Minimum wage: How we arrived at N615,000 — NLC
While Nigerians desperately seek succour following the asphyxiating socioeconomic situation prevalent across the country, the authorities and the organised labour are locked in a hide and seek over the appropriate amount that should constitute a new minimum wage
May 1 has come and gone and the raging psychological battle between the authorities and the organised labour persists, as the latter has even rejected the latest percent increase in the certain categories of federal workers. Therefore, labour says it is ready for a ‘maximum’ battle over a ‘minimum’ wage.
The uncertainty over when the matter will be resolved is no surprise to some key stakeholders in the industry and the organised labour. They had envisaged the likely hide and seek that has dragged from weeks into months as many are beginning the countdown to the first anniversary of the current administration. In the meantime, workers, nay Nigerians, are battling what is arguably their worst socio-economic challenges in recent times. There is weak purchasing power among the people. Transport fares have become unbearable. Cost of housing, healthcare services, has risen astronomically just as spiraling inflation has eaten deep into domestic budgets and plans for workers to send their children to school. Public utilities have become dilapidated and abandoned, while energy supply in particular is in limbo. Insecurity has led to a ripple effect on the prices of basic food items as most farmers could no longer have an unfettered access to their farmlands. These and many other factors and variables, according to most observers, have made a new minimum wage imperative. A choked business environment has also culminated in the demise of big, medium and small scale enterprises. The national economy is suffocated by a huge debt burden that incapacitates the country from seriously investing in infrastructure renewal. Debt servicing still consumes a large chunk of the national revenue. While public utilities are almost non-existence and with power and energy supply in a perilous state, government and its agencies, as well as private concerns, jack up rates on services, indiscriminately with consumers at the receiving end. These issues became catalysts for a quick action by the government to go beyond offering mere palliative measures that have had salutary impact on the vast majority of the population.
The Federal Government on January 30 had unveiled a broad-based panel to work out the blueprint of a new minimum wage. The 37-man tripartite committee was mandated to look into the implementation. The committee, led by a former Head of Civil Service of the Federation, BukarAji, has six governors among its members. They are Governor Mohammed Bago of Niger State, representing the North-Central; Governor Bala Mohammed of Bauchi State, representing the North-East; Governor Dikko Radda of Katsina State, representing the North-West; Governor Charles Soludo of Anambra State, representing the South-East; Governor Ademola Adeleke of Osun State, representing the South-West; and Governor Otu Bassey of Cross River State, representing the South-South. The other members comprise the Minister of State for Labour and Employment, Honourable Nkeiruka Onyejeocha; Minister of Finance and Coordinating Minister of the Economy, Wale Edun; Minister of Budget Economic Planning, Atiku Bagudu, and the Head of the Civil Service of the Federation, Dr (Mrs) Yemi Esan. The inauguration of the body was seen by some stakeholders as an indication of the government was at the verge of wrapping up everything concerning the minimum wage notwithstanding that it will have to go through a legislative crucible.
But one of those who mentioned May 1 for the unveiling of a new minimum wage for workers would not be realistic was the Director-General of the Nigeria Employers’ Consultative Association (NECA), Adewale Smart-Oyerinde. With the benefit of hindsight and as an insider, he had said a new minimum wage could not be announced on May 1. “We have not actually started real negotiations. The last meeting we had was, when we received reports of the public hearings. We were asked to send our proposals to the secretariat of the committee. We have done that as an Organised Private Sector (OPS). We believe others have sent in theirs. We are waiting for the reconvening of the committee for the negotiations to start. We are ready for the negotiations.”
The president of the Trade Unions Congress (TUC), Mr. Festus Osifo, reinforced the view as expressed by the DG of NECA, who asserted, “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 harmonised 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, 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.”
Similarly, a former NLC president, Ayuba Wabba, clarified issues concerning the move to have the new minimum wage, as the current one expired on April 18, 2024. He also shed light on the ongoing negotiations, as well as the failure by some states and the private sector to implement the subsisting N30,000 minimum wage, just as he touched on sanctions for defaulters.
According to him: “The Minimum Wage Act of 2019 made clear provision on when negotiations should start and be concluded, which is six months to the expiration of a prevailing national minimum wage. Also, there was a clear provision for enforcement in a court of law including payment of interest rate to the workers that have been denied payment of minimum wage. Before I left office in 2023, we had contacted Mr Femi Kuti (SAN), to prosecute Taraba, Zamfara and Abia states that refused to start implementing the N30,000 national minimum wage for any of their employees. I am sure they have not implemented it as we speak.”
Provisions of the law
There have been renewed agitations that the National Minimum Wage Act 2019, enacted by the National Assembly, should be reviewed to reflect the contemporary socio-economic realities in the country. The Act replaced the National Minimum Wage (Amendment) Act, 2011 that provided for N18,000 as a wage that is relatively sufficient to meet the basic needs of workers.
