N46,000 Proposed Minimum Wage for Nigerian Workers: How Sustainable?


September 2, 2015
NEWS WEEK, OCTOBER 15-19, 2018

Introduction

The Nigerian Labour Congress (NLC) recently started agitating for a review of the national Minimum Act of 2010 that raised the minimum wage from N5,500 to N18,000 in 2010. However, the nagging question is “Can Nigeria afford to increase the minimum wage from the current N18,000 to N46,000 a month? . Given the current persistent drop in oil price and the fact that the major buyer of the Nigeria crude oil, USA, has stopped buying, it is doubtful whether labour’s yearning is rightly timed.

Issues at Stake

It is a known fact that the official exchange rate of the naira to dollar, which was N155.23 at 13/08/2014, now stands at N199.5 one year after (CBN, 2015). Since Nigerian economy is an import-driven economy, this translates to an increase in the prices of consumer goods; hence a reduction in the real purchasing power of the naira. This simply makes an increase in wage a bill a tall dream.

President Buhari recently approved the sum of N1.2trillion (a kind of multiple-intervention package  reportedly drawn from the Excess Crude Account (ECA), LNG funds and CBN soft loan), to serve as a rescue plan for bankrupt states in order to meet up with the payment of arrears of salaries. The president also approved a debt relief program designed by the Debt Management Office to help states’ restructure and extend the lifespan of their loans. Bankrupt states had blamed their failure to meet up with the payment of salaries on the drop in the revenue from the federation account.

This drop in the federally collected revenue can be attributed to the recent oil glut in the world market and decrease in the export volume. Looking at the situation in the world market for crude oil, it is likely that this oil glut may persist for some years. Following this, Nigeria cannot hope for a dramatic increase in oil prices in the nearest future and this may spell doom unless the economy is quickly diversified.

Take a look

For Nigeria to be able to afford this new minimum wage, the following need critical examination:

  • Detection and weeding out of ghost workers in the civil service. For instance, Benue State government, with a labour force of about 29,600 public servants, after verification discovered 14,000 ghost workers, (Source: Daily Trust, 12/10/2014). Unfortunately, NLC will kick against this as they always seeing the move as witch-hunting.
  • Rejuvenation of manufacturing sector. In 2014, the manufacturing sector contributed paltry 9.95% to the GDP of Nigeria (CBN Statistical Bulletin 2014). The manufacturing sector is one of the sectors that have the potential to boost the nation’s export and subsequently the economy and divert the country import-dependent tendencies. This will in turn reduce the effect of exchange rate fluctuations, hence, stabilize the economy.
  • In addition, the President’s efforts in blocking leakages from the federally collected revenue is said to be yielding meaningful results. According to the Central Bank Governor, Mr. Godwin Emefiele, the foreign reserves increased from $27.87billion by the end of May 2015 to $31.53 billion as at July 22, 2015 as a result of these blockages (Source: Information Nigeria 25/07/2015).
  • Should the government take care of the aforementioned areas among others, it would be easy to mop-up funds that could go a long way in making funds available for a higher minimum wage. Otherwise, following the current economic situation, Nigeria will find it very difficult to sustain the payment of a higher minimum wage. Indeed, for the Federal government to achieve successful implementation of the labour’s demand, a structural change, through more attention on the development of non-oil exports thereby moving away from oil as its major source of revenue as well as carrying out a reform in the civil service in order to fish out ghost workers, is hereby recommended.

"Miss Chiamaka Okolomike, a graduate of Economics, is youth corps member at AfriHeritage"

2 Comments

  1. Www.abdullahsaleh37@gmail.com'
    Abdullah saleh
    3 years ago September 2, 2015 / Reply

    Yes nlc chairman now we are looking for N46000 minimuming wage a mothn.

  2. gmbezekiel@mail.com'
    Gambo Ezekiel
    3 years ago / Reply

    minimum wage and lack of promotion,which is more pending?

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