Small and Medium Enterprises (SMEs) across Nigeria have voiced concerns about their ability to comply with the recently approved N70,000 minimum wage. President Bola Tinubu’s approval of the new wage, which will be reviewed every three years, aims to improve workers’ living standards but has left many small businesses worried about their survival.
During the signing of the Minimum Wage Act (Amendment) Bill into law, Senate President Godswill Akpabio announced that the new wage would apply nationwide, affecting federal, state, local governments, and private sector employers, including individual businesses.
The National Bureau of Statistics reported that as of December 2020, there were 39,654,385 micro, small, and medium enterprises in Nigeria, a decrease from 41,543,028 in 2017. Additionally, the 2023 Social Statistics Report highlighted a significant drop in small-scale industrialists, with numbers falling from 246,200 in 2020 to 170,098 in 2022 due to economic challenges. This decline poses a threat to Nigeria’s ambition of becoming a trillion-dollar economy.
Operators of small businesses warn that the new minimum wage could lead to widespread business closures and layoffs. Segun Kuti-George, National Vice President of the Nigerian Association of Small-Scale Industrialists, noted that many businesses are already struggling with high production costs. He expressed concerns that the new wage could force companies to downsize or close, exacerbating the country’s unemployment problem.
“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,” Kuti-George said. “The new minimum wage is a good step in the right direction, but whether we as small businesses can pay or not is another major issue.”
The Head of Corporate Affairs at the Small and Medium Enterprise Development Agency of Nigeria, Alhaji Moshood Lawal, echoed these sentiments, calling the new minimum wage “unrealistic” for small businesses in the current economic climate.
Gbenga Komolafe, General Secretary of the Federation of Informal Workers Organisation of Nigeria, pointed out that in other countries, social protection programmes help bridge the gap for employers who cannot meet minimum wage requirements. He suggested that similar measures might be needed in Nigeria to support small businesses.
However, Samson Gbadamosi, Deputy Executive of the Nigeria Association of Small and Medium Enterprises, noted that small businesses within the association were part of the organised private sector, which participated in the minimum wage negotiations. While the Organised Private Sector (OPS) initially proposed a N66,000 minimum wage, they eventually supported the government’s decision to set it at 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,” Gbadamosi said.