The 2019 Act stipulates conditions for the implantation of the law by government at all levels and failure to meet those obligations are to attract sanctions. For instance, Section 9 of the Act mandates employers in establishments covered by the Act, to pay the workers at least N30, 000 monthly, subject to statutory deductions. So, failure to comply with the provision amounts to an offence punishable with a fine not more than five percent of the defaulter’s monthly wage, payment of the outstanding monthly wages. For each month the violation continues, the employer is liable to pay an additional penalty of a rate not less than the prevailing Central Bank of Nigeria (CBN) lending rate on the wages owed.
Some commentators predicated their call for a review of the minimum wage on the vagaries of the time. According to them, the cost and standard of living varies from one state to another. Thus, this is why the regulation of minimum wage should not be within the exclusive preserve of the Federal Government. According to them, this calls for a constitution amendment such that Item 34 of the Exclusive Legislative List should be moved to the Concurrent Legislative List. This will enable states the power to determine the minimum wage appropriate for their local peculiarities.
Meanwhile, Governor Godwin Obaseki of Edo State broke the ice, when he announced N70,000 as the new minimum wage for civil servants in the state. His cross Rivers counterpart, Bassey Otu, has followed suit by announcing N40,000 as the new minimum wage for civil servants in the state, a figure he said was in tune with the “realities of the time rather than sentiments.” According to Otu “Owing to the peculiarity of Cross River State regarding its lean finances occasioned by low Statutory Federal Allocation and aggravated by the unfavourable State GDP to Debt servicing ratio, the new wage implementation is in line with the realities of the time rather than sentiments.”
Otu appears more affirmative on the capacity of Cross Rivers on the issue of a new minimum wage for the state workforce. The same cannot be said about Edo since Governor Obaseki says he is ready to do more if the need be once a new national minimum wage is formally proclaimed into law. Yet, all the 36 state governors have further expanded the scope of the raging debate over the minimum wage brouhaha. Acting under the aegis of Nigeria Governors Forum (NGF), the governors cautioned workers against undue high expectations from the minimum wage negotiations, as states will pay only implementable and sustainable wages. The governors have their representatives in the negotiating team put together by the government to suggest a new minimum wage for workers. “As members of the committee, we are reviewing our individual fiscal space as state governments and the consequential impact of various recommendations to arrive at an improved minimum wage we can pay sustainably,” the governors said.
Defaulting states on N30,000 minimum wage
Five years after the proclamation of the current national minimum wage, at least 15 states are still defaulting on the payment to workers. Labour has not succeeded in its occasional standoffs with governments to comply with the act that brought about the minimum wage in 2019, whereas the law states unambiguously stiff sanctions against any act of infractions of the provisions of the law. Ironically, some of the states had embarked on populating the workforce of their states through fresh appointments and recruitments, which, the civil society organisation called BudgiT says has shot up cumulative personnel cost of the 15 affected states by 13.44 per cent to N1.75tn in 2022 from N1.54tn in 2021. It added that those states grew their overhead bills by 23.42 per cent to N1.24tn in 2022.
At different times and forums, labour had frowned at and remonstrated against the utter disregard by those states for the law on the minimum wage. Wabba, who is a former NLC president, had asked workers in the affected states to engage in actions compatible with labour law to register their protest against the authorities for undermining their rights. He opined that it is “disheartening” that amid the current economic situation, some states “still need persuasion” to pay workers the national minimum wage.
Federal allocation formula
There is the perennial issue concerning the federal allocation formula, which is skewed against states and local governments. The belief is that it is against the fundamentals of federal principles. The issue has, for the umpteenth time, brought forward by governors in the raging debate and discourse for a new minimum wage. Under the existing system, the Federal Government gets 52.68 percent; states 26.72 percent and local governments 20.60 percent of the federal allocation.
The governors have made a fresh demand for a review of the revenue allocation formula to enable them to implement the proposed national minimum wage. Governors Ademola Adeleke (Osun), Bala Mohammed (Bauchi), Caleb Mutfwang (Plateau), AbdulRahman AbdulRazaq (Kwara), and Mohammed Bago of Niger State, spoke on the resolve of the governors at the zonal public hearing on the national minimum wage. They insisted that the current revenue allocation must be reviewed in favour of states to empower them to meet the workers’ expectations. The public hearing came amidst the call by workers at meetings held simultaneously in Lagos, Kano, Enugu, Akwa Ibom, Adamawa and Abuja for various figures as a living wage due to the current economic hardship and hyperinflation in the country. The public hearing was meant to receive stakeholders’ inputs which will be considered by the 37-member Tripartite Committee on the New National Minimum Wage set up by President Tinubu in January. The position of the South-West governors was delivered at the public hearing in Lagos. The Minister of Finance and Coordinating Minister of Economy, Mr Wale Edun, presided. A member of the Tripartite Committee, Adeleke, called for an urgent review of the revenue-sharing formula to favour the state and local governments. He urged the Federal Government to move the control of solid minerals from the Exclusive Legislative List to the Concurrent Legislative List and that states should be allowed to negotiate with their workers’ pay. He declared: “It has to be reiterated that the majority of the government at the sub-nationals can’t sustain and improve wages and salaries for their workers without a significant adjustment in some of the narratives in the national economy….I call on the National Assembly through the Revenue Mobilization Allocation and Fiscal Commission to urgently take decisive action to look at the ratio objectively and realistically.” His Bauchi counterpart reiterated the call for the review of the current sharing formula, because, the “majority of the Nigerian people live in the states.”
