By Oluseye Ojo
Within the past few weeks, Nigeria’s organised labour unions have been on the war path with the Federal Government over the national minimum wage. The National Minimum Wage Act of 2019 requires periodic reviews of the minimum wage in Nigeria every five years. After five years of the current N30, 000 ($66) minimum wage, the unions are demanding that it be increased to N250,000 ($550) per month.
The organised labour came down to the N250, 000 from a staggering N615,000 it started with. It had earlier reduced it to N494,000. However, the government balked at the proposal, arguing that such a drastic hike would be economically disastrous for the country.
President Bola Tinubu had, on January 30, 2024, appointed a 37-member panel, led by Vice President Kashim Shettima to recommend a new national minimum wage for Nigeria.
Membership of the panel include representatives of the federal and state governments, the private sector, and organised labour. Governors Umar Bago (Niger), Bala Mohammed (Bauchi), Dikko Radda (Katsina), Charles Soludo (Anambra), Ademola Adeleke (Osun), and Otu Bassey (Cross River) represented the six geo-political zones of the country.
At present, the negotiations have reached an impasse, with both sides refusing to budge from their positions. The organised labour is demanding N250,000 and the Federal Government is offering N62,000, which is an increment of N2,000 over the initial N60,000 it proposed. The labour unions, led by the Nigerian Labour Congress (NLC) and the Trade Union Congress (TUC), have threatened another nationwide strike and protests if their demands are not met. On the other hand, the government has remained firm, insisting that the unions’ demands are unrealistic and unaffordable. However, analysts have concluded that the implications of the standoff could be far-reaching, potentially impacting the livelihoods of millions of Nigerians and the overall health of the Nigerian economy.
According to them, as the two sides continue to battle it out, the nation watches with bated breath, wondering which side will emerge victorious and what the consequences will be.
The Backdrop
Nigeria’s current national minimum wage of N30,000 per month was introduced in 2019, replacing the previous rate of N18,000 that had been in place since 2011. The increase was the result of protracted negotiations between the government and labour unions, which had been pushing for a higher minimum wage for years.
At the time, the new minimum wage was hailed as a significant victory for Nigerian workers, many of whom had been struggling to make ends meet on the meagre previous rate.
However, the celebrations were short-lived, as inflation and the economic impact of the COVID-19 pandemic quickly eroded the purchasing power of the new wage.
Five years later, the labour unions are back at the negotiating table, demanding that the minimum wage be increased to N250,000 per month. They argue that the new figure is necessary to keep up with the rising cost of living and to provide a decent standard of living for Nigerian workers and their families.
The government pointed to the country’s fragile economic situation, marked by high inflation, growing debt, and sluggish growth, as reasons why such a drastic increase in the minimum wage is simply not feasible.
The Unions’ Argument:
The labour unions’ case for a higher minimum wage is based on the rapidly rising cost of living in Nigeria.
According to the National Bureau of Statistics, the inflation rate in Nigeria stood at 21.91 per cent as of February 2023, the highest level in nearly two decades. This has eroded the purchasing power of Nigerian workers, making it increasingly difficult for them to afford basic necessities such as food, housing, and healthcare. The unions insist that Nigeria’s minimum wage is among the lowest in the region, lagging behind countries like South Africa, Ghana, and Senegal. They argue that a higher minimum wage would help to reduce the country’s high level of income inequality and poverty. The NLC President, Joe Ajaero, minced no words in his assessment of the situation during a recent encounter with Saturday Sun, stating bluntly, “Having watched the removal of fuel subsidy, it is obvious that things have changed a lot.”
He explained that the current minimum wage of N30,000 is woefully inadequate, unable to even cover the basic necessities for a family of four, let alone the rising costs of transportation, food, housing, education, and healthcare.
Ajaero’s calculations painted a grim picture, with the average cost of living for a family of six estimated to be a staggering N270,000 per month, excluding expenses for communications, religious obligations, security, and social needs. He contended that the NLC’s demand is not an arbitrary figure, rather a carefully considered response to the harsh realities being faced by workers in Nigeria.
Government’s stance
The Federal Government offered to pay a new minimum wage of N60,000 which is an increment of 100 per cent over te current minimum wage. The government, however, has firmly rejected the unions’ demands, arguing that a minimum wage of N250,000 per month would be economically disastrous for the country. The Minister of Information and National Orientation, Mohammed Idris, responded by saying the N494,000 national minimum wage would cumulatively amount to a N9.5trillion bill, saying it is capable of destabilising the economy and jeopardising the welfare of over 200 million Nigerians.
