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NLC’s ultimatum: Why minimum wage, fuel subsidy removal & revenue formula do not mix

This report  captures the plethora of paradoxes in the emerging debate over the request of state governors that an improved revenue sharing formula and the withdrawal of the subsidy on petroleum products  may be conditions precedent before they can obey, as it were, the Minimum Wage Act. Short of condemning their position, the report concludes that all the governors need to do is find creative ways of meeting the challenges of obeying the Act as well as reducing the huge wastes in running their states and, necessarily, their offices.

By Jide Ajani,  Deputy Editor

Nigerian governors, like most politicians, easily lose it.  Yet, they defend the loss.

It may not matter to them that between 1981 and 2011, the salary of the Nigerian worker has suffered a huge tumble – the equivalent of N37,500 in 1981 to today’s N18,000 as minimum wage.

Yet, the committee that was set up to package the N18,000 worked at it for some three years.

Interestingly, according to Sunday Vanguard findings, 15 of the state governors made presentations to the committee.  Information  also suggests that the governors made representation through proxies.

“The governors merely sent their state Heads of Service to make the presentation,” a source said. But, the action, in itself, speaks volumes about the attitude of the governors to the welfare of their civil servants.

In the course of this investigations, it was gathered that the average proposal of the governors to the committee came to N22,000 – which was some 18 per cent above the N18,000 that has now generated controversy.

It was the late President Umaru Yar’Adua who set up the Justice Belgore Committee.

Represented in the committee were the small and medium enterprises group, the Central Bank of Nigeria, CBN, which presented memos about the state of the economy along with the Federal Ministry of Finance; and the Revenue Mobilisation and Fiscal Allocation Commission who knew about revenue formula.

The proposal of labour to that committee was N52,000 – which was a proposal for a working pay.

After the committee finished its work,  Yar’Adua presented the report, and the N18,000 that was agreed, to the National Council of State which ratified it before it became a presidential bill.

It was then sent to the National Assembly where the two chambers debated it – 360 House of Representatives members and 109 senators.

One of the salient points in the report was the exemption granted to employers of labour with less than 25 staff.

On March 15, 2011, after dilly-dallying, President Goodluck Jonathan signed the bill into law – more like an election manifesto.

Today, the governors are complaining that they may not be able to afford to pay the N18,000.

The pittance called N18,000

But how would the governors, who are lamenting the supposed inability to obey the Minimum Wage Act, react to the over 100 per cent  discount of today’s N18,000 and 1981’s minimum wage of N125?

The mathematics is simple.  In 1981, a naira exchanged for $2. Therefore, the N125 minimum wage of 1981 was equivalent to $250.  By simple arithmetic of today’s exchange rate of N150 plus to a dollar, the exchange rate of the $250 of 1981 to today’s exchange rate would amount to N37,500, which is 100 per cent more than the N18,000 of today.

That is not all.  Also in 1981, Chief Obafemi Awolowo’s Unity Party of Nigeria, UPN, which was ruling Lagos, Ondo, Ogun, Oyo and Bendel states, said it was ready to accept the N300 proposal by the Hassan Sunmonu-led Nigeria Labour Congress, NLC.  The N300 of that era would have translated into $600 which would have been N90,000 by today’s exchange rate.

In fact, at executive sessions of NLC, N90,000 was considered as living wage for workers.

Sunday Vanguard gathered that the computation had been done by the leadership of labour but only decided to put forward the N52,000 which it presented to the Belgore committee.

Back to the Second Republic:  President Shehu Shagari’s National Party of Nigeria, NPN, had to jump at a negotiated N125 because it was already losing face.  Sunmonu’s NLC had already called the workers out.  It led to a major strike by the leadership of NLC between May 11 and May 12, 1981.

In an interview, Alhaji Sunmonu said, “I was invited by President Shehu Shagari to come for dialogue and I did but, I insisted that until we started negotiation and sign an agreement, I wouldn’t be able to go back to Nigerian workers to say they should go back to work.  If I do that, I would be a traitor.  We also insisted that the negotiations must be at the highest level”.

It was learnt that those who led the Federal Government delegation were then Vice- President, Dr. Alex Ekwueme; the Senate President, Dr. Joseph Wayas; and the Speaker, House of Representatives, Mr. Edwin Ume-Ezeoke. The N125 of 1981 is the equivalent of N37,500 today.

The governor’s lamentation

What the state governors are saying is that there is no way they would pay the N18,000 minimum wage without creating a major dislocation in the governance of their states.

Therefore, they looked for a way out.They have been arguing – and ferociously so – that certain realities have also come to their mind.

