Following organised labour’s yearnings for a review and increase in minimum wage, which is in line with the current economic inflation and the imbroglio that have followed negotiations with the Federal Government, the need to meet up with infrastructural deficit across the 36 states and to build an economy that will provide the new minimum wage seems to have thrown governors in a state of dilemma. BIOLUWATIFE AKINYEMI explores the challenges surrounding the exigencies. His findings:

For the past six months, at least, the Organised Labour has consistently been on the government’s neck for the review of the minimum wage, which was last reviewed in 2019. Considering the cost of goods and inflation in the country, coupled with the present state of the economy, the request by the labour unions is considerably appropriate.

Workers must survive, just as other Nigerians are not privileged to join the labour force. Ordinary Nigerians, that is, the artisans, traders, farmers, transporters and others would bear the impact of whatever increment the government considers the minimum wage. As the workers will seem to congratulate themselves on the battle well- fought to subdue the forces of government, they would still cough the money back in a way, through tax, higher purchasing costs and others.

Approximately, 720,000 federal public servants in Nigeria will benefit from the new minimum wage, aside from the state government workers, but their percentage pale into insignificance, considering the over 230 million population that will bear the brunt of whatever decision the government make. Nigeria, the most populous nation in Africa with vast potential, is, however, lacking infrastructure to boost the well-being of its people. The 2019 Global Competitiveness Index Report ranked Nigeria 130th out of 141 economies for infrastructure quality. The country has a significant infrastructure deficit.

Nigeria could not boast of a workable transportation system across the country. Its rail system is yet to cover a comprehensive space, the same with its water transportation and even road. The country, at the moment, could not boast of air transportation being funded by the taxpayers’ money. Citizens are at the mercy of the racketeers, reason they pay exorbitant fees for transportation.

The same goes for the power sector and the oil and gas. The country is blessed with an abundance of petroleum resources and natural gas. Yet, it struggles to import refined petroleum products, like diesel and petrol. Its refineries are moribund, as they have been undergoing turnaround maintenance for almost a decade. The Port Harcourt and Kaduna refineries are expected to come alive soon. With the intervention of Dangote Refinery, Nigerians may no longer rely on the importation of petrol to have the product.

For decades, Nigeria had maintained a fuel subsidy regime that gulped $84.39 billion between 2005 and 2022 from the public treasury. The Nigerian National Petroleum Corporation Limited (NNPCL), being the sole importer of fuel, had amassed trillions of naira in debts for absorbing the unsustainable subsidy payments. Most of the gases produced in the country are flared, as there are no infrastructures to address that. At present, Nigeria does not have a Floating Liquefied Natural Gas (FLNG) facility for production storage and offloading units to conduct its Liquefied Natural Gas operations for developing offshore natural gas resources.

The NNPCL, in partnership with Seplat, SPDC, TotalEnergies and other oil and gas multinationals, are currently working on more than 20 projects geared to supply an additional 4.6 billion cubic feet of gas to domestic and international markets by 2030, in a bid to increase Nigeria’s gas production by over 50 per cent.

This infrastructure shortfall in the country is far below the 70 percent international benchmark set by the World Bank. The population growth rate is projected to exceed 2.5 per cent annually and 400 million people by 2050. Given the projection, the current infrastructure would not sustain Nigerians and there is a need for more investments.

Regrettably, the budget every year is dominated by the overhead cost. The new minimum wage will take its toll on the budget as passed and would need another supplementary budget to meet up. The National Assembly passed a budget of N27 trillion for 2024. By July, the Federal Government is proposing to send a supplementary budget of N6.6 trillion to provide for identified transformational projects, including the Lagos-Calabar Coastal Road; proposed Sokoto-Badagry Road; completion of all ongoing railway projects, which have not been provided counterpart funding. The supplementary budget is also expected to fund the rehabilitation and expansion of dams and irrigation schemes to increase production and boost the economy.

In a discourse penultimate week, former Lagos State governor, Babatunde Fashola, spoke on the minimum wage issue. He said the extant law on minimum wage is the National Minimum Wage Act 2019 which which came into force on April 18, 2019, provides in Section 3 (4) that: “The national minimum wage expires after five years, and it shall be reviewed in line with the provision of this Act.”