“Nigerians need to understand that whereas the Federal Government is desirous of ample remuneration for Nigerian workers, what is most critical is that President Bola Ahmed Tinubu will not encourage any action that could lead to massive job loss, especially in the private sector, which may not be able to pay the wage demanded by the organised labour,” he said. The minister said though labour is keen on the take-home pay of about 1.2 million workers, the Federal Government is concerned with the welfare of over 200 million Nigerians based on its guiding principle of affordability, sustainability, and the overall health of the nation’s economy. The government argued that the cost of implementing such a high minimum wage would be prohibitive, requiring massive cuts to other government spending or significant tax hikes to fund it. This, they say, would have a ripple effect throughout the economy, leading to job losses, reduced investment, and a slowdown in economic activity.
“We cannot afford to put the entire economy at risk just to satisfy the demands of the unions. We have to balance the needs of the workers with the broader economic realities that we are facing as a country,” a government source said.
The government also said the fact that many private sector employers would be unable to afford the higher minimum wage might potentially lead to widespread layoffs and business closures. This, they argue, would ultimately harm the very workers that the unions are trying to protect.
Potential consequences of impasse
With both sides unwilling to budge from their positions, the negotiations have reached an impasse, raising the spectre of a potential showdown between the government and the labour unions. The unions have already threatened to call for nationwide strikes and protests if their demands are not met, a move that could cripple the country’s economy and disrupt the daily lives of millions of Nigerians.
Given the high stakes involved, some experts have urged the labour unions to embrace a compromise to resolve the impasse.
The Nigerian economy
Studies have shown that Nigeria’s economy has experienced fluctuations and challenges in recent years, including a severe recession in 2016 and the impact of the COVID-19 pandemic. While there was a positive upturn in economic performance in 2021, subsequent years have shown a decline, indicating on-going challenges to robust economic growth.
The removal of fuel subsidies and implementation of a managed exchange rate float have inadvertently led to a cost-of-living crisis, with a sustained increase in the general price level of goods and services, resulting in decreased purchasing power and increased poverty levels.
FG’s policies on subnational revenue
The removal of fuel subsidies and the managed float of the naira have led to an increase in nominal revenue for the states.
However, due to a surge in inflation, the real value of additional revenues has shrunk. The states have seen a marginal increase in net deductions, but the overall impact on revenue growth has been limited. This has implications for considering further wage increases, as any significant revenue shock or rise in personnel costs could pose financial challenges for the state governments.
Revenue growth and consideration for wage increase
While the average recurrent revenue growth rate surpasses the increase in personnel-related costs, many states have not implemented the 2019 minimum wage. It is believed that any significant revenue shock or rise in personnel costs could pose challenges for state governments, indicating the need to carefully consider fiscal constraints and their impact on future wage policies. The trend, as gathered made governors in Nigeria to come strong against the proposal of the organised labour. The governors said they could not afford even N60,000 minimum wage, let alone N250,000.
Personnel Costs and Revenue Trends
Studies have also revealed that wage increases contribute to higher personnel costs, which have steadily increased over the past few years. But the total recurrent revenue, as gathered, has not kept pace with the costs. In 2019, fiscal constraints reportedly prevented the implementation of the current minimum wage, and during the COVID-19 pandemic, personnel expenditure substantially increased as a percentage of total recurrent revenue. The trend showed in the unintended consequences of federal policies on inflation and poverty levels, coupled with limited response options for states due to shrinking real value of additional revenues. The situation, experts have said, underscored the need for a delicate balance in fiscal decisions. While state governments can influence fiscal policy, the complementarity of fiscal and monetary policies at the federal level is said to be necessary to achieve desired results.
“Any wage increase should align with economic realities at the subnational level and consider affordability and the ability to pay. It is a known fact that everyone has subscribed to the fact that the minimum wage should increase. But the increment must be realistic and affordable to the employers, even in the private sector.
This is a national minimum wage, not for federal workers alone. It will be used as a minimum standard for all private companies as well. Do you know how much many private nursery and primary schools owners pay their teachers? Are you aware that a number of them pay between N5,000 and N20,000 per month at present? To me, N60,000 or N62,000 is realistic. The labour unions should be realistic in their demands, otherwise mass retrenchment is inevitable,” Dr Morayo Ajao, an economist, noted.
Tayo Babafemi, who owns a printing press in Ikeja, concurred. “Do they even understand what a national minimum wage is, these labour leaders? Where would I get N250, 000 to pay the lowest worker in this firm when I as the CEO pays myself N300, 000? They should just tell us to pack our bags and shut the company down,” he stated.