Small businesses face existential threat over inability to pay N70,000 minimum wage to staff

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The recent approval of a N70,000 minimum wage by President Bola Tinubu has sparked concerns among small business operators, who claim they cannot afford to pay their employees the new wage. This development threatens the survival of millions of small-scale businesses, which are the backbone of Nigeria’s economy.

According to the National Bureau of Statistics, there were 39,654,385 micro, small, and medium enterprises in operation in Nigeria as of December 2020. However, the 2023 Social Statistics Report revealed a 45% decline in small-scale industrialists between 2020 and 2022, from 246,200 to 170,098. This decline undermines Nigeria’s goal of becoming a trillion-dollar economy, as small-scale industries are crucial for economic growth.

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Operators of small businesses argue that the new minimum wage will lead to widespread closures and layoffs, exacerbating the country’s unemployment crisis. The National Vice President of the Nigerian Association of Small-Scale Industrialists, Segun Kuti-George, emphasized that while the new minimum wage is a positive step, its implementation is unrealistic for small businesses struggling with high production costs.

He 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.”

This situation highlights the need for a comprehensive review of the minimum wage policy to consider the capacity of small businesses to comply. Failure to do so may lead to unintended consequences, including business closures, job losses, and a further decline in Nigeria’s economic fortunes.

Tag: Minimum Wage, SMEs, Businesses, Nigeria, Bola Tinubu, Nigeria, Economy, Nigerian Association of Small-Scale Industrialists, Unemployment