Ruckus over N70,000 new national minimum wage

 

Introduction

President Bola Tinubu signed into law N70,000 as the new national minimum wage on Monday, July 29, 2024 after the bill was expeditiously passed into law by the National Assembly. Hitherto, the minimum wage was N30,000. It was also agreed that due to inflationary trends, the new national minimum wage will be reviewed every three years rather than the statutory five years. This was no mean achievement for the Nigerian labour unions. They had hitherto asked for N250,000 but had to settle for N70,000 when government said that is the only condition that will make it not to increase the price of petrol. Unfortunately, despite this gentleman agreement, the Federal Government recently jerked up the price of petrol to above N800 per litre.

Recall that on January 30, 2024 a 37-man Tripartite Committee to negotiate the new national minimum wage was inaugurated. It was headed by a former Head of Service of the Federation, Alhaji Bukar Goni Aji. The committee submitted its report on June 10, 2024. It’s almost two months since the new minimum wage was signed into law but no federal or state worker has yet to enjoy the payment of the new wage. In fact, just last week the federal government inaugurated a 16-man committee on the consequential adjustments in salaries in line with provisions of the National Minimum Wage Act, 2024, of N70,000 approved by President Bola Tinubu. The Head of the Civil Service of the Federation, Mrs. Didi Walson-Jack, inaugurated the committee in Abuja.

State government kicks against N70,000 new national minimum wage

While some states have also set up an implementation committee for the N70,000 new minimum wage, most states have expressed inability to pay the new wage. Recall that while the labour unions were asking for N250,000, the Nigerian Governors Forum issued a statement that they cannot pay even N60,000. The Ag. Director Media and Public Affairs of the Nigeria Governors’ Forum (NGF), Hajiya Halimah Salihu Ahmed, disclosed this in a statement on Friday, June 7, 2024. The statement read in part: “The Nigeria Governors’ Forum (NGF) is in agreement that a new minimum wage is due. The Forum also sympathises with labour unions in their push for higher wages. However, the Forum urges all parties to consider the fact that the minimum wage negotiations also involve consequential adjustments across all cadres, including pensioners.

“The NGF cautions parties in this important discussion to look beyond just signing a document for the sake of it; any agreement to be signed should be sustainable and realistic. All things considered, the NGF holds that the N60,000 minimum wage proposal is not sustainable and cannot fly. It will simply mean that many states will spend all their FAAC allocations on just paying salaries with nothing left for development purposes. In fact, a few states will end up borrowing to pay workers every month. We do not think this will be in the collective interest of the country, including workers. We appeal that all parties involved, especially the labour unions, consider all the socioeconomic variables and settle for an agreement that is sustainable, durable, and fair to all other segments of the society who have legitimate claim to public resources.”

If the Nigerian governors kicked against N60,000 minimum wage, they are simply inconsolable about the signed N70,000. However, it is noteworthy that states have always resisted minimum wage. Recall that the state governors did not support the N30,000 minimum wage. They were initially rooting for N22,500. Later, they agreed to N27, 000. The N30,000 negotiated and approved in 2019 was spurned by many states. Noteworthy is that in 2019, the governors asked and did get from ex-President Muhammadu Buhari   bailout fund to enable them to pay the minimum wage.

State governors have never minced words about the need to decentralise the negotiation of new minimum wage. They argued that states are not equally endowed and should be allowed to negotiate with their workers’ unions at the state level a fair, affordable and sustainable minimum wage. They claim that national minimum wage will leave them with no choice but to owe workers or retrench them due to high wage bill. They said they are not elected to pay only salaries and that the state civil servants are just a fraction of the state population. They said they have to provide infrastructure and other essential services including security.

What many state governments are angling for now is financial support from the federal government to enable them to pay the N70,000 new minimum wage. It is unclear if President Tinubu will be willing to offer the financial succor and for how long?

Organised Private Sector coping strategy

It is noteworthy that the organised private sector though has not uttered any opposition to paying the new minimum wage, however, many of them are unwilling. Save for the buoyant corporate organisations in the OPS, many of them are complaining of high cost of doing business, multiple taxation, and unfriendly business environment. What many of them usually do is to resort to staff casualisation in which case their workers are not allowed to unionise and are not offered full staff benefits such as housing, transport, health, allowances, leave bonus as well as pension and gratuity at disengagement. Truth be told, many private companies have been embarking on staff rationalisation, downsising and retrenchment in order to stay afloat in business. Those that are not taking these draconian measures are placing their staff on half salary or owing them backlog of wages and emoluments.

Current economic realities

Truth be told, while the positions of the governors and the organised private sector are genuine, the economic realities every worker in Nigeria face is that the N70,000 new minimum wage is too paltry to improve the living standard of workers. This is because the depreciation of the naira has weakened the purchasing power parity of the currency. The cost of living and the dependency ratio of average worker have made a mincemeat of the new minimum wage they are even yet to enjoy. As the price of energy such as petrol and electricity increased and food inflation stands at over 40 per cent, while rent, school fees and cost of goods and services have skyrocketed, the new national minimum wage pales into insignificance.

What to do?

Federal Government of Nigeria will need to subsidise energy cost as leaving it to vagaries of demand and supply will be counter-productive.  Petrol is now being sold at over a N1,000 per litre in Abuja and many other cities across the country. This has exponentially increased the cost of transportation. FGN therefore will have to continue to subsidise petrol and electricity. Nigerians are still waiting for the full implementation of the Compressed Natural Gas initiative which the FG said is a game changer that will bring down transportation cost by about 60 per cent and save the country N2 trillion naira being spent on fuel importation every month. There should be roll out of these CNG Powered buses so that commuters can have access to cheap transportation.

Additionally, Federal Government needs to stop the floatation of the naira which has led to a situation where a dollar currently exchanges for about N1,600. If our national currency continues to be floated against international currencies such as Pound Sterling, Euro and Dollar, so will the price of commodities in Nigeria continue to soar. This is because Nigeria is import dependent and importers of raw materials or finished products will have to charge cost-recovery prices since they are in business to make profit. Lastly, President Tinubu should consider giving bailout to states that are incapable of paying this new national minimum wage. This should be soft loan repayable over a period of time. It is also important for states and federal government to weed out ghost workers and reduce the size of the workforce where absolutely necessary. There is no point keeping bloated bureaucracy in the face of dwindling resources and lack of productivity.