ANALYSIS: Intrigues involved in new minimum wage for Nigerian workers

Nigeria Labour Congress (NLC)
Nigeria Labour Congress (NLC)

Barely three days after calling out its members on a seven-day nationwide warning strike, Nigeria Labour Congress (NLC) and affiliates on Sunday suspended the strike. National President, Ayuba Wabba, said labour decided to suspend the strike following a “firm and formal invitation” by the federal government to reconvene the tripartite committee on national minimum wage on Thursday.

The strike was called because since its inauguration in November 2017, the committee was unable to meet to complete its assignment and make recommendations to the government on a new minimum wage. As the committee reconvenes, Business & Economy Editor, Bassey Udo, reviews the issues likely to shape the direction of the resolution by the committee.

By now Nigerians appear to have come to terms with the stark reality. The agitation by Nigeria Labour Congress (NLC) and affiliates for a new national minimum wage for Nigerian workers has merit.

Evidently, the current economic fundamentals do not favour continuing to keep the current N18,000 minimum wage approved since 2010. Since 2015, the pay became due for another review in line with the provisions of the National Minimum Wage Act (amendment) 2011.

Whatever indices or parameters used to arrive at N18,000 in 2010 must have become grossly obsolete.

Abuja –based economist and chief executive of Global Analytics Consulting Limited, Tope Fasua, said labour has a right to demand for higher wages at the time, given spiraling inflationary rate in the country, which has compounded since the last review in 2011.

Mr Fasua, who is also the Abundant Nigeria Renewal Party (ANRP) presidential candidate, said the value of N18,000 in 2011 has diminished to less than N8,000 today.

Economic Fundamentals

In 2011, Central Bank of Nigeria (CBN) data showed inflation at about 10.8 per cent, with exchange rate of the Naira to the dollar averaged between N151.96 and N155.26.

The country’s gross domestic products (GDP) stood at about $411.7 billion and GDP growth rate at about 8.2 per cent.

In 2018, the NBS put inflation rate in the second quarter of the year at 11.23 per cent, with exchange rate of Naira to the dollar at N306.25, or N362 in the parallel market. GDP is estimated at $375.77 billion since 2017, growing at the rate of 2.9 per cent.

To compute a minimum wage, consideration must be given to the prevailing cost of living index, inflationary trend and capacity of employers to pay a living wage.

Living wage is based on the belief a worker should earn enough income from his or her work to afford the basic living costs of his or her family.

According to WageIndicator.org, living wage is an approximate income a worker needs to meet his or her family’s basic needs for food, housing, transport, health, education, tax deductions and other necessities.

In other words, living wage should take care of the worker’s food costs, housing costs, transport costs, tax/contribution costs and other costs, including medical and children education.

Therefore, in approving minimum wage, consideration must be given to all the essential needs of workers and their families.

But, Mr Fasua said Nigerian government at all levels do not always bear in mind these factors when paying their workers.

For Ayo Teriba, an economist and chief executive officer, Economic Associates, the real issue in the minimum wage debate is no more whether the demand is necessary, but whether N18,000 take home pay will “take the workers home and allow them live reasonably”.

“Divide N18,000 by 30 days, that comes to N600 a day. What can anybody do with N600 per day?” Mr Teriba asked in an interview with Leadership Newspapers.

At N56,000 (the initial figure labour proposed), he said this would translate to a paltry N1,866, an amount he says is not even up to what some less endowed countries pay their citizens as unemployment allowance.

Is N65,000 Demand Realistic?

Since the debate shifted focus on recent demand by organised labour for N65,000 as new minimum wage, the question most concerned Nigerians are asking is: justified as the demand might seem, how realistic, affordable and achievable is it in the face of the country’s current economic reality?

The question is even more compelling when labour says at least 33 of the 36 states and the Federal Capital Territory are owing various months arrears of salaries to their workers at N18,000 a month.

