New minimum wage conundrum

At the recent May Day celebration, the issue of minimum wage came up again. The Nigerian Labour Congress (NLC) wants the a new minimum wage of N56,500. 00 The other faction of NLC, not to be outdone, is pitching for N90, 000. 00. Feeling its demand of N56, 500. 00 was too low, the Ayuba Wabba led NLC recently raised its demand to N66, 500.00. The NLC president said the union considered the prevailing realities including certain variables and current inflation to make an upward review of its demand.

The demand by the labour unions for a raise in the minimum wage, which is currently a paltry N18, 000.00, didn’t start this year. It started as far back as 2015. We recall that in 2016, the NLC threatened to embark on a nation-wide strike in May 2017 if the federal government did not begin the implementation of the N56, 500 new national minimum wage it proposed. Apparently, the threat did not work but the unions are not relenting in mounting pressure on the government to approve the new minimum wage.

Well, considering that the elections are close at hand, the federal government quickly accepted to begin paying a new minimum wage with Minister of Labour and Employment, Chris Ngige, announcing that the payment would take effect from September 2018.

Haven raised the hope of workers, the minister again dashed their hopes announcing that the new minimum wage cannot be ready for implementation in September. He said the September date was just the timeline to conclude negotiations after which a report will be presented to government for deliberation and approval before an executive bill is sent to the National Assembly on the issue.

True, we agree with Wabba that the 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 uniqueness of the Nigerian situation however is the capacity to pay. 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.

Also, over 70% of the federal government budget is spent on recurrent expenditure with salaries and emoluments contributing the lion share. Any steep rise in the minimum wage will worsen the ratio. This is coming at a time where there is unanimity in the call for the government to reduce its recurrent expenditure in favour of capital expenditure. The Minister also hinted at the capacity to pay and the need to get inputs of all those concerned including state governments and the organised private sector.

Reality is: 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. Like the minister revealed recently, may state governments are adamant that they will not be able to pay the new minimum unless the current revenue allocation formula is reviewed in favour of the states and local government.

What is more, the economic impact of tripling or quadrupling the minimum wage on the economy may be severe and undesirable.

We feel the NLC must face the reality of the moment. The current federal arrangement is unworkable and unsustainable and cannot pay the wage demands of the labour unions the moment the price of oil dips.

It is our considered view that the NLC and other labour and trade unions 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.