He added, “Please note that it is the ‘minimum wage’ that has expired but not the Act, and as is shown in the underlined portion above, the review of the 2019 minimum wage provisions, after five years, shall be in line with the provision of the 2019 Act.”

He defined the minimum wage from Section 3 (1) of the law, which provides that: “Every employer shall pay a national minimum wage of not less than N30,000 per month to every worker under his establishment, except as otherwise provided under this Act.”

He said since it is a federal law, there must be constitutional authority for the Federal Government, through the National Assembly, to make laws on minimum wages.

While he defined a salary as a fixed annual amount, payable at specific intervals subject to agreement and which can be paid weekly, bi-weekly or monthly, wages, on the contrary, refer to payment based on an hourly rate and the number of hours the employee works.

“If we follow the proper definition of wages as an hourly rate and apply the global method for computing it, which is to divide the gross annual sum by 52 weeks, and further by 40 hours recommended per week, we will have for Nigeria a minimum wage that is not N30,000 per month, but rather N30,000 x 12 (months) = N360,000 divided by 52 (weeks) = N6,923.07 divided by 40 (hours), which will give a minimum wage of N173.07 per hour,” he said.

He added that “in other jurisdictions where the minimum wage is applicable, amendments to increase them do not necessarily translate to massive distortions across the salary compensation scheme. Those bound to pay minimum wage can also adjust their ability to pay by limiting the hours employees work and maximise productivity as employees cover the gap by working the additional hours in other places.”

In Nigeria, according to the Act of the Constitution stated by Fashola, the national minimum wage is an item in the Exclusive list of the constitution. Therefore, the minimum wage can only be legislated on by the National Assembly and passed for assent by the President to make it binding.

A look at wages and the corresponding values shows that Nigeria has been increasing wages for its workers, yet not meeting their needs. The former president, Chief Olusegun Obasanjo, increased the minimum wage to N7,500 in 2000. The value then in its corresponding Dollar value cannot be said of its value today, with the N30,000 minimum wage. The value of N30,000 in 2019 is not the same today. The naira has been devalued, inflation has increased, purchasing power has been reduced and many other economic factors.

Emphasis should, therefore be placed on how to empower the Naira to compete favourably through the provision of infrastructure, which would help Nigerians, across the board, to live a better life.

A document prepared by the Nigeria Governors’ Forum showed that the employment strength of the work force in each state outweighs the revenue accruing to the state monthly and annually.

The money spent on recurrent expenditure, to wit, salaries, pensions and debt repayment, among others, takes a chunk of the revenues accruing to each state every month, leaving next to nothing to provide infrastructure for the state and the country.

For Abia, the recurrent expenditure takes about 76 per cent of the total revenue. Adamawa’s recurrent expenditure takes about 64 per cent of the total revenue, while Akwa Ibom spent 53 per cent of its generated revenue, including the Federal Account Allocation Committee, on recurrent expenditure.

Lagos spent 50 per cent of its total revenue on recurrent expenditure while Delta spent about 54 per cent of its revenue on recurrent expenditure.

From the chat shown in this piece, states like Jigawa, Katsina, Taraba, and Kebbi are spending their revenues on recurrent expenditure, making it difficult to embark on any other activity for the populace.

Instead of focusing on minimum wage, Nigerians should demand improvement in infrastructure and the economy. One of the mainstays of Nigeria’s economy is the oil and gas, but the contribution from the sector has declined over the decades. In 1983, oil was responsible for 24.97 percent of Nigeria’s income. By 1993, it increased to 28.96 percent, declined to 27.13 percent in 2003, further declined to 11.24 percent in 2013 and by 2023, it reached an abysmal low of 5.40 per cent. The sector’s GDP dropped from ₦7.11 trillion in 2013 to ₦4.14 trillion in 2023. The decline underscores the need for economic diversification and infrastructure investment to support other sectors.

According to the latest data International Monetary Fund(IMF), Nigeria’s inflation rate is predicted to stabilise at 14 per cent in 2029, indicating a potential end to the current upward trend. This projection will be a relief, as the latest inflation rate currently stands at 33.69 per cent, according to the National Bureau of Statistics, a variation from the IMF’s prediction of 24.6 percent in the year.

