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There’s fair middle ground in Nigeria’s failing minimum wage negotiation

Nigeria's economic challenges demand that both the government and organised labour climb down from their high horses to strike a fair, just, and enforceable middle ground

The Nigerian government and organised labour have taken extreme positions on the ongoing minimum wage negotiation where economic challenges demand that both parties climb down from their high horses to strike a fair, just, and enforceable middle ground to, if for no other reason, save the country from implosion.

Tossing N48,000 ($32) to workers as a proposed new monthly minimum wage in a country where a meal costs about N5,000 in a local restaurant shows that the government has no regard for its workers. But organised labour will not demonstrate sufficient sensibility if it continues to insist on its N615000 ($410) wage floor in a country where the country is surviving on debt.

Whereas the lingering foreign exchange (FX) crisis, cost of living crisis, and infrastructure decay are all serious troubles the excruciating economy has had to bear, the potential breakdown of the minimum wage impasse adds a tonne of uncertainty. Already, the Nigerian Labour Congress (NLC) and its affiliates have walked out of the ongoing meeting, describing the N48,000 offer as a wage reduction.

Exactly a month since Nigerian workers have been due for a new minimum wage (the existing act became invalid on April 18), the parties are leaving the negotiation table more disparaged. And the government, with the hindsight of a history of mistrust with the labour union, should be worried that the workers’ representatives have lost faith in its commitment to a peaceful resolution.

A worthless minimum wage 

The current N30,000 ($20) wage floor has lost over 70 per cent of its worth to inflation since 2019 when it was adopted. On assumption of office, President Bola Tinubu removed the age-long fuel subsidy and raised the price of the white commodity by over 200 per cent.

Today, a car user can barely fill a tank twice with the proposed minimum wage. But most importantly, the high cost of fuel has increased the cost of transportation by over 300 per cent in some cases and triggered fresh concern about food inflation, which is now 40.53 per cent, from 24.6 per cent a year ago. Naira, also, has taken a beating from Tinubu’s neoliberal reforms, losing about two-thirds of its value to other currencies.

The pains and the government’s suspicion of what could follow have smacked off some arm-twisting tactics even months ahead of a discussion on new wage fixing. Last year, the government offered to pay a worker N35,000 top-up in what it called a wage award pending the conclusion of the new minimum wage. The labour union executives reluctantly accepted the markup not because they did not want their colleagues to earn a better wage but because they saw the extra pay as an arm-twisting, Greek gift.

The wage award was (is) interpreted as one of the schemes of government to evade real discussion. Labour also understood it was a banana peel, hence it rejected it abi nitio while calling for a more definite discussion. The demands of Labour branches, which were regional, ranged from N700,000 to N1 million minimum wage but the national leadership eventually adopted N615,000 as the national demand. The demand, about 2000 per cent above the current N30,000 monthly wage cap, has not resonated with the media and other critical stakeholders but raised questions about labour’s patriotism and genuineness of purpose.

Higher wage adds to heavy public financial burden 

The media had balked at the government’s ability or willingness to pay the bonuses. In confirmation of the fear, about 30 states have reportedly ditched the wage award agreement, with some paying N10,000 or N15,000 while others do not pay at all.  The federal government has also reportedly defaulted in fulfilling the obligation in the past months. The defaults reflect the true financial strength of the government and are telling realities of a material difference the ongoing negotiation will make in real terms.

Until last year when fuel subsidy removal and Naira depreciation raised the nominal incomes of the government, the percentage of public revenue spent on debt servicing was above 90 per cent. In the first nine months of last year, the figure (debt servicing to revenue ratio) climbed down to 66.9 per cent, which was celebrated as a four-year low

By any standard, 67 per cent debt service to revenue ratio is too high for a healthy statecraft. With the return of fuel subsidy payments, the figure could spike again, which will weaken the government’s ability to meet its basic financial responsibilities, including salaries, and push the government deeper into a debt trap. Currently, 31 states owe the Central Bank of Nigeria (CBN) N340 billion in unpaid salary-support overdrafts granted to them since 2016.

When public officials live in ‘maximum opulence’      

But the argument that the government is too broke to pay a living wage is a hard sell in a country where public office means opulence. For this reason, the President of the NLC, Joe Ajaero, said both federal and state governments can pay the minimum wage labour has demanded if they prioritise employees’ welfare. But that stops at a wish as citizens’ welfare sits at the bottom of the government’s preferences.

Recently, the American International School of Abuja (AISA) wrote the Economic and Financial Crimes Commission (EFCC) to furnish it with details for the refund of $760,000, which is the balance of the advance payment the immediate governor of Kogi state, Yahaya Bello, deposited for the education cost of his four children in the school. The governor, who has been declared wanted in connection with a N82 billion fraud while in government, had paid for the education of his children in advance, allegedly from the coffer of a state that could not pay pension entitlements for 16 years.

Bello’s case is not an exception. From northeast to southwest and from southwest to northwest, Nigerian politicians drive in convoys worth hundreds of millions and budget billions of Naira on the renovation of offices and residences every year while they pay workers peanuts under the guise of poor state revenue.

The labour demand is unrealistic as suggested by some experts and does not align with logical progression. But if the leakages are blocked, official wastes checked and the ‘big men’ are made to pay just taxes rather than peanuts under fraudulent waivers and concessions, the state can, indeed, raise enough to pay more decent wages than the mocking N48,000 it is offering.

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