Oworo to Victoria Island is now N1,000 per trip? It used to be N500! That\u2019s not even counting lunch or other small things here and there.<\/p>\nBaba Tolu<\/strong>: So, what\u2019s your point?<\/p>\nTolu<\/strong>: The point is, the N77,000 isn\u2019t going far. With these rising prices, it\u2019s like the increase just disappeared. I\u2019m still broke, Daddy!<\/p>\nBaba Tolu<\/strong>: Hmm, so a rich corper, but still a poor boy?<\/p>\nTolu<\/strong>: Exactly!<\/p>\n <\/p>\n
Money illusion, wage and price inflation<\/strong><\/p>\nFrom the satirical illustration, we see money illusion, wage and price inflation at play. Iya Tolu\u2019s excitement over her husband’s new N70,000 minimum wage quickly fades when she realizes rising costs have wiped out its benefits. Similarly, Tolu\u2019s thrill over his N77,000 NYSC monthly allowance is dampened by soaring transport and living expenses.<\/p>\n
This illustrates money illusion\u2014the belief that more money equals better financial standing, which is false when inflation is factored in. While wage increases seem like a relief, wage inflation does little in the current economy, where price inflation dominates. As prices for food, transport, and fuel skyrocket, the increased wages can\u2019t keep up, leaving workers still struggling.<\/p>\n
Historically, wage increases, like the Udoji awards, occurred during periods of economic boom, supported by oil revenue. Today, with inflation, currency devaluation, and borrowing costs, the wage hike loses its intended value. Many Nigerians have already spent their increases on repaying debts, making it difficult to see any real financial improvement. In the end, rising prices have erased the perceived benefits of higher wages.<\/p>\n
Informal employment will take a hit<\/strong><\/p>\nWhile the formal sector may feel limited effects\u2014given that most corporates already pay more than the new minimum wage\u2014the informal sector tells a different story. As of Q1\u201924, informal employment made up a staggering 92.7% of total employment in Nigeria. This sector is far more sensitive to wage hikes and will bear the brunt of these adjustments. The burden on the informal businesses, heightened by high borrowing costs (32\u201334%) and soaring PMS prices, will present two difficult choices: absorb the rising costs or pass them on to consumers. In a worst-case scenario, the burdens are absorbed, due to weak consumer spending, leading to potential layoffs and shutdowns. With unemployment already on the rise\u2014reaching 5.3% in Q1 2024, up from 4.1% in Q1 2023\u2014any slowdown in the informal sector could weigh on Nigeria’s overall GDP.<\/p>\n
In this latest edition of Prism, the FDC Think Tank takes a deep dive into recent economic developments and their impact on your business and corporate strategy.<\/p>\n
Enjoy your read![\/vc_column_text][\/vc_column][\/vc_row]<\/p>\n","protected":false},"excerpt":{"rendered":"
[vc_row][vc_column][\/vc_column][\/vc_row][vc_row][vc_column][vc_column_text]Dear Subscriber, More pay, less goods (Baba Tolu walks in after a long day to meet Iya Tolu dancing excitedly…<\/p>\n","protected":false},"author":11,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[18,35],"tags":[],"_links":{"self":[{"href":"https:\/\/fdcng.com\/wp-json\/wp\/v2\/posts\/122111"}],"collection":[{"href":"https:\/\/fdcng.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fdcng.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fdcng.com\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/fdcng.com\/wp-json\/wp\/v2\/comments?post=122111"}],"version-history":[{"count":1,"href":"https:\/\/fdcng.com\/wp-json\/wp\/v2\/posts\/122111\/revisions"}],"predecessor-version":[{"id":122112,"href":"https:\/\/fdcng.com\/wp-json\/wp\/v2\/posts\/122111\/revisions\/122112"}],"wp:attachment":[{"href":"https:\/\/fdcng.com\/wp-json\/wp\/v2\/media?parent=122111"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fdcng.com\/wp-json\/wp\/v2\/categories?post=122111"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fdcng.com\/wp-json\/wp\/v2\/tags?post=122111"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}