By Henry Boyo
IT would be heartless to ignore organised Labour’s demand for an urgent upward review of the N18, 000/month minimum wage, which was established over 6years ago, when this income was above the international value of $150 i.e. above $5/day and more than double the poverty bench mark of less than $2/day.
Regrettably, as Naira crashed from above N155 to the present N360=$1, the same N18,000 minimum wage is now barely $0-50; the minimum wage has sadly dwindled in purchasing power by two thirds! Worse still, this value will further diminish if we also factor in annual inflation rates between 10-17% since 2011. It is undeniable therefore, that total dependence on N18, 000 monthly salary would have since shunted millions of Nigerians down the poverty drain.
Furthermore, the collateral reduction in consumer demand caused by the devastating crash in real income value would invariably constrain capacity utilization in factories and other commercial houses and in turn precipitate massive layoffs, with serious social and economic consequences, as indeed, presently amplified by the palpable level of insecurity, seemingly fuelled by the growing number of unemployed youths nationwide.
In reality, however, with ravaging devaluation and unyielding double digit inflation rates, any income that does not increase as fast as the prevailing inflation rate, will invariably compel severe belt lightening in most Nigerian homes. Arguably, the constant inability to successfully stretch depreciating income through every calendar month may unfortunately, induce the temptation to engage in corrupt enrichment at workplaces and offices. Sadly in such circumstances, an otherwise upright citizen may begin to rationalise any opportunity for corrupt enrichment in their establishment as ‘divine’ provision.
The preceding is not intended to justify any brazen act of corruption in offices and workplaces, but, the temptation to engage in corrupt practices would, probably be more courageously dismissed, if the legitimate wages of workers, commanded values that could accommodate some level of dignified lifestyles.
In retrospect we may recall that before the structural adjustment in 1986, middle level administrative officers, including teachers built their personal homes and funded (often with significant sacrifice) their children’s education, even up to tertiary level, from their legitimate incomes, admittedly, often with support from enterprising spouses.
In effect, it is impossible, for a Nigerian white collar executive, with an exceptionally handsome N1m monthly salary package, to acquire a simple 3 bedroom apartment, from their legitimate salary alone, after the usual deductions, such as taxes and other existential commitments.
Thus, in view of the obvious social and economic significance of paying realistic living wages, it would be truly inconceivable, to challenge Labour’s increasing and pressing demand for an urgent significant upward review of the minimum wage to N56, 000/month, or $3/days i.e. the purchasing value of about $150/month with N360=$1 exchange rate, so that the new minimum wage will exceed the $2/day poverty benchmark.
Although, a 56,000 monthly income may not provide any surplus, as savings, to acquire a car, let alone a house, nonetheless, the expectation that N56k would triple the present spending capacity and relieve several domestic and other existential pressures and bring lasting succor may regrettably not materialize.
The following excerpts are culled from the article titled “N56, 000 minimum wage or a stronger Naira?”(Earlier published May 2nd 2016 in this column) please read on:
Nigeria Labour Congress (NLC) president, Comrade Ayuba Wabba told a news conference last week (May 20), in Abuja that even though it is true that the economy is not doing well, but the law states that wages for workers must be reviewed after every five years”. However, in reality, any significant wage increase will regrettably, most certainly, cripple the economies of several states, as the salary bill will become tripled with heavily lopsided recurrent budgets that erase any hope of infrastructural enhancement, and further increase the seriously worrisome present debt burden of, and diminish any prospect of impactful infrastructural development in the states.
Furthermore, the joy of a N56, 000 minimum wage will be quickly threatened by a rise in the general price level while inflation may exceed 20% from the current volatile springboard of 12.8%.
Invariably, spiraling inflation, significantly reduces consumer demand, discourages domestic production and ultimately fuels an already combustible unemployment rate, with unsavory social and economic consequences. Unfortunately, the very high cost of borrowing, that is irrepressibly instigated by the albatross of surplus Naira supply, will ultimately also restrain the productive sector’s capacity to create jobs and produce price/quality competitive goods for export.
Instructively, reprieve from this cyclical bondage may however come, only if inflation can be tamed to best practice rates below 3%; unfortunately, however, the significant increase in money supply, inevitably caused by a 200% rise in nominal wages would, however make such fine achievement in monetary management impossible. Furthermore, any significant increase in money supply would also quickly compel CBN to also step up its compulsive counterproductive high interest borrowings, to reduce the system’s bloated Naira values and restrain inflation, even though this process would further instigate higher interest rates and also crowd out the real sector from ready access to the cheap funds required for expanding domestic production and creating jobs, while inexplicably, the funds mopped up with such oppressive cost, simply remain sterilized from use in CBN vaults!
Consequently, if the high inflation rate fuelled by persistent and increasingly excess money supply remains untamed, government would need to carefully examine how successful economies everywhere, sensitively manage money supply to ensure that excess money supply does not become problematic and trigger inflation beyond, say 3 percentage, so that cost of fund will fall below 10%; infact, in such socially sensitive money markets, commercial banks may also pay a penalty fee to their respective Central Banks to warehouse surplus funds in the custody of commercial banks.
CBN does not deny that the monetisation of distributable dollar revenue (read as unilateral substitution of Naira for dollar denominated revenue) is actually the primary cause of persistently excess Naira, with its train of disenabling, and counterproductive monetary indices, such as, unusually high inflation and interest rates and a weaker Naira as readily admitted in the Monetary Thrust Statement of Government’s Vision 2020.
Conversely, such astute, best practice liquidity management, particularly in the forex market will gradually strengthen and sustain Naira below N100=$1. In such event, the present N18,000 minimum wage, would now command the current dollar equivalent of almost $200, without much ado and the abrasive negotiations for wage increases. Fortunately, liquidity can become better managed when CBN breaks its stranglehold monopoly in the forex market and ceases to auction the dollar for the highest Naira bids.
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