First, the governors have now remembered that the revenue sharing formula that was supposed to be reviewed every five years but which has been on since 2000 is now due for review.  Read, more money.
The present sharing formula allocates about 52 per cent  of revenue to the Federal Government while the states, local government councils and some agencies share the remaining 48 per cent.

Then, they also remembered that the subsidy that the Federal Government claims to be spending on petrol is too much.  Their solution: Remove the subsidy.

That way, the huge money annually spent on subsidy should be saved for other forms of development.

The governors have suddenly also remembered that with such monies, they are ready to engage in massive development of their states.

Part of their argument is that the workforce in the states is, at any given time, less than 2.5 per cent of the total population and, therefore, ask why just a very minimal percentage of the population should tie the hands of development.

According to the chairman, Nigeria Governors’ Forum, Governor Rotimi Amaechi of Rivers State, the needs and challenges of each governor differ from state to state and, therefore, while some governors would be able to pay the minimum wage effortlessly, others would find it really difficult to pay.

How much is the subsidy?

Last year, the subsidy claimed to have been spent on petroleum products was in excess of N500 billion.
As at June this year, according to reports, the subsidy has already exceeded the N500bn mark.
What this means is that, at the same rate, the subsidy cost at the end of the year would hit N1trillion.

To be fair, this money would go a long way in assisting development.

But the argument is immediately deflated in the face of the content and context of the subsidy.

So, what is the subsidy for? Well, in plain simple language, it is made up of costs borne out of pure inefficiency and an inability to be creative in managing governance.

Nigeria’s refineries are working – in a manner of speaking.  But the capacity at which they are operating only amounts to less than 30 per cent of national needs.

No new refineries have been built since 1999 when the civilians came in – not that any has been built since the Kaduna refinery was commissioned in the early part of the last quarter of the last century – some three decades ago.

With massive importation of petrol into the country and the inefficiency at the ports, what constitutes the subsidy is a mish-mash of demurrages, transportation, shipping, banking costs, bridging costs, laziness, inefficiency, greed and ineptitude – all these come together to make for the cost of subsidy.

What Labour is saying

NLC has already issued a two-week ultimatum which expires this weekend.
Labour’s argument is that the issue of minimum wage should not be lumped together with review sharing formula or the removal of petroleum subsidy.

Indeed, NLC’s position is that there was an agreement which subsists and which states that the N65 per litre cost of petrol should not be tampered with.

A source in NLC told Sunday Vanguard that “we said the issue goes beyond just deregulation or removal of subsidy.  It should be the whole value chain that should be looked into – re-invest, bring back the refineries and all such”.

NLC is also insisting that the country must move from import reception destination to direct local production.
“We talked about the need to punish sharp practices and reward or acknowledge those who comply with the law”, the source said.

It was also discovered that there is something potentially dangerous in the current debate.
The N18,000 that is currently the butt of argument was based on an inflation rate that was in single digit. By the time the agreement was reached and the Minimum Wage Act signed into law, inflation had hit the double- digit.  So, the parameters have changed.

But the governors are not looking at that. In addition, how would it add up for the Nigerian worker whose N18,000 minimum wage was based on a pricing regime of N65 per litre of petrol but who is now being told that he would have to pay between N120 and N150 per litre? He would simply, also, ask for more money as the governors are doing now.

Then, there is the issue of the revenue sharing formula. At the time NLC went into negotiations and agreed on the N18,000 minimum wage, the Federal Government’s share of the nation’s revenue was 52 per cent.

Labour is insisting that should the governors succeed in getting a better share of the revenue after an upward review, then the workers, too, would seek to be part of the booty.  Therefore, tying the proposed removal of petroleum subsidy and upward review of the revenue sharing formula to the minimum wage would never add up.

Instead, it would create a never-ending potpourri of needless acrimony.

The Minimum Wage Act
National Minimum Wage (Amendment) Act, 2011 Explanatory memorandum

The Act further amends the National Minium Wage Act, Cap N61 Laws of the Federation of Nigeria, 2004 as amended, to provide for a revised national minimum wage and also to provide for a realistic penalty regime for violation of the provision of the Act

National Minimum Wage      (Amendment) Act, 2011
A bill for an Act to amend the National Minimum Wage Act Cap N61 Laws of the Federation of Nigeria, 2004 to provide for a revised national minimum wage and; for related matters
Enacted by the National Assembly of the Federal Republic of Nigeria:
1. The National Minimum Wage Act Cap N61 Laws and Federation of Nigeria, 2004 (in this Act referred to as “ Principal Act) as amended, is further amended as set out in this Act

2. Section 1 of the Principal Act is amended in subsection (1) by substituting for the existing subsection (1) a new subsection (1)

“(1) As from the commencement of this act, it shall be the duty of every employer (except as provided for under the principal Act as amended) to pay a wage not less than the national minimum wage of N18,000.00 per month to every worker under his establishment”.