The IMF data suggests that the inflation rate will gradually decline from 23 percent in 2025 to 16 percent in 2026, 15.4 percent in 2027, and 14 percent in 2028 and 2029. This predicted stabilisation is a welcome development for the Nigerian economy grappling with rising inflation and interest rates.

Our declining infrastructure has seen our drop from the first to the fourth economy in Africa, with headline inflation rising to 33.95 percent from 22.41 percent; food inflation rising from 24.82 percent to 40.66 percent and the exchange rate devalued from $1/N635 to around N1,500. Because we do not care for our refineries, Nigeria keeps importing petrol and diesel and paying subsidies. When the present administration led by President Bola Tinubu came on board, he removed subsidies and the petrol price jumped from an average of N165/N230 to around N580/N700.

Infrastructure deficiencies and recommendations

Nigeria generates only 5,000MW for 220 million people, compared to Egypt’s 59,063MW for 114 million people and South Africa’s 58,095MW for 61 million people. The country is now the largest importer of generators in Africa, due to insufficient power supply. Nigeria will need reforms to attract private investments, build power plants, and continue its rural electrification projects.

On transportation networks, Nigeria boasts of poorly maintained roads, outdated railways, and congested ports. Many of the airports in the country too are not up-to-date. The government must rehabilitate and expand roads. It must be ready to build new roads, like the Lagos-Calabar Coastal road. There must be extra efforts in railway modernization and spread, while the ports must be upgraded. The airports must also be upgraded to meet the International Civil Aviation Organisation (ICAO) standard.

On water supply, it is regrettable that millions lack access to clean water and adequate sanitation. The government should enhance urban water systems and implement the National Action Plan for Water, Sanitation and Hygiene (WASH).

There should be efforts to build healthcare facilities and provide health insurance for citizens. The facilities should be properly funded and state-of-the-art equipment provided. The educational facilities should also be enhanced by the government. Public schools should receive adequate attention and be made affordable, to curb migration to private schools.

To meet the infrastructural deficit, the government should invest in technology and training, and explore private-public partnerships, international loans and grants. Labour unions and the government must prioritise infrastructure development alongside wage increases. Well-developed infrastructure supports sustainable economic growth, ensuring that salary increases are meaningful and beneficial in the long run. Nigeria can create a more prosperous and equitable society for all its citizens by fostering a balanced approach.

State governments need to reduce cost of governance to meet demand for infrastructure amid wage increase — Dr Adedeji

Speaking with the Founder & CEO of 4MNT (a US-based Economic Policy Management and Consulting outfit), Dr Muyiwa Adedeji, suggested that states need to explore ways to reduce the cost of governance by cutting unproductive expenditures in order to meet up with payment of minimum wage and deliver infrastructures.

The former Economist at the International Monetary Fund (IMF), said, “In order to adequately finance the envisaged high personnel costs and other critical expenditures (such as infrastructure) on a sustainable basis, states will have to examine the composition of their expenditures and explore ways to reduce unproductive capital and recurrent expenditures. Particularly, consideration has to be given to reducing administrative capital expenditures (capital expenditures with low impact on enhancing total factor productivity and alleviating supply bottlenecks). It is extremely important to plug leakages and substantially reduce the cost of governance.”

He, therefore, suggested that government need to place emphasis on improving the quality of public investment by further enhancing the procurement process to reduce cost, and to also improve on greater use of Public Private Partnerships (PPPs) for infrastructure provision, without jeopardising fiscal sustainability.

“States need to consider the establishment of a public investment management unit to further improve value for money, focusing on improving the efficiency and productivity of capital investment; streamlining the preparation, appraisal, approval of all capital projects; and deciding on the share of public investment budget subject to project appraisal.

“Also, states should collaborate with the Federal Government in further improving their tax administration and seek for technical and financial assistance from development partners.”

It is a violation of the constitution for governors not to pay minimum wage — NLC

Mr Kayode Martin, Oyo State NLC Chairman explained in an interview that the minimum wage negotiation falls within the exclusive list, and that it is a violation of the constitution for governors not to pay.

“Minimum wage falls within exclusive list and must be negotiated at such levels. Salaries for political office holders at federal, state and local government levels likewise. It is a violation of the constitution on the part of governors.

“On what to do, we know how to tackle them and expose their gimmicks,” he said.

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