Surging prices: Between minimum wage and taming inflation

Senior Staff Association of Statutory Corporations and Government Owned Companies (SSASCGOC) is deeply troubled by the way inflation depletes the new minimum wage and forces workers to raise loans to feed their families.

“CWC in session is alarmed at the rising cost of living in the country that has made minced meat of the National Minimum Wage, which some states are yet to implement,” lamented a communique signed by SSASCGOC president, Muhammad Yunusa.

SSASCGOC is worried that the minimal gains of the 40 per cent increase in minimum wage from N18,000 to N30,000 has been depleted by the 50 per cent rise in inflation rate from 9.5 per cent in 2015 to 17 per cent in May 2021.

SSASCGOC’s worries came just as the World Bank raised its stake on inflation in Nigeria, despite claims by the National Bureau of Statistics (NBS), that inflation rate is dropping.

The World Bank in a portentous alarm on Nigeria’s economy warned that the cost of freighting goods within Nigeria is 500 per cent higher than what obtains in the United States of America (USA).

U.S. inflation just inched up above five per cent. There is a fierce battle against it. Conversely, no one in the federal government is worried about Nigeria’s 20 per cent food inflation rate.

The World Bank blamed the atrociously high cost of haulage in Nigeria on poor transportation infrastructure. The report reveals how escalating cost of evacuating food items from Nigeria’s inaccessible rural communities to the markets in urban slums, worsens Nigeria’s food inflation rate.

The complaints by the World Bank and SSASCGOC unequivocally highlight the futility of declining inflation figures churned out in the last six months by the NBS.

Commodities prices rise weekly while inflation figures decline monthly. It borders on deceit.

Nigeria’s inflation is fueled by an odd combination of factors including high haulage cost complained by the World Bank.

The first is the persistent depreciation of the naira. The naira was N380 to the dollar in the parallel market when the current minimum wage negotiations entered the closing stage.

Today it has depreciated to N560 to the dollar. With Nigeria’s embarrassing dependence on imports even of refined petroleum products which it should be exporting, the relentless depreciation of the naira has inflicted incalculable damage on the economy through imported inflation.

The second factor that fuels inflation is the nation’s compromised supply chain. Nigeria’s supply chain is plagued with encumbrances that triple prices of products as they meander their ways from farms and factories to the markets.

Retailers, corrupt law enforcement officials and middlemen make more profit than farmers and manufacturers. A giant size pineapple gets to the market in Benin City at N300. Traders sell it at N400.

Traders who ferry them to Lagos wade through a minimum of 30 check points mounted by police, soldiers, Federal Road Safety Commission (FRSC) and Nigeria Customs Service (NCS). The truck driver parts with a minimum of N500 at each check point derisively tagged “toll gate”.

By the time they get to Lagos the toll gates might have added a minimum of N15,000 to the cost of freighting the food items. The haulers calculate the cost of the toll gates in advance and add them to the transport fare.

The traders pay and pass the bill to consumers through higher price for the food items. At the parks where the food items are dropped, union officials collect levies that would raise the cost of each pineapple by a minimum of N100.

At the end of the transaction, the pineapple that left the market in Benin at N400 is sold to the final consumer in Lagos at a minimum of N1,500. Encumbrances in the supply line adds N1,100 to the cost.

As rightly imputed by the World Bank, Nigeria’s decaying transport infrastructure is a key factor to the surging inflation in the land.  Nigeria is perhaps the world’s largest economy running its land transportation system largely on roads.

Nigeria Railway Corporation (NRC) has been in comatose for close to 30 years. Consequently, goods are hauled mostly on dilapidated roads. Rail rehabilitation has been at snail speed in the last 10 years. No one knows precisely when haulage on rail would fully commence.

Rail is the most efficient means of hauling goods. If food items were hauled to markets on the rail, traders would evade the menace of corrupt law enforcement officials at check points and get their goods to the market at half the cost they pay at the moment.

The senseless concentration of land transportation on roads worsens inflation from two angles. It makes the rendezvous with the illegal toll gate keepers inevitable, and piles pressure on the roads making them collapse faster.

Dilapidated roads inflict avoidable damages on haulage trucks. Transporters pass the higher truck maintenance cost to traders who levy consumers accordingly at the end of the supply chain.

Nigeria’s obdurate security crisis is also at the root of the surging food inflation. Peasant farmers abandon farms for fear of being slaughtered by terrorists. Insecurity accounts for the hundreds of check points that have become illegal toll gates used for extorting money from transporters and traders.   

World Bank and SSASCGOC complaints emphasise the altruism of the report by Institute of Development Studies (IDS), a British think tank which rated Nigeria as the world’s second poorest country in terms of food affordability.

(IDS) concluded that with a minimum wage of N30,000 per month and current food inflation rate, an average Nigerian worker requires 101 per cent of his monthly pay to feed. That explains why workers now borrow to feed.

The truth is that with inflation surging and the purchasing power of the naira receding precipitously, attaining a living wage for Nigerian workers through minimum wage hikes is an exercise in futility.

Minimum wage hike would simply fuel more inflation and impoverish the workers. A concerted effort at taming inflation is the solution to the deplorable plight of Nigerian workers.

Ironically no one in the federal government knows how to fight inflation. Government has missed its budgetary inflation targets for three consecutive years. The current one is as illusory as the previous ones.

Government hope of bringing inflation rate down to 12 per cent at the end of 2021 is as unattainable as taking the naira parallel market rate to N300 to the dollar. Six weeks to the end of 2021, the nation’s consumer price index surges along at well over 16 per cent, even with NBS deceptive figures.  

UNI Agric Markurdi
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