With talks between the three tiers of government and the Organised Labour still deadlocked, it may be difficult for the federal government and the states to pay the N250,000 minimum wage being pushed by the Nigeria Labour Congress(NLC) and the Trade Union Congress (TUC).
Documents seen by Blueprint have shown that despite the increase in the Federal Accounts Allocations Committee (FAAC), some states have experienced a reduction in the amount that accrued to them in the last six months of 2023.
In the several months, the NLC and its sister union, TUC, had insisted on a ‘living wage’ for workers, backing down from its initial N400, 000 to N250, 000.
However, the States have repeatedly said they lacked the capacity to meet the demand from the Organised Labour.
Last week, President Bola Ahmed Tinubu had said the government would only pay wages that are sustainable.
…Findings
However, documents seen by this newspaper have revealed that many States received more allocation in the second half of the year of the post-subsidy regime compared to the period when the subsidy regime was in place.
Others received more allocations at the first half of the year when compared to the second half of the year of non-subsidy regime.
Between January to June 2023, the States received the sum of N2, 188, 580, 129, 544.13 while the sum of N2, 305, 371, 085,484.65 was shared from July to December.
Despite this increase, Akwa Ibom, Bayelsa, Delta and Rivers are the only states that received lower allocations following reduction in the 13% derivation in the second half of the year.
…Fuel subsidy removal, managed exchange rate float
The Nigeria Governors’ Forum noted that the Federal Government’s decision to eliminate fuel subsidies and implement a managed exchange rate float, which, while aiming to achieve stability and resilience, inadvertently led to a cost-of-living crisis underpinned by a sustained increase in the general price level of goods and services. They said, it resulted in a decrease in the purchasing power and increased poverty levels.
“Significantly, headline inflation surged from 22.4% in May 2023 to 28.9% in December 2023.
“During this period, the price of PMS increased from about N198/Litre to N626/Litre between May and December 2023.
“Additionally, there was a notable devaluation of the naira against the USD, moving from N461/$1 to N1, 493/$1. These adverse effects prompted mid-year budget amendments by the state governments. Reallocating resources for palliative measures and adjusting capital expenditure appropriations to accommodate variations in critical infrastructure projects,” said the NGF.
According to the governors, removing subsidies and the Naira’s managed float led to an increase in nominal FAAC revenues, coinciding with a surge in headline inflation.
But despite the marginal increase from N1.39 trillion in the first half of the year to N1.52 trillion in the second half of 2023, additional revenues shrunk due to the impact of both policies.
…Labour must change approach
In a chat with Blueprint, a physician and chartered management consultant, Dr. Prosper Ahworegba, said that using the same approach will not yield any result for labour.
Ahworegba insisted that rather than talk about wage increase, the Organised Labour should engage the government on more practical ways of improving workers welfare.
He said: “I am not an advocate of wholesale salary increment. Over the years, it has led to inflation that leaves workers worse off. Despite this experience, I am burdened that labour leaders have not thought of other ways to engage the government and OPS for improved welfare of workers. It is only a madman who does the same thing over and over again and expect a different outcome.
“Finally, labor leaders are been unrealistic with their demand for N494 minimum wage. A cleaner in a private hospital, hotel or an eatery will earn that amount. How feasible is that?”
…Breaking away from the past
A source, who did not want his name on print because he was not authorised to speak on the issue, said the minimum wage issue is dicey due to past experiences by the federal government.
According to him, the federal government would not want to go back to the era where it borrowed to pay salaries of its staff.
“During the last administration and the early part of this current administration, the government used to raise monies from some revenue generating agencies to make up for the short fall in salaries.
“Most times after the salary for the month has been prepared, there were shortfalls running into tens of billions of Naira, and in order to bridge the shortfall, the government often resorted to borrowing from revenue generating agencies. When they go to one agency this month, the next month they go to another one.
“In the early days of this administration, the same thing used to happen until they got their acts right and have been paying salaries without resorting to borrowing.
“And that is why you see that the government is still at N62,000, and if it comes to the worst, they would end at N65,000. Anything beyond that would mean the government would have to downsize before they can pay.”
…Downsising option
Analysts fear that the government might choose the downsizing option if it is to exceed what it has the capacity to pay.
There have been suggestions in some quarters that the federal government might cut down on its workforce in order to be able to pay above N65, 000.
According to Awhoregba, who is also a public affairs analyst, “the situation is complex, and the outcome will depend on the government’s willingness to engage in dialogue, the labor unions’ negotiating stance, and the economic realities on the ground.
“Government might agree to a minimal wage increase, but with conditions like downsizing, rationalization, or privatization of some state-owned enterprises. Labor unions might resist downsizing and push for alternative solutions: reduced government waste and reduction of salaries and emoluments for political office holders. If the government proceeds with downsizing, it could lead to social and violent protests.”
On his part, a financial analyst, Aliyu Ilias, said the situation has not gotten to the stage of downsizing staff.
“The government is saying the government may downsize because of N65, 000, I don’t think there is a reason for that because you will remember that OBJ and am not sure we have recovered from that.
“The fact remains that the government should do the needful. They know the number of people that are on their payroll is about 5.3 million. So, the federal government will take care of 5.3 million, and N65, 000 minimum wage would not cost them an arm or a leg. The fact is that people don’t really need the request for money if purchasing power is okay,” Ilias said.
…Reducing cost of governance
Analysts are of the view that the federal government can still go beyond the N62, 000 it is putting forward, if it cuts down on the cost of governance.
Also, a public affairs analyst, Matthew Dadiya, told this reporter that the executive and the legislature should cut down on what is appropriated to them.
“The NASS should reduce their budget, they should reduce the pay the National Assembly workers and their aides are receiving, and that way, the government will have more money to support the minimum wage.
“The executive, the legislature and even the judiciary are earning so much money. So, they should be able to cut down on their salaries and their allowances and even the expenses on government should be reduced. There are ways they can do that. The government should look into that,” he said.
“The only thing that can help us is if we have our refineries working and we have a good balance of trade and balance of payment that could also help. That is if we are not importing again. The value of the dollar will come down but I don’t see it happening any time soon,” Ilias also said.
…States’ limitation
The Governors’ Forum harped on the need for labour to consider the ability of States to pay.
The States noted that broader economic context, marked by fluctuating GDP growth rates and the unintended consequences of federal policies on inflation and poverty levels, emphasizes the interconnectedness of fiscal decisions.
“The real value of additional revenues has shrunk due to the surge in inflation, restricting the response options for States to the current socio-economic crisis and emphasizing the delicate balance States must maintain.
“It is crucial to recognize State governments’ limitations in addressing today’s socio-economic situation. While the State government can influence fiscal policy, it requires complementarity of fiscal and monetary policies at the federal level to achieve the much-desired results.
“Any wage increase approach should align minimum wage adjustments with economic realities at the sub-national level,” the governors stressed.
