As the debate over the new National Minimum Wage rages between the government and the Organised Labour, ABDULWAHAB ISA writes that only a realistic figure would save the nation from further crisis. That is against the backdrop that some states are even finding it hard to pay the current N30, 000 minimum wage.
All the members of the minimum wage negotiation team agreed to the imperative of a higher wage for Nigerian workers in the face of rising economic challenges. Unanimously, the wage increase committee agreed that Nigerian workers across the divides—federal level, state, local government, and employees in the private sector—deserved an upward review of the minimum wage. The N30,000 minimum wage of 2019 has not only been eroded, but the paltry wage base is unsustainable in the face of the mountainous economic challenges of the moment. Not every state has implemented the N30,000 minimum wage adopted in 2019. The wage review team consented to an upward review of the minimum wage. However, the intractable problem lies in the amount to be adopted—a figure that will not be injurious to the economy and, at the same time, gives a Nigerian worker economic relief. This is the dilemma. The Federal Government is financially endowed with the capacity to pay any figure above N100,000. However, states and, by extension, the local government councils and private sector players do not have equal financial might with the Federal Government. In the last couple of years, until the removal of fuel subsidies with effect from June 2023, allocation from the federation purse to the states by the Federal Allocation Account Committee (FAAC) had been dwindled on account of subsidy contingent provision.
States’ FAAC allocation, IGR outlook pre-subsidy, and post-subsidy removal
For the 36 states and the Federal Capital Territory FCT, Abuja, monthly disbursement from the FAAC allocation purse is the major source of finance inflow outside of the Internally Generated Revenue (. IGR). Over time, the amount received monthly by each state dwindled substantially on account of fuel subsidy provisions. Effective June 2023, FAAC disbursement to states improved with the removal of fuel subsidy funding by the current administration. For instance, many states received more allocation in the second half of the 2023 post-subsidy regime when compared to the period when the subsidy regime was in place. Akwa Ibom, Bayelsa, Delta, and Rivers states are the only states that received more allocation in the first half of the year when compared to the second half of the year of the non-subsidy regime. This is due to an increase in the 13 per cent derivation in the first half of the year and a reduction in the 13 per cent derivation in the second half of the year. Total FAAC gross allocation to the 36 states before fuel subsidy removal (between January and June 2023) stood at N2,188,580,129,544.13, while gross allocation to the 36 states post-subsidy removal stood at N2,305,371,085,484.65, indicating a 5 per cent difference. In terms of IGR by state, this varies. More populous state like Lagos, Rivers, and Kano, with a remarkable presence of business and commercial activities, generates more IGR than Osun State, Kogi, Kwara, Ekiti, and others. The FAAC net distribution of 36 states in 2023 stood at N3,877,197,582,680.42. The total collective IGR of 36 states in 2022 was N 1,842,111,445,832.29, translating to a combined revenue of N 5,719,309,028,512.71. Similarly, the recurrent expenditure of the 36 states in 2022 amounted to N4,608,706,106,985.52, leaving the 36 states with a net revenue sum of N1,110,602,921,527.19.
Appropriate minimum wage contest
With the Federal Government still locked in minimum wage negotiations with the leadership of the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC), trying to arrive at an acceptable minimum wage figure, the Federal Government at the last session offered N62,000. Organized Labour reduced its demand from the previous N494,000 position to N250,000. This was after the Minister of Finance, Wale Edun, submitted the cost implications of the minimum wage to President Bola Tinubu. The Federal Government has advanced multiple reasons why a higher minimum wage figure put forward by labour leaders is unsustainable. The current fragile economy, it said, can’t support it. Given the substantial differential in the capacity of states in terms of FAAC disbursement allocation and IGR, there is a general consensus that the minimum wage should increase. But it has to be within a realistic range of what all parties can pay. That is why the private sector and the government offered N60,000 in bandwidth. In his June 12 democracy day remark, President Bola Ahmed Tinubu hinted that the Federal Government will only pay the minimum wage it can afford, saying that the country will cut its coat according to its cloth. To this end, the president alerted the National Assembly to expect his memorandum on the final settlement for a new national minimum wage. On the minimum wage issue, speaking to the leaders of the National Assembly, represented by the President of the Senate, Godswill Akpabio, the President said the government would do what is expected but would also pay what it can afford. “Senate President, Deputy Senate President, you’ll get a notice on the minimum wage; we’re going to do it—what Nigeria can afford, what you can afford, and what I can afford. They ask you to cut your coat according to your size, if you have a size at all,” the president said.
Experts views
Experts and financial analysts have weighed in with their perspectives on the minimum wage negotiation imbroglio. An Abjua-based wealth management expert, Mr. Gabriel Idakolo, said the utmost caution must be applied by both parties in arriving at an equilibrium figure. He said: “Organized Labour has a statutory right to use strikes as a tool to press home their various demands if the government refuses reasonable negotiations. However, looking at the national minimum wage, there is a need to engage in realistic discussions based on the implementation of the previously agreed N30,000 national minimum wage, which most state governments and some private organizations are not adhering to,” he said. According to him, the current new negotiation is valid against the background of the present economic situation in the country and the high cost of living. He said it needs to be substantial but within the capacity of stakeholders to effect maximum compliance. “The two-day strike called a week ago caused a lot of disruptions and losses to the economy, and if the Federal Government and Organized Labour failed to reach a resolution on the minimum wage issue, another strike could lead to disastrous consequences. The people are already on edge, and any insensitive act from the government could lead to chaos. “To achieve equilibrium, it will mean that the national minimum wage should be tied within a band.”. For example, Idakolo suggested that each local government, state, organized private sector, and Federal Government would pay from N62,000 to above N100,000 to give everyone room to fall within its range of capacity. An economist, Dr. Aliyu Alias, insists states shouldn’t pay the same amount as the Federal Government. He said states should be accountable for the FAAC allocations they receive. “There is never an equilibrium. It’s not necessary that the state pay what the Federal Government will pay. The Federal Government should pay more than N62, 000. It is not a function of labour; it is a function of the economy. Regrettably, from the time the fuel subsidy was removed until now, we were supposed to have seen the impact of fuel subsidy removal in terms of reinvestment, capital inflow, and business opportunities the government has created,” he said. In his submission, former Governor of Jigawa State, Sule Lamido, posited that Nigeria is rich enough to pay any amount as a new national minimum wage. Lamido, who spoke recently on Channels Television, said if the Nigerian government can budget about N17 trillion for the LagosCalabar Coastal Highway without passing through the National Assembly, then it can pay any amount as the minimum wage. Governor Chukwuma Soludo of Anambra State warned President Bola Tinubu against approving an “unsustainable” minimum wage for workers in the country. Speaking on Wednesday at a special edition of The Platform, an event organized by The Covenant Nation to promote national development, Soludo delved into the complexities of the minimum wage debate and its broader economic implications. The former Governor of the Central Bank of Nigeria (CBN) warned that not all state governments and the organized private sector can pay the N62,000 proposed by the Federal Government and the N250,000 demand of Organized Labour. Soludo cautioned that adopting an unsustainable wage could lead to job losses and further economic challenges.
