Determinants of Workers’ New Minimum Wage in Nigeria: Incorporating Nigeria’s current Economic Situation

The minimum wage is a government-imposed requirement that employers pay their employees a specified minimum amount in compensation. This study makes a unique contribution by investigating the factors that determine the new minimum wage for workers in Nigeria. This investigation will take into account Nigeria’s current economic situation, which led to the consideration of economic indices to determine the new minimum wage while also controlling for the country’s population growth rate. This study used yearly time series data collected from the World Bank development indicators spanning from 1991 to 2023. According to the results, the applied OLS regression model reveals a significant relationship between the new minimum wage and its determinants, including the inflation rate, unemployment rate, public debt, poverty rate, and GDP, while controlling for the population growth rate. The VAR model demonstrated a significant short-run relationship between the minimum wage, inflation, unemployment, public debt, poverty, GDP, and population growth rate. The FMOLS model demonstrates that inflation has a negative long-run effect on the minimum wage, whereas unemployment, public debt, GDP, and population growth rate have a positive long-run effect on the minimum wage. Therefore, it is crucial to determine the new minimum wage in Nigeria holistically, taking into account the economic reality of the inflation rate hike and other economic indices. This will not only enhance the standard of living and productivity of workers but also positively impact economic growth in the long run.