Minimum wage conundrum

After a three days warning strike, the government has proposed to increase the minimum wage from N18, 000 to N24, 000. The labour unions have also climbed down from the initial N56, 000 they were demanding to a moderate N30, 000.

We agree with the labour unions that a review of the minimum wage is long overdue. The current minimum wage, set in 2011, was at a time the Naira exchanged with the dollar at N150.00. Presently, the exchange rate hovers around N360 to a dollar. It even went as high as N500 at a time in 2016. Clearly then, inflation has eroded the value of the naira and the minimum wage as it stands is a huge joke. In saner climes, minimum wages are reviewed at periodic intervals to keep pace with inflation and the needs of the time. But that has clearly not been the case in Nigeria.

The problem though, is not about reviewing the minimum wage but the capacity to pay. Even at the proposed N24, 000, the increase will push the federal government’s wage bill to N2.4 trillion, 90 percent of government’s total revenues in 2017. Last month, the budget office of the federation released the 2017 budget implementation report indicating that the federal government only realised half of its projected revenues last year and had to borrow N2.5 trillion from both the domestic and international markets to fund the deficit.

The same thing is happening again this year and the government is borrowing to fund its budget. Recently the president sought permission from the National Assembly to raise a $2.86 billion Eurobond loan to fund its 2018 budget which has a deficit of N2.4 trillion and could even widen if ambitious revenue targets set out in the budget are not achieved, as has been the case for the past three years.

Sadly, a higher minimum wage is being proposed at a time the government is being urged to cut down its recurrent expenditure to be able to spend more on infrastructure.

The situation of state governments is even direr. Before the recent upsurge in the price of crude oil, about 30 states of the federation were unable to pay salaries (the meagre N18, 000 minimum wage) and have to depend almost exclusively on bailouts to pay the little they were paying pay, like half salaries in some states or reduction in working days by some state governments. Meanwhile, the same NLC agitating for an upward review of the minimum wage has not been able to do anything to compel delinquent states to pay their workers the old minimum wage.

The sad reality remains that as desirable as the new minimum wage is, the Nigerian federation (especially states and local governments) do not have the capacity to pay the amount. True, the labour unions and most Nigerians could point to the outrageous cost of running government especially the salaries and allowances of elected and appointed government officials as the reasons behind the dire financial situation of the country. As genuine as that complaint is, it will not increase the capacity of states to pay the new agreed minimum wage.

Expectedly, many state governments are already service notice that they will be unable to pay the new wage with their current revenue expectations. We foresee the new minimum wage causing upheavals and labour unrests in many states of the federation.

It is our considered view that rather than focusing on forcing the government to review the minimum wage, the NLC and other labour and trade unions, in addition, should join hands with those calling for the restructuring of the Nigerian federation along fiscally viable lines such that states will be financially and economically viable enough to maintain and pay its workforce without recourse to the federal allocation. Only a viable federation can ensure fiscally strong and stable states.