Who is happy about the proposed minimum wage in Nigeria? This government worker isn’t

For more than two years now, Mrs Bello has been receiving half of her N62,500 ($171.9) salary. Her employers call it “modulated salary”. Few weeks to the gubernatorial election in her state, Mrs Bello was paid another half, reducing the number of halves owed her to 16 months. She is not the only one; everyone working for the Osun government, a state in Nigeria’s south west region has been paid half of their salary since a cash crunch occasioned by the fall in oil prices hit Nigeria. Workers on grade levels 1-7, however, receive their salaries in full, hence the modulation the state government often speaks of. The workers on this lower cadre are also the only ones that have been on the N18,000 minimum wage since it was passed into law in 2011. So, when asked how excited she is about the N30,000 ($82.5)minimum wage, Mrs Bello scoffed.

“They did not use the table that showed how much every level earns based on the N18,000 minimum wage calculation. Rather, they only added a certain percentage to levels 8 and above. Only levels 1-7 currently enjoy the N18,000 minimum wage,” Mrs Bello told The Nerve Africa. “If we did not enjoy N18,000, do you think we can enjoy N30,000?”

“Of course, we might get some percentage increase, but to what end? Even with the current salary structure, the government owes me salary of 14 and a half months,” she said. “People on grade level 8-10 are owed more than nine months. Only levels 1-7 are not owed any salary,” Mrs Bello, who works in a government ministry said. “I don’t care about the so-called minimum wage, I really don’t care. I just want to be able to afford the things I need and paid my salary on time.”

Like Mrs Bello, many Nigerians have questioned the rationale behind the new minimum wage which the country’s labour union fought tooth and nail for. The government’s seeming ascent to their request is at best political, as Nigeria is just months away from the 2019 presidential election where President Buhari is seeking re-election. The last minimum wage increase also happened few months before an election. Whether the government has the capacity to pay is another discussion.

In its “State of States” report released last month, civic organization BudgIT noted that despite a N1.8 trillion bailout from the federal government, some states in Nigeria still owed workers and pensioners. Many states in Nigeria do not generate enough revenue to cover wages, forcing them to default, especially whenever monthly allocations from the federal government drops. Therefore, it was understandable when many Nigerian governors said they were unable to pay the minimum wage the Nigeria Labour Congress requested. Nigeria’s N8.61 trillion budget for 2018 had in it personnel costs of N2.11 trillion, Pensions and Gratuities of N190.03 billion, and overheads worth N246.06 billion. Implement the N30,000 minimum wage and watch the wage bill rise, eating into available funding for health, education and infrastructure.

However, with the president’s promise to forward the minimum wage Bill to the National Assembly which is expected to pass the the Executive Bill into law, governments at all levels should start thinking of options available to them, and default should not be one of the options. Of course, default is the easiest option but there are others.

In May, the Nigerian government removed more than 50,000 workers from the its payroll. The government has continued its work to eliminate ghost workers on its payroll; success in this will significantly reduce the personnel cost.

State governments across Nigeria should follow in the federal government’s steps by putting structures in place to ensure only people duly employed by the state are on its payroll. Also, states should look inwards and be more innovative in revenue generation.

Is the workforce bloated? Nigeria’s federal and state governments need to cut their workforce. One way of doing this is to start by collapsing government agencies into each other, retaining only key staff needed for the efficient running of such agencies. In 2013, a White Paper Committee headed by then President Goodluck Jonathan to look into the recommendation of former Head of Civil Service of the Federation, Stephen Oronsaye-led committee to restructure government Parastatals, Commissions and Agencies of the federal government approved the scrapping of 220 Parastatals, Commissions and Agencies. Similar organisations that have outlived their significance should also be scrapped. Although, a backlash will follow from the NLC due to the number of jobs that will be lost, but the Nigerian government cannot afford to continue spending the way it currently does. Whether this difficult but necessary action is taken or not, unemployment in Nigeria will continue to rise as the current growth rate is below the rate of the country’s population growth. Nigeria’s population grew by 2.6 percent in 2017. In the same year, GDP growth rate was 0.8 percent.

There are hard choices for the Nigerian government to make if the N30,000 minimum wage bill is approved by the National Assembly to ensure that the government does not default on payment of workers’ salaries. None of the choices will be well received by any party affected, but the government has to act regardless. But in Nigeria, politics sometimes trump reason, hence the government might not make any of the hard choices and just hope its revenue grows to accommodate a new wage bill.

There are also other issues to be considered, including how the market reacts to it.

“Turkey hiked the minimum wage by 60 percent over 2015-18 – the currency has halved in value since 2015,” noted Charlie Robertson Global chief economist, Renaissance Capital in his reaction on Twitter.

“There is a case to be made for a higher minimum wage. The NLC points out the currency has halved in value, and petrol prices are up 80% since the last wage change. Ivory Coast and Kenya have min wages around roughly $100. However, when wages are too high and uncompetitive, currency devaluation often becomes the market led response to address the problem,” he explained.

“Nigeria’s wages must be lower than Vietnam’s to remain competitive, because Vietnam has better adult literacy (95 percent vs 60 percent in Nigeria, 2015 data), 10 times more electricity per person and higher investment/GDP.

“This is leaving aside the issue of whether Abuja can afford to dramatically high wages. Six months before an election, it is remarkable how often a government discovers it can grant a pay rise (often it’s the next government which has to deal with the fall-out),” Robertson noted.