Not even the so-called oil producing states that receive additional derivation revenues from the monthly federation account allocations have been able to meet this obligation.

If one is looking at the narrow view of today’s finances and state of the country’s economy, said the lead director, Centre for Social Justice (CENSOJ), Eze Onyekpere, N65,000 minimum wage is not realistic.

The economy has been struggling to stabilise, hardly able to assimilate further recurrent pressures, following its fragile recovery from one of its worst recessions in the country’s history in 2017.

At the end of the Monetary Policy Committee (MPC) meeting last week Tuesday, the CBN warned the country risked slipping back into recession if fiscal and monetary authorities are not getting their acts together to curb rising inflation and declining growth in key sectors of the economy.

One of the things these authorities have to avoid is piling further recurrent pressures on the largely deficit budget through huge overheads and unrealistic salary bills.

According to Mr Onyekpere, looking at the 2017 Budget implementation report released recently by the federal ministry of budget & national planning, the country is already bankrupt and does not need to attempt “to bite more than it cannot chew”.

He said the report shows total revenue Nigeria realised from all sources, including tax and crude oil exports, was N2.657 trillion, while recurrent expenditure, consisting overheads, workers’ salaries, service wide votes, was N2.7 trillion.

“This means the country even borrowed about N100 billion to finance recurrent budget, while the country paid N1.634 trillion as debt, meaning for every 100 kobo we (Nigeria) borrowed, 68 kobo was used to repay the debt, leaving 32 kobo. If we borrow to augment recurrent expenditure and service wide votes, it means the country is bankrupt,” Mr Onyekpere noted.

Latest data by the NBS showed that since recovering from recession in 2016, the country’s GDP, which declined from 2.05 per cent in the last quarter of 2017 to 1.95 per cent in the first quarter of 2018, slipped further by -0.45 basis points to the current 1.5 per cent.

Crude oil, which accounts for more than 80 per cent of the country’s export revenues, is at the moment selling at a high price of about $80 a barrel at the international oil market.

But, the country’s daily oil production capacity has consistently dwindled below the 2.3 million barrels projection in successive federal budgets since 2016.

From about 2.05 million barrels per day in the first quarter of 2016, the output has dropped to about 1.84 million barrels recorded in the second quarter of 2018.

Also, the country’s foreign reserves has been trending southwards, from about $45 billion at the end-July to $44 billion on September 20, while the Debt Management Office (DMO) reports a rising public debt profile currently at about N22.4trillion as at June 30.

High Minimum Wage Could Fuel Inflation

Interestingly, labour’s argument for a new minimum wage is based on the rising inflationary trend.

Regardless, the flipside of the argument has been that the demand for a new minimum wage at this time could fuel inflation in the economy.

Mr Fasua agrees.

“With the perennial mismanagement of the economy on several fronts, if government increases minimum wage to N65,000, or by over 200 per cent today, under one year, the economy will definitely spiral into a hyper-inflation that will take everything and return the workers to where they started,” Mr Fasua said.

He said the greater danger will be that the private sector, especially small and medium-scale enterprises (SMEs), would not be able to also increase their wages at the same scale. The outcome would be “shedding of weight or actual closure”.

Rather than ask for N65,000 new minimum wage, Mr Fasua said, labour should settle for about N30,000 pay, while also insisting on government to embark on mass employment for the youth.

Also, he said labour should demand for increased investment in critical sectors of the economy and social amenities that usually take a sizeable chunk of their monthly salaries.

“Government should focus on the development of social infrastructures that take a large percentage of the workers’ salaries.

“These include food production, by working with the universities and polytechnics to utilise their scientific research findings; incentivising the textile sector to produce clothes, providing low income housing and affordable mass transportation.

“When all thes are provided, Nigerians will need a behavioural change to focus more on the bare necessities and avoid frivolities,” Mr Fasua said.

