By Dele Sobowale

“I inherited $587m, N85b debt, reason Kaduna can’t pay salaries – Uba Sani.” THE NATION, MARCH 31, 2024.

Governor Sani’s confession has already sparked a political conflict in Kaduna State between the supporters of the former Governor, El-Rufai and his hand-picked successor. People, who detest the idea of out-going elected officials seeking to impose those to replace them on the people, smile knowingly. We have witnessed so many such previous attempts ending in open antagonism between the former and the latter several times. Kaduna’s case will not be the last. Rivers state is divided on account of another one of those self-serving ambitions. Nigerians never learn from their own history. However, more serious than the clear message from the Governor, is another one more sinister and to which everyone should pay attention. If Kaduna’s debt burden inherited from El-Rufai, has rendered the state unable to pay salaries now, it is quite obvious that the state will certainly not be in a position to pay the new minimum wage – whatever that might be.

  But, just in case anybody, especially organised Labour think Kaduna is the exception, let me remind all of us of warnings given earlier.

Kano State was the first to declare that it would not be bound by any minimum wage agreement if it beyond its ability to pay. Furthermore, at least thirteen states are not paying the current minimum wage of N30,000 and will certainly not be able to pay the new wage. Clearly, Nigerian workers, expecting a new wage structure, which will bring relief from the economic hardships imposed by high inflation, should get ready for several unpleasant surprises this year. Here are a few reasons to ponder.

FG, states are broke

“31 States borrowed N457.17bn to pay salaries.”—News Report.

  It all started when Buhari pushed through the N30,000 per month minimum wage in 2019. Unable to pay, virtually all the states turned to the FG for bail-out – which was granted. Soon, they realised that the bail-out could not last them forever. Only about six could afford to pay. Two options were open to each state government: borrow-and-pay or refuse to pay. Some adopted the first approach; others the second. Despite bluffing, organised Labour was unable to get the 13 states, not paying to comply. There was a reason. All the states offered their workers the Devil’s alternative. If forced to pay massive retrenchment will follow. Labour meekly backed down. The states are in worse shape financially now than in 2019. Those unable to pay N30,000 will make the same offer to workers; and Labour will again back down.

  What makes Labour’s bargaining position weaker was contained in another report about the top ten states in terms of new debts acquired since May 29, 2023. States one would regard as self-sustaining are topping the borrowing chart. Abia (N14bn), Kaduna (N14bn), Ondo (N15bn), Benue (N16bn), Edo (N16bn), Osun (N16bn), Oyo (N17bn), Kano (N20bn), Kogi (N20bn) and Imo (N20bn). Obviously, states borrowing now to uphold their financial obligations will either have to borrow more to pay increased wages – or repudiate any agreement reached on minimum wage; and signed into law by the President.

  It is a known fact that most Nigerian states spend about sixty per cent  of their budget on wages, salaries and other entitlements. Double the wages and more than the entire budget is consumed by one obligation. Expenditure on capital projects will stop. Even loan repayment will cease and with that most governments might as well close shop.

  The FG is in a bad shape also. After promising the states N5 billion for palliatives, Tinubu’s government double-crossed them. Only N2bn was delivered; and it was regarded as a loan. Furthermore, the current administration has continued where Buhari’s left off. It is borrowing at a record rate – mostly to pay the salaries and other perks of office of 48 Ministers. Increasing the wage bill by 500% will lead to a major crisis; given the already unsustainable debt burden.

I have gone to great lengths to caution the President and government representatives and Labour, especially Labour, not to promise more than they can deliver to the people. The consequences could be most unpleasant for all of us. There is a rumour going round that Tinubu has approved N175,000. One can only hope that it remains a rumour. Increasing wages by 500%, at once, will take us back to the blunder of the Udoji awards and the calamities it induced then – after the initial euphoria by the know-nothings.

Inflation spiral inevitable

No government deficit can create inflation unless the quantity of money goes up.

G. Haberter.

  Certainly, the quantity of money in circulation is always guaranteed to go up with every upward adjustment of wages. In 1976, Nigeria’s crude oil revenue was rising faster than expenditure. Udoji was temporarily affordable. But, by 1978, a mere two years after, the FG under General Obasanjo was forced to declare austerity measures. Federal and State governments coffers had been depleted by the higher payroll bill. Nigeria, hitherto debt-free, was forced to seek    $2.8 billion loan from the International Monetary Fund, IMF, which Nigerians were told would be easily repaid. It was not. Instead, it became the first installment in what turned out to be a $36 billion debt trap; from which the nation was not released until Okonjo-Iweala became Finance Minister in 2003.

  Presidents Obasanjo, Jonathan and Buhari increased minimum wage during their tenure of office – with predictable results. Inflation increased. Nothing suggests that the repercussions of the new minimum wage contemplated will be different. In fact, given the underlying pervasive scarcity of virtually everything, the new wage might quickly push inflation, now over 30 per cent to more than 40 per cent. By 2027, if the FG and the states have not collapsed under the financial burden, Nigerian workers will again be agitating for a review. All the temporary gains would have been wiped out.

Massive retrenchment unavoidable

“PZ Cussons loss worsens to N94bn in Q3” — Report, April 2, 2024.

PZ Cussons, once a darling of the Nigerian Stock Exchange, is not alone.

Recent monetary policy changes, as well as unprecedented losses by several large multinationals – MTN, Cadbury, Nigerian Breweries, GUINNESS etc – already threaten workers presently employed by many companies. The heat will also be felt by their suppliers, transporters, distributors, insurers, clearing agents, advertising agencies and bankers. The fall of a multinational brings down with it several local stakeholders. A typical brewery is served by nothing less than 500 suppliers; a large healthcare producer with twelve or more products provides work for over 700 suppliers. Some left last year; others might head for the exit gate this year; the new wage bills they face might be the last straw that breaks the camel’s back. In my 20 plus years working in the private sector, there has been no minimum wage increase that was not followed by companies folding up and retrenching staff. This next one will not be an exception. Those in manufacturing and banking are particularly vulnerable.

Obviously, we are headed for a major crisis requiring serious negotiation based on unavoidable facts. Maturity and patriotism are badly needed to save Nigeria.