President Muhammed Buhari inaugurated a Technical Advisory Committee for the implementation of a National Minimum Wage, on Wednesday 9th January 2019, in Abuja. The occasion offered Mr. President the opportunity to declare his commitment “to a review of the present N18,000 minimum wage.” Consequently, PMB assured workers that “we at the federal level have made adequate provision for increase in the minimum wage, in our 2019 budget proposals, which we have submitted to the National Assembly.” Curiously, however, the budget submission came, barely a week before Parliament went on recess in December 2018, while the Advisory Committee would also, submit its report barely a week before the General Elections in February 2019!

Although, the 2019 budget may accommodate the additional cost incurred in ‘moving up’ all personnel who currently earn below the new minimum wage, however, according to PMB, negotiations for salary review for all workers who already earn above the new minimum wage will begin, after the Wages Advisory Committee has submitted its recommendations. Furthermore, PMB warned that the implementation of the expected, considerable wage adjustments, for higher category of Public Servants, must not adversely “affect the appropriate, targets defined for levels of Capital Expenditure, Public Debt, Inflation, Employment, etc, in Government’s Economic Recovery & Growth Plan (ERGP).”

The Minimum Wage Advisory Committee’s specific terms of reference, include, “to develop, and advise government on how to successfully bring about a smooth implementation of the ‘imminent’ wage increases; the Committee is also expected to identify new revenue sources, and areas of existing expenditure, from where some savings could be made, to fund the proposed wage increases, without adversely impacting the Nation’s development goals captured in ERGP.”

The Wages Committee is expected to also propose a work plan with appropriate modalities for implementation of the salary increases, and proffer suggestions that will assist in the implementation of this and future wage increases.

However, “given the urgency of this exercise,” the Committee is expected to complete its deliberations and submit its report and recommendations, within one month from the date of its inauguration, on 9th January 2019; consequently, the Committee’s final report will be presented to PMB barely a week, before the General Elections begin on February 16, 2019.

Bismarck Rewane, a well known Economist and ‘brother’ of this columnist, has been appointed as Chairman of the Minimum Wage Advisory Committee. Ben Akabueze, the current Budget Office Director General, will serve as Secretary to the Committee, which also includes, the Solicitor General, about 6 Federal Permanent Secretaries, a Representative of Nigeria’s Governors’ Forum, as well as, about 25 other nominees from both the public and private sectors.

Regrettably, the characteristic, traditional fire brigade approach to resolving critical national issues, is again starkly amplified, by the ongoing process of adopting and implementing a new National Minimum Wage schedule. Evidently, PMB’s Administration, was aware that the minimum wage was constitutionally due for review in 2016, i.e. five years after the present N18,000 minimum wage was adopted in 2011.

Curiously, however, despite the obviously parlous, inflation ravaged wages of a pauperised working class, and several reminders and numerous threats of a general strike by Organised Labour, Government, characteristically prevaricated, until, virtually ‘well after’ the ‘last minute’ before seeming to take remedial action. In retrospect, the N18,000 minimum wage was the equivalent of $112, with N151-165=$1 in 2011; conversely, N18,000, now has a purchasing value of barely $50, with today’s exchange rate of N360=$1. 

Thus, although the proposed N30,000 may seem like almost 100 percent nominal increase on N18,000, nonetheless, in real terms, N30,000 is presently barely $83, i.e., still below the real purchasing value of N18,000 in 2011, and clearly below the International Poverty threshold of less than $3/day!

Regrettably, Nigeria has since become the World’s Poverty Capital, according to a Washington based Economic think-tank, with reportedly, six Nigerians falling below the poverty line, every second! It is clearly ironical that this TOGA of deepening poverty now ‘adorns’ an acclaimed reformist and progressive Administration, which purportedly came to power to redeem Nigerians from economic bondage and an allegedly clueless Administration.

Although the Federal Government has agreed, in principle, to pay N30,000 minimum wage, there are however concerns that, less than 8 of the 36 State Governors, have expressed their willingness and capacity to pay N30,000/month, with the additional pro-rata adjustments, for all workers, who already earn more than the proposed N30,000 minimum wage.

Instructively, however, since the issue of minimum wage is on the Exclusive Legislative list, the Federal administration cannot exclude those States, with evidently weaker revenue generation base, from any legislation for upward wage review. Consequently, although PMB has declared readiness of his administration to enact a N30,000 minimum wage, his plan maybe ambushed in the National Assembly, by representatives from majority of states which have, already, protested the escalation of the minimum wage, beyond their respective capacities to pay. Thus, the question will ultimately arise, as to what will happen, if President Buhari’s Minimum Wage Bill fails to pass through the National Assembly, before or after the elections; in other words, will the Federal Government and other willing states proceed, thereafter to adopt the promoted new minimum wage, without legislative mandate? Arguably, with the present disposition of several state governors, the matter of an acceptable new National Minimum Wage is probably far from over! Interestingly, there seems to be a swelling consensus amongst State Governors that the revenue sharing formula may have to be reviewed in their favour, if they must pay the Federal Government’s prescribed minimum wage.

Ultimately, the product of the almost 30-member Minimum Wage Advisory Committee’s deliberations, may only be limited in application to just the Federal Government and a handful of states. In fairness, however, it would be unreasonable to expect that PMB’s Wages Advisory Committee, could adequately evaluate within 30 days, the “revenue opportunities and capacities of all 36 States and the Federal Government and to also carefully identify, viable new revenue sources, and also select areas of expenditure, from where some savings could be made, to fund the ‘wage increases’ without adversely impacting Government’s declared ERGP developmental goals.” Clearly, this would be a very ambitious brief for a Committee with a 30-day lifespan, but may, as a strategy, keep Labour agitations on hold!

It is equally inexplicable that the Wages Advisory Committee was established barely a month before the General Elections, even when, the issue of a review of the minimum wage had been glaringly imminent, as far back as 2015 when the old minimum wage, legally expired and Buhari’s administration took over.

Ultimately, however, if the Federal and all State Governments, ‘magically’ succeed in adopting N30,000 minimum wage, with similar adjustment to salaries of workers, who already earn above N30,000, the vastly expanded resultant money supply will drive double-digit inflation rates and weaker exchange rates which may fast-track another round of devaluation and rapidly reverse any positive result from the ‘celebrated’ bloated wage increase! Furthermore, both Federal and State Governments may become compelled to compound their already oppressive and possibly unsustainable debt burden to pay the N30,000 minimum wage. Predictably, however, the sustenance of an expanded wages bill, will invariably also reduce spending for provision of critical social infrastructures.

Ironically, however, any huge nominal quantum salary increase will invariably also drive higher inflation rates and deepen poverty; however, a stronger Naira rate, of say N100=$1, will invariably translate the existing N18,000 minimum wage to about $180, i.e. an income of almost $5/day, well above the poverty bench mark of $3/day. Instructively, such a stronger Naira will remain elusive so long as the CBN continues to substitute Naira allocation for distributable dollar revenue and proceed thereafter to auction morsels of its dollar reserves in a market besieged by a Naira liquidity surplus, which is deliberately created by CBN!