Bigger Picture

For Mr Onyekpere, if we are looking at the big picture, the questions to ask are: Is Nigeria tapping all the resources available to it? Are we collecting all the taxes we are supposed to collect? Have we reformed enough to cut the cost of governance and plug all the loop holes for corruption and loses in the economy?

“If we answer these question in the positive, then we have no reason not to pay workers decent salaries. There is no reason why our ministers and members of the National Assembly are living in opulence, while the rest of Nigerians are living in poverty,” he said.

For chief executive officer, Pan Africa Develoment Corporation, Odilim Enwegbara, labour should insist Nigerian workers are paid N100,000 minimum wage.

“They should even insist they will only vote for presidential and governorship candidates who will be ready to pay a N100,000 minimum wage,” Mr Enwegbara said.

He said Nigeria has one of the lowest minimum wages in the world. He wonders how workers would be productive and shun corruption if they are not paid well.

Blaming government misplaced priorities, Mr Enwegbara urged government to downsize unproductive workforce, remove ghost workers and keep a slim and efficient workforce it can pay good salaries enough for them to lead a good living.

“If you pay peanuts, you get monkeys to work for you,” he said.

New Perspectives, More Questions

As the tripartite committee returns to conclude its assignment and give the country a new minimum wage, several other perspectives and issues have emerged from the debate.

Within the context of true federalism, should minimum wage be a national issue? Or should the federating units (the states) be allowed to pay what they can afford to the limit of their economic capacity and resources? Will the current agitation by labour end up with national minimum wage for workers in public or private sectors?

Or would the new minimum wage bridge the dichotomy between the pay to workers in the civil service and their colleagues in the commissions and parastatals under the same government?  Should there be a legislation prescribing stiff sanctions against employers of labour that fail to pay their workers in accordance with the approved national minimum wage law?

In 2008, prior to the commencement of negotiations that led to the current N18,000 minimum wage, labour had proposed N52,000 as new minimum

It was learnt that at least 20 state governments submitted memoranda proposing various amounts ranging from N46,700 to as low as N10,000 a month as minimum wage.

At the end of negotiations, although the average from the various submissions tallied at about N24,000, labour settled for N18,000, taking into considerations the prevailing economic conditions in the country then, subsisting revenue allocation formula and capacity of private and public employers to pay.

Prior to the commencement of the now suspended warning strike by the NLC, the minister of labour & employment, Chris Ngige, said the work of the tripartite committee on minimum wage was stalled following some state governors’ reluctance to submit their proposal on a new wage system.

The minister said without inputs from the governors on the issue, there cannot be any agreement on a new minimum wage.

At the inauguration of the 30-member tripartite committee on minimum wage last November, President Muhammadu Buhari urged them to work towards a new minimum wage all tiers of government would be able to pay.

The president also touched on the issue of minimum wage being under the exclusive legislative list in the 1999, and not the concurrent legislative list. This puts the issue under the purview of the federal government.

A former minister of national planning, Abubakar Sulaiman, told Punch newspapers that apart from inadequate capacity of states to determine their workers’ minimum wage, they lack the requisite independence to legislate on labour related matters.

“As long as we are not practising fiscal federalism, let the centre continue to decide the minimum wage for Nigerian workers across all tiers,” the former minister said.

To give states capacity to shoulder the minimum wage obligations regularly, the governors have been asking for a review of the existing revenue sharing formula.

The formula gives federal government 52.68 per cent of total revenue from the federation account, the 36 states and the Federal Capital Territory (FCT) 26.72 per cent and the 774 local governments 20.6 per cent.

For Joe Aligbe, former national vice president, Association of Senior Civil Servants of Nigeria, as long as minimum wage is on the exclusive list, states cannot legislate on it.

He says whatever the federal government approves, the states can choose to raise it to whatever level they desire, citing the Edo State example which raised its minimum wage above N18,000 to N25,000.

Beyond the monthly allocation from the federation account, the states need to transform their internally generated revenue to enhance their capacity to pay their workers living wages in line with the size of their respective economies.


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