3. Section 3 of the Principal Act is amended in subsection (1) by substituting for the amount:
a. N100.00 in line 5, the amount N20,000.00 and
b. N10.00 in line 6, the amount N1,000.

4. Section 5 of te Principal Act is amended by substituting for the amount:
a N100.00 in line 6, the amount N20,000.00; and
b. N100.00 in line 6 the amount N1,000

5. This Act may be cited as the National Minimum Wage (Amendment) Act, 2011
In accordance with Section 2 (1) of the Acts authentication Act, Cap A2, Laws of the Federation of Nigeria 2004. That this is a true copy of the bill passed by both house of the National Assembly.

Salisu Abubakar Maikasuwa, mni
Clerk to the National Assembly
15 Day of March 2011

I certify that the bill has been carefully compared by me with the decision reached by the National Assembly and found by me to be true and correct decision of the House and is in accordance with provision o the Acts authentication Act cap A2 Laws of the Federation of Nigeria 2004

Salisu Abubakar Maikasuwa, mni
Clerk to the National assembly
15 Day of March 2011

Dr Goodluck Ebele Jonathan, GCFR
President of the Federal Republic of Nigeria.
A brief history of Minimum Wage

Between 1945 and 2000, when the Olusegun Obasanjo administration agreed to the N5,500 minimum wage for state civil servants and N7,500 for federal civil servants, there had been 15 labour struggles for minimum wage.

In fact, the first, in 1945, by the late Pa Michael Imodu, Labour Leader Number One, was over COLA – Cost of Living Allowance.  Imoudu led labour to a successful outing and, according to Hassan Sunmonu, former president of the Nigeria Labour Congress, NLC, that singular act began the liberation move which culminated in Nigeria’s independence in 1960. The strike lasted 45 days.

Just before independence, in the 1950s, a technician in the employ of the Nigerian Railway Corporation earned between 2 shillings, 6 pence) and 3 shillings, 6 pence per day. He did not earn all of that for 30 or 31 days but he earned it for an average of 24days.

In the Western Region, just before the elections of 1956, Chief Obafemi Awolowo promised workers in the region that he would give them a pay raise from the 2sh/6p to about 5sh per day.  Though some other politicians scoffed at his proposal, Awolowo remained undaunted. In the Eastern Region, it was 3sh/4p.  In the Northern region, it was 2sh/6p.

Later, the Federal Government engaged in a periodic increase in the minimum wage until the great revolt of May 1981 led by NLC, which led to the N125 minimum wage.

But after the introduction of the Structural Adjustment Programme and things almost got out of hand, with several military administrations before democracy in 1999, workers’ salary moved slowly upwards but not appreciably.

But after rounds of protracted negotiations, a legally permissible minimum wage of N5,500 was introduced for the states while the Federal Government paid N7,500 in 2000.
States such as Rivers, Delta and Bayelsa were also involved in paying the marked up N7,500 to their workers because they had the capacity to do so.
Today, the figure is N18,000.

Subsidy Removal  Forever?

There is a grand paradox in the way government continues to tout the removal
of subsidy on petroleum products as an elixir for good life and living.  Again,
another controversy is raging on the proposed removal of subsidy by  government.  But Nigerians are asking: What subsidy?  Here is the history of the ever changing prices of petrol.

1978, 15kobo per litre
1990, 60kobo per litre
1992, 70kobo per litre
1993, N3.25kobo and N11 per liter

And from 1994 to 1998, the official pump price hovered around N11 per liter. All these happened during the military era. However, the people expected that their living conditions would improve with the coming of “democracy” in mid-1999, but they were wrong!

Instead of “democracy” to improve their lives, things became tougher as the price of a liter of fuel was pushed from N11 per litre to N20 and up again to N22 in 2000.

The anomalies in the nation’s economic policy making process have always made life unbearable in the society. As if the government was not happy that the people are still breathing, it increased the price again to N26 in 2001 from where it was increased in 2003 to N40, with the usual deceptive promises that it would make the commodity available.

Just before then Obasanjo administration left office, it jerked up the price of petrol to, first, N65 per litre and again over N100 per litre.

When the late President Umaru Musa Yar’Adua came in, the NLC resisted the increase and forced Yar’Adua to revert to the N65 per litre for petrol.

Today, Nigerians are being told that they may have to pay between N120 and N150 per litre of petrol – all in the name of removal of subsidy on petrol.


Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.