IT would be heartless to ignore organised Labour’s demand for upward review of the N18,000/month minimum wage, which was established in 2011, when this income was well over $100 i.e. above $3/day and well above the international poverty bench mark of less than $2/day.
Regrettably, as Naira crashed from N155 to the current N360=$1, the purchasing power of N18,000 minimum wage has, now sadly, dwindled to barely $50.00 i.e less than half its former value! Worse still, this value will further diminish, if annual inflation rates between 10-17%, since 2011, are also factored. It is undeniable therefore, that dependence on N18,000 monthly salary has since shunted millions of Nigerians down the poverty drain.
Invariably, the reduction in consumer spending, forcibly caused by the devastating crash in real income value, would simultaneously constrain optimal capacity utilization in factories and other commercial houses; ultimately, massive layoffs will become inevitable, with serious social and economic consequences, as indeed, presently amplified by the palpable level of insecurity, arguably fuelled by the growing number of unemployed youths nationwide.
In reality, oppressive Naira devaluation and unyielding double digit inflation rates, will invariably compel, severe belt lightening in most Nigerian homes, especially where income levels rise more slowly than the rate of inflation. Arguably, the constant inability to successfully stretch depreciating incomes through each calendar month, may unfortunately, induce the temptation for workers to engage in corrupt enrichment. 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, such temptation to engage in corrupt practices would, probably be more courageously resisted, if the legitimate wages of workers, commanded values that could sustain some level of dignity in lifestyles.
In retrospect we may recall that before government’s Structural Adjustment Programme 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 salaries, and other income support from enterprising spouses.
Regrettably, it is presently impossible, for a Nigerian white collar executive, with an exceptionally handsome N1m, monthly salary package, to acquire a standard 3 bedroom apartment, from their legitimate salary, after making 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, (i.e. approximately $150/month with N360=$1 exchange rate) so that the new minimum wage will exceed the $2/day international poverty benchmark.
Although, a monthly income of N56,000 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 of workers and adequately fund several pressing domestic and other existential needs, may regrettably not materialize. The following is a summary of a piece titled “N56, 000 minimum wage or a stronger Naira?”(First published on 2nd May 2016) please read on: “Nigeria Labour Congress (NLC) president, Comrade Ayuba Wabba told a news conference last week (April 27, 2016), 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”. Nonetheless, in reality, any significant wage increase will regrettably, certainly, cripple the economies of several states, as the salary bill will become tripled to worsen, the already, heavily lopsided recurrent government budgets, to erase any hope of infrastructural development, and invariably increase the already worrisome present debt burden in several states.
Furthermore, the joy of a N56, 000 minimum wage will be quickly threatened by a rise in the general price level, and inflation may well exceed 20% from the current volatile springboard of 15.6%.
Invariably, spiraling inflation, significantly reduces consumer spending, discourages domestic production and ultimately fuels an already combustible unemployment rate, with unsavory and horrendous social and economic consequences. Unfortunately, the very high cost of borrowing, that is aggressively instigated by the albatross of surplus Naira supply and spiraling inflation, 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 is tamed to best practice rates below 3%; unfortunately, the significant increase in money supply, which will be, inevitably, triggered by a 300% rise in workers’ wages, would however, make such desirable goal in monetary management, impossible to attain.
Furthermore, any significant increase in money supply would also compel CBN to quickly step up its, compulsive counterproductive, high interest borrowings with T/bill auctions, to reduce the perceived systematic Naira excess values and restrain inflation. Ironically, such CBN interventions would in turn propel higher borrowing rates and crowd out the real sector from ready access to the cheaper funds, required to expand domestic production and create jobs, even when, ironically, the funds mopped up despite the oppressive cost, will simply remain sterilized from any practical use in CBN vaults!
Consequently, if high inflation rates fuelled by persistent and increasingly excess money supply remains untamed, government would need to carefully examine how successful economies everywhere, sensibly and sensitively manage money supply so that systematic excess money does not become problematic to push inflation beyond, say 3%, so that cost of borrowing will also fall well below 10%. Conversely, in economies where socially sensitive monetary management is practiced, commercial banks, are made to pay a penalty fee to their respective Central Banks to warehouse any stock of surplus funds.
CBN does not deny that the monetization of distributable dollar revenue (read as unilateral substitution of Naira for dollar denominated revenue) is actually the primary cause of, persistently, excess Naira supply which triggers disenabling, and counterproductive monetary indices, such as, unusually high inflation and interest rates and a weaker Naira, as evidently recognised in the “Monetary Policy Thrust Statement” of Government’s Vision 2020.
Instructively, astute, best practice management of money supply, particularly in the forex market, will gradually strengthen and sustain Naira below N100=$1. In such event, the present N18, 000 minimum wage, without much ado, would then command the current dollar equivalent of almost $200, without the usually abrasive negotiations for wage increases. Fortunately, excess Naira liquidity will become better managed when CBN breaks its stranglehold monopoly in the forex market and ceases to auction the dollar for the highest Naira bids.
SAVE THE NAIRA, SAVE NIGERIANS!