- Calls For Independent National Wage Commission
By Iduh Onah
A NEW formula for determining Nigeria’s national minimum wage could put the monthly wage at about ₦654,206 in 2027, based on inflation, exchange rates, household size, economic growth and the international poverty threshold.
The new formula was proposed by US-based Nigerian and public intellectual, Dr Izielen Agbon. Dr Agbon, who taught at the Department of Petroleum Engineering, University of Ibadan (UI), where he had served as ASUU Chairman, is a regular public affairs analysts and commentator.
Agbon, in an opinion article examining the ongoing debate over the next national minimum wage, argued that Nigeria should move away from periodic and largely contentious wage negotiations and adopt a statutory formula that automatically adjusts workers’ pay to changes in the cost of living and broader economic conditions.
His proposal comes amid renewed tension over the minimum wage, after the Nigeria Governors’ Forum (NGF) proposed an increase to ₦100,000 per month, a figure rejected by the Nigeria Labour Congress (NLC).
Agbon’s proposal effectively shifts the focus of the wage debate from how much the minimum wage should be at a particular point in time to how workers’ purchasing power can be protected continuously as economic conditions change.
Agbon said the governors’ proposal was made without first consulting organised labour, arguing that minimum-wage determination should remain a tripartite process involving government, labour and employers.
The NLC has maintained that workers’ purchasing power has been severely eroded by inflation, currency depreciation and rising living costs.
Agbon cited these pressures in arguing that a nominal increase alone would not adequately address the deterioration in workers’ living standards.
He also referred to the NLC’s October 9 ultimatum to the Federal Government, which demanded for measures to reduce petrol prices and the commencement of negotiations for a new national minimum wage.
NLC President, Comrade Joe Ajaero, according to Agbon, identified two possible mechanisms for protecting workers’ wages: linking wages automatically to inflation or tying them to a cost-of-living index that reflects expenses such as food, transportation, housing and other basic needs.
Agbon favoured the inflation-linked approach, arguing that it would be more suitable for Nigeria because of the volatility of the country’s economy and what he described as the difficulty of successive governments in consistently honouring labour agreements.
Formula-Based Wage Adjustment
Agbon proposed that Nigeria establish a formula that would automatically account for changes in the value of the naira, food inflation, economic growth and the cost of supporting a worker’s household.
His proposed formula is: MW = UNPL × EXR × NPH × (1 + FIR) × (1 + GGR) × NWD
Under the formula, MW represents the monthly minimum wage; UNPL is the international poverty line in dollars per person per day; EXR is the average annual naira-to-dollar exchange rate; NPH is the average number of people in a worker’s household; FIR is the annual food-inflation rate; GGR is GDP growth; and NWD represents the average number of working days in a month.
Agbon said the formula should be applied annually, preferably in January, to ensure that the minimum wage keeps pace with changes in economic conditions.
Using figures he identified for 2026, including an international extreme-poverty threshold of $3 per person per day, an average exchange rate of ₦1,365 to the dollar, a household size of six people, food inflation of 16.15 per cent, GDP growth of 4.2 per cent and 22 working days per month, Agbon calculated a 2027 minimum wage of approximately ₦654,206.
He described the figure as the “barest minimum” required for the survival of a six-member worker’s household under the assumptions contained in his formula.
Purchasing Power Under Pressure
Agbon argued that the decline in workers’ purchasing power becomes clearer when historical wages are compared with the cost of essential commodities.
He cited the 1981 national minimum wage of ₦125 per month, when the exchange rate was approximately ₦0.61 to the dollar. On that basis, he calculated that the wage was equivalent to about $204.92 at the time.
He further compared the purchasing power of the 1981 wage with that of the current ₦70,000 minimum wage, using petrol prices as an illustration.
According to his calculation, ₦125 in 1981 could purchase about 817 litres of petrol at a pump price of ₦0.153 per litre. By comparison, ₦70,000 at a petrol price of ₦1,400 per litre would purchase about 50 litres.
Agbon therefore estimated that a monthly wage of approximately ₦1.14 million would be required to purchase the same quantity of petrol in 2026 as ₦125 could buy in 1981.
He used the comparison to argue that assessing minimum wages solely by their nominal naira value fails to capture the erosion of workers’ real purchasing power over time.
Exchange Rate and Inflation
The proposed formula places significant emphasis on the exchange rate and inflation, reflecting the impact of currency depreciation and rising consumer prices on household incomes.
Agbon traced the depreciation of the naira from approximately ₦0.61 to the dollar in 1981 to ₦1,334 in October 2026, noting particularly sharp movements following the introduction of structural adjustment policies in the 1980s and, more recently, foreign-exchange reforms and the floating exchange-rate regime.
He also pointed to changes in Nigeria’s inflation measurement following the rebasing of the Consumer Price Index (CPI) by the National Bureau of Statistics (NBS) in December 2024.
According to Agbon, the CPI rebasing changed the base year from 2009 to 2024, expanded the basket of goods and services used in calculating inflation from 740 to 960 items, and introduced additional indices covering areas including farm produce, energy, services, goods and imported food.
He noted that the reported headline inflation rate fell from 34.80 per cent in December 2024 to 24.48 per cent in January 2025 following the rebasing, while food inflation declined from 39.84 per cent to 26.08 per cent over the same period.
Agbon stressed, however, that the statistical decline did not mean that prices in Nigerian markets had fallen, arguing that the level of prices remained a critical consideration in assessing workers’ purchasing power.
He cited a national food-inflation rate of 19.59 per cent in September 2026.
Lessons From Other Countries
The proposed Nigerian formula draws partly on wage-adjustment mechanisms used in other countries, according to Agbon.
He cited Brazil, Costa Rica and France as examples of countries where minimum-wage adjustments incorporate economic indicators rather than relying entirely on periodic negotiations.
In Brazil, he said, the minimum wage adjustment formula incorporates changes in the Consumer Price Index and GDP and has been established through legislation. In Costa Rica, the formula considers consumer-price changes and GDP per capita, with a tripartite commission involved in determining its components.
France, he said, uses a formula that takes account of changes in consumer prices and blue-collar hourly wages, with additional wage adjustments triggered when the relevant price index reaches a specified threshold.
Agbon argued that Nigeria could adapt elements of these approaches to its own economic circumstances.
Call For National Wage Commission
Beyond the formula itself, Agbon called for the establishment of an independent national wage commission that would recommend annual minimum-wage levels to the National Assembly for legislative approval.
He argued that such an institution would provide a more predictable and transparent mechanism for wage determination while reducing the recurring political and industrial confrontations that accompany minimum-wage negotiations.
According to him, the commission should develop recommendations based on measurable indicators including inflation, food prices, the exchange rate, GDP growth, poverty levels and household needs.
Agbon said labour unions should make the establishment of such a mechanism a central objective in the forthcoming minimum-wage negotiations.
“Nigerian workers produce the wealth of the nation,” he argued, urging the NLC and the Trade Union Congress to mobilise workers around a demand for a permanent formula for determining the national minimum wage.
