…as FG, labour unions continue dialogue
Any moment from now, the Nigerian government is expected to roll out a new minimum wage regime. In Nigeria, the minimum wage is subject to review every five years, based on extant laws. The current N30,000 minimum wage became effective in the year 2019 and it has since expired in March 2024. While affected citizens are eager to see the next step the government will take, perhaps it is safe to say that there’s a wave of cautious optimism, even as the country braces for a significant economic shift which will impact various sectors of Africa’s largest economy.
As the old wage structure expires, a new one is set to rise in its stead, born out of the ashes of contentious new policies including fuel subsidy removal by President Bola Ahmed Tinubu in May last year. The removal of fuel subsidy in particular led to a temporary wage increase of N35,000 for federal workers as a palliative measure. However, the organized labour unions have been adamant that this was merely a stopgap, advocating for a more substantial review in 2024.
The proposed figures for the new minimum wage have sparked a dialogue between the government and labour unions. While the government’s reported initial proposal ranges between N150,000 to N200,000, the Nigeria Labour Congress (NLC) and Trade Union Congress (TUC) have pitched a significantly higher figure of N615,000, citing the country’s economic realities.
Mr. Festus Osifo, the TUC President, confirmed this recently in Abuja. According to him, “The negotiations by the Tripartite Committee are still ongoing. If you remember, the TUC earlier submitted N447,000 as the new minimum wage, but we have harmonized our figure with the Nigeria Labour Congress (NLC). It is now N615,000.
“Regarding the when for the new minimum wage, the committee is still working. So, certainly, May 1 will not work for the pronouncement of the new minimum wage. Except if the Federal Government wants to pay the minimum wage of N500,000 to workers.”
This proposed figure is a substantial leap from the previous minimum wage, reflecting the unions’ stance on the need for a living wage that can sustain an average worker amidst rising living costs. Should the new proposal be accepted, it would mark an unprecedented increase, setting a new benchmark for wages in Nigeria.
Whatever the outcome of the ongoing negotiations will be, it certainly won’t affect the federal workers alone but is also expected to influence the private sector and state governments workers, potentially reshaping the financial landscape for workers across Nigeria. The public sector will face the challenge of implementing a wage that supports workers without causing undue strain on the nation’s budget.
As for business owners, they could be faced with a major dilemma. On one hand, they understand the need for a fair wage that reflects the rising cost of living. On the other, there’s a fear that a significant wage increase could lead to inflation, reduced hiring, and even layoffs. A pragmatic approach that considers the impact on businesses and the economy at large will greatly favour the private sector.
The legislative process will be a meticulous one, with the National Assembly at the heart of the debate. To that effect, a meeting has been scheduled to take place at the office of the Secretary to the Government of the Federation (SGF), to arrive at a consensus that would be acceptable to all parties involved. The letter pertaining to the meeting, as reported by This Day, was dated April 24 and carried the signature of the permanent secretary on behalf of the SGF.
In the letter, it was stated that “the purpose of the meeting is to deliberate and agree on the government position on the new minimum wage, which will be presented at the next meeting of the tripartite Committee”.
It is commendable that the Federal Government has at least recognized the strain on citizens brought about by the recent economic reforms well enough to necessitate a committee to reassess the national minimum wage.
Meanwhile, economists have expressed concerns over the possibility that a substantial increase in the minimum wage could lead to uncontrollable inflation. Without corresponding increases in productivity, the economy could suffer, affecting not just businesses but the very workers the wage increase aims to help.
Professor Tayo Bello, a lecturer at Adeleke University and seasoned stockbroker, posited that higher wages may contribute to a boost in consumer spending, potentially stimulating economic activity.
He asserted: “The downside is that this wage increase might exacerbate inflationary pressures. As businesses face higher labor costs, they may pass on these expenses to consumers through increased prices for goods and services. This, in turn, could create a feedback loop, with rising wages fueling further inflation.”
Also, Dr. Nelson Nkwo, a financial economist at Ebonyi State University, emphasized the necessity for the government to adopt additional policies that would mitigate the adverse impacts of wage hikes. He suggested that such measures could include a stricter monetary policy to keep inflation in check and specific support programmes for businesses that might be impacted.
According to Dr. Nkwo, it is essential to find an equilibrium between fulfilling valid calls for increased wages and controlling inflationary tendencies to foster enduring economic advancement.
“Policymakers must carefully consider the broader economic implications and adopt a comprehensive approach to ensure a harmonious and stable economic environment,” he said.
Amidst all of this, another interesting question begging to be answered is just how the government is prepared for this wage transition. We already know that the Federal Government has earmarked a staggering N24.66 trillion for salaries over the next three years, a figure that underscores the gravity of the decision at hand. Yet, amidst these negotiations, the true readiness of the government remains shrouded in uncertainty.
In the face of deteriorating economic conditions, Nigeria’s government personnel costs are projected to rise by 8.51% from N7.36 trillion in 2023 to N7.99 trillion in 2024. Further increases are expected: 2.41% to N8.18 trillion in 2025, and 3.77% to N8.49 trillion in 2026. Despite these hikes, these figures are dwarfed by the planned N23.37 trillion capital expenditure, which is 27.65% of the total budget for the same period.
This trend underscores an ongoing pattern of high operational expenses overshadowing capital investments, leading to substantial fiscal deficits. By September 2023, nearly 30% (N3.78 trillion) of the Federal Government’s spending was allocated to salaries, out of a total expenditure of N12.7 trillion.
Ultimately, the implementation of the new wage policy will serve as a litmus test for the government, reflecting its commitment to social equity and its ability to enact policies that bridge the gap between the rich and the poor. The success of this policy will largely depend on the government’s resolve to enforce compliance and its agility in adjusting economic levers to mitigate any adverse effects.
The disparity in the implementation of the present minimum wage across states highlights the uneven terrain of economic development in Nigeria. Some regions may struggle to adopt the new wage structure, potentially leading to industrial unrest. Moreover, the private sector’s response to the wage increase will be critical, as businesses will surely grapple with the dual pressures of wage hikes and competitive markets.
On a social level, the wage increase is expected to alleviate the struggles of many Nigerian workers. The harrowing tales of families subsisting on meagre incomes are heart-wrenching. With the new policy, there is a glimmer of hope for improved living standards, better nutrition, and access to education for the children of wage earners. But only time will tell if this hope is unfounded.