How much is appropriate?
However, the opinion of a few individuals that differ with the labour over the agitation for minimum wage is based on the amount being demanded to replace the current N30, 000 minimum wages. They want labour to be more realistic in the demand. For instance, a former NLC president and now the senator representing Edo North, Adams Oshiomhole, has said state governors can no longer cite low revenue as an excuse for withholding payment of a new minimum wage to their workers. Oshiomhole said this is based on improved federal allocation payments to their coffers. Oshiomhole said that all concerned parties acknowledged that the current minimum wage of N30,000 is outdated and should be increased to meet with rising cost of living. He canvassed for a mutual agreement between workers and the Federal Government and the state counterparts that there is an urgent need to increase the minimum wage. According to him, “I think there is some agreement between employers, including private employers and obviously the Federal Government, and I believe state governments that the current minimum wage of N30, 000 is a joke.” But the former Edo governor said governors purchasing cars at current prices had reason for failing to implement the new wage upon approval. He added: “Those governors are buying cars at the current price. They don’t pity them because revenue is low. The truth of the matter is that we have to speak the language of the market. Those forces that drive prices also drive the cost of living. There is a recognition of the fact that the purchasing power of the workers across the board including directors, permanent secretaries not to talk of those on levels one to four, has dropped radically and you need to beef it up and put food on the table for families. In a market economy, there are even countries where wages are indexed to the weight of inflation. So, I think there is a shared commitment that wages should go up and go up radically as much as prices have skyrocketed. All employers, including the private sector, should increase their wages as they are charging higher prices.”
Governor Sule Abdullahi of Nasarawa State, who also agreed that workers deserve better pay given the current inflation statistics, explained that all sub-national now receive more allocations and can pay a little more than what is currently paid. He said: “No state in the federation can say we have not seen improved revenue that has come to us and I think every state is proving it by the number of so many infrastructure developments and other kinds of development that are taking place.”
Balancing act
Critics of the increase say wages are a factor in the overall welfare package for workers. They suggest that the government should consider other components of the welfare of all Nigerians, because the whole matter borders on the weak purchasing power of the Nigerian currency (Naira). Others called for a positive shift in the lifestyle of the political leadership to reflect the demand and needs of the larger society. The critics say profligacy seems to have subsumed the culture of service, commitment and transparency and accountability among those privileged to lead at federal and state levels in particular. “Besides, the productive sector must be revamped in order to reduce the current huge importation of goods and services that can be sourced locally. In this regard, the further diversification of the economy, with emphasis on where the country has a comparative advantage should be of utmost priority,” a historian, Mr Bayo Omiwole, stressed. “These and other measures should be precursors to a sustainable wage structure that would be vulnerable to the whims and caprices of political gladiators.”
Impact
Whatever the outcome of the ongoing negotiations will affect all the citizens and influence the private sector and state government workers. The public sector will face the challenge of implementing a wage that supports workers without causing undue strain on the nation’s budget. So, there is a need for a wage that tackles the rising cost of living and tries to strike a balance with inflation and checkmates job losses. A corresponding increase in production is vital, as Professor Tayo Bello, a lecturer at Adeleke University, counseled that, “The downside is that this wage increase might exacerbate inflationary pressures. As businesses face higher labour 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.” A financial economist at Ebonyi State University, Dr Nelson Nkwo, suggested that the government should introduce more measures capable of cushioning the domino impacts of wage increase. He said the measures could include a stricter monetary policy to check inflation and specific support programmes for businesses. “Policymakers must carefully consider the broader economic implications and adopt a comprehensive approach to ensure a harmonious and stable economic environment,” he said. Other experts suggested that governments should invest more in those sectors of the economy that can create jobs that gear up production of more goods and services at affordable costs. Besides, they advocated that the authorities should engage the services of professional managers to manage the nation’s fiscal and monetary policies in order to maintain economic stability, as well as improving the infrastructural facilities in the government-owned schools, hospitals, providing good road networks, quality and affordable water, power, foodstuffs, housing, and security of lives and properties.
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