THE Leadership of Organised Labour have welcomed President Buhari’s establishment of a Committee to consider a significant increase in the minimum wage. The President of the ULC, Comrade Joe Ajaero, for example, has demanded for a N100, 000 minimum wage, while also advising his members to “prepare for war” to confront those State Governors, in the Committee, who are currently defaulting on the present N18, 000 minimum wage.
The following narrative is a summary of an article which was published in Vanguard Newspaper on 25/12/20016, with the title “More Money or Better Value”. It seems that, Labour Leaders have failed to learn the important lesson that wage increases may not mean higher purchasing power. Please read on.
“Nigerians and the Labour Unions especially, inexplicably, clamour for optically larger incomes rather than demand for increase in the purchasing value of their incomes. Instructively, the Naira was once equal to the British Pound Sterling, while $1 exchanged for about 50 kobo. During this period, it was generally unheard of for a Nigerian, who is resident or studying in the UK to send money back home to Nigeria either for upkeep or as supplementary income for dependants back home. Indeed, the dream of every Nigerian youth, who went abroad, at that time, was to return to the comfort of home and friends and the ‘better life’ in Nigeria.
Today, the number of Nigerians who can educate their children abroad from income derived from legitimate wages or enterprise, as opposed to the proceeds of treasury looting and other such corrupt engagements, has diminished significantly. Worse still, impoverished as we are, we make heavy sacrifices to train our children from our scarce resources, only to turn them out, thereafter, into a jobless market, which propels them to seek extremely mean jobs abroad as greener pastures! But who cares?
Those youths who can make it either legally or illegally via perilous desert routes and wide open seas may ultimately become providers for the increasingly impoverished and hopeless families they left behind in Nigeria. This desperation ‘to check out’ gradually developed with the increasing loss in the Naira’s purchasing power!
There are basically two main ways in which the currency of a country can lose value; these are by an uncontrolled inflationary spiral (unabated rising prices of goods and services over time) and/or by an actual formal devaluation of a nation’s currency by the monetary authorities! In our case, both factors have conspired to wreak havoc on our value system, our lifestyle, and our hope and aspirations, both as individuals and as a people.
Consequently, as the naira continued to depreciate from stronger than parity to its current rate of N130=$1, this has meant that in order for an average family who earned, say, N10,000/annum in 1980 to maintain the same real income value, they would require a minimum salary of N1,300,000/annum today; the gargantuan leap in incomes is responsible for the devastation caused by spiraling inflation over the last 25 years; for example, a bag of rice which cost less than N20 in 1980 now costs over N7000, a finger of plantain which cost less than 10 kobo now costs over N20 each.
So, an average Nigerian family would require over N2m in 2006 to maintain the same standard of living that they enjoyed with less than N20, 000 in 1980s; but pray, what percentage of Nigerians, after the decimation of the middle class by the evil twins of devaluation and inflation, currently earns such money?
Various administrations have often been compelled by intense pressure, from labour unions to pump up the quantum salaries paid to civil servants, to marginally ameliorate the ravages of a currency with a diminishing value; however, it is clear, that a yawning gap presently exists between the higher numerical wage levels and the reduced quantum of goods and services and the lifestyle people can afford.
For example, the Federal Government approved a 15% wage increase for all civil servants with effect from January 2007 (see page 5: Guardian Newspaper of 20/12/2006); Under normal circumstances, any attempt to bridge the poverty gap caused by loss in purchasing power of incomes would be welcome, but in a situation where the monetary authorities
fervently decry the presence of too much cash (otherwise known as excess Naira liquidity) in the system, and the inflationary potential of a rise in petrol pump prices (with reduced subsidy as indicated in 2007 budget) plus the equally legitimate pressure to spend more of our idle accumulated reserves on the improvement of dilapidated infrastructure, it may be a pipedream to expect that the recently approved bigger quantum salaries, will bring succor to any home. Although, incomes and salaries will invariably become nominally bigger, with any increase in minimum wage, however the collateral loss in Naira purchasing value, will as usual, leave majority of our people poorer than they were in 2006!
I never cease to be amazed that inspite of this recurrent cycle of increasing salaries and income and abiding poverty, our Trade Unions continue to clamour for quantum elevations rather than demand that the income they earn receive better value, so that the same income will buy more and more rather than less and less! Sadly, Labour Leaders, seem enamored by the theme of big is good, but they obviously fail to see that less could command better value.
I have advocated in several articles in this column that the naira in our pockets can and will buy more, if the value of the naira is not debased by the conversion of our export dollar earnings into naira before sharing to the three tiers of government. The need to consolidate the naira from the money market as well as the additional currency printed for this purpose, remains the bane of our monetary system. So long as this system persists, the naira will continue to be under pressure to depreciate, even in the face of rising external reserves; this is an economic paradox, if ever there was one!
Consequently, if the CBN releases its stranglehold on the supply side of the foreign exchange market by the allocation of the dollar component of the federation pool with dollar certificates, the naira will quickly consolidate and exchange below N50=$1 as dollar values chase limited naira supply; in such event, all the economic policy shenanigans which have brought additional suffering to the masses will become unnecessary, as inflation may drop below 1% while interest rates fall below 5-7% i.e. the requisite parameters for real growth in a sensibly managed economy. The authorities know this, but the watchword is for self rather than communal interest. Heaven help us!”
SAVE THE NAIRA, SAVE NIGERIANS!
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