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Nigeria: The Politics And Reality Of National Minimum Wage

July 15, 2011
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In a free enterprise or capitalist system which Nigeria practices, the nexus of market forces otherwise known as the invisible hand determines the price of goods and services. Wages like other economic indicators are controlled by the forces of demand and supply. The government sometimes intervene in the market to achieve a set purpose.

There are two major ways by which the government does this. This is known as the maximum and minimum price legislations.

In the case of maximum price legislation better called price control, the price is fixed below the market price to ensure that many people can access a good or service. The problem associated with such intervention is that demand becomes greater than the supply thereby leading to shortage. The shortage engenders black-market because what is put on the market is far less than the demand. More buyers are empowered by the forceful regulation of the market forces. A very good example is the current price of a litre of kerosine which is fixed at N50 by government but which is not available in the market.

The government can only ameliorate such situation by increasing the supply into the market. It is only when this is done that the intended benefit to be enjoyed by the people can be achieved. In economic terms, the minimum price legislation otherwise called minimum wage is fixed above the market price. This simply means that the new wage, which is above the market value ensures that the least worker earns a reasonable wage. The government intervenes in the market forces so that the least income earner could meet some basic needs. Inflation could engender minimum price legislation. The effect of government intervention by minimum price legislation is normally unemployment because the supply of labour will outstrip the demand.

By the time this piece is published, the tango between the organised labour and the government may have been resolved. For now, 48 hours to the deadline earlier given by the Labour Congress (NLC) and the Trade Union Congress (TUC), there seems to be no solution in sight.

There are salient points that need to be resolved. The minimum wage bill was passed by the 6th National Assembly and assented to by President Goodluck Jonathan. Now the minimum wage is an Act which must be implemented whether money is available or not by the state governments and employers of labour of not less than 50 persons.

From the labour side, the argument is that the state governments were involved in the negotiation that culminated at N18,000 because their initial demand was N52,000. Labour, from every indication, chose the right time to strikes. The organized labour chose to make demand just some few months to the last electioneering campaigns, so obviously the Governors accepted knowing full well that its rejection could be disastrous or catastrophic to their campaigns. The issue at this stage has gone beyond what were the factors placed on table at the point of negotiation. But all the same we need to revisit the issues before it can be finally settled. The prolong military rule and the constitution bequeathed by them has made Nigeria more of a unitary structure in practice than the federalism we proclaim to practice. In reality are we saying the cost of living in Osogbo is the same as Abuja, Port Harcourt or Lagos even though the work engaged in by workers may be the same? Are we also arguing that all the states are equally endowed? The answers to these posers are very fundamental in resolving the minimum wage. Besides these, most states depend largely on the federal allocation which is based majorly on crude oil. If agreements are arrived at based on the current revenue, what happens if the oil revenue falls below the prevailing level? Again what happens if there is oil glut like we experienced under the government of Alhaji Shehu Shagari in the second republic?

Some analysts have castigated state governors of lacking initiative to increase their Internally Generated Revenue (IGR). As at now, it is only Lagos and Rivers States that generate more than one billion naira monthly. These two states have many functional industries which employ many workers who earn reasonable income. The market in Lagos is so wide for agricultural and manufactured products which engages many workers.

The Governors did not help matters by arguing that subsidy should be withdrawn on petroleum products. This argument smacks of insensitivity because it shows how some of them are far away from their people. Senator Bukola Saraki, the immediate past chairman of Nigeria’s Governors Forum (NGF) recently canvassed for the total removal of subsidy. It is gratifying to note that Dr. Ngozi Okonjo-Iwela, the immediate past Managing-Director of International Monetary Fund (IMF) and the new Finance Minister-designate has agreed that there is a need for subsidy. The argument of subsidy withdrawal is as hollow as it is bunkum. The petrol dealers engage in smuggling even when custom officers are paid by the state to look the other way when the smugglers are engaging in their illicit business.

The second argument of the NGF that the revenue allocation should be reviewed in favour of the states is a welcome development. The federal government with all its gargantuan resources is also guilty of lack of initiative in looking at possible areas of income generation. Petroleum has been the major income earner of the country for over forty years.

Should the ordinary people be made to pay for the ineptitude of our leaders because that is what paying high prices for petroleum products implies.

In all countries, citizens enjoy low prices in products the country has a comparative advantage. The Peoples Democratic Party (PDP) that has ruled the country for 12 years should tell us among the Organisation of Petroleum Exporting Countries (OPEC) any country that has only three malfunctioning refineries like Nigeria.

One hopes the NLC and TUC would not go on national strike to sort out things. However, the organised labour is not happy with the jumbo pay of the legislators. In spite of earning a large chunk of the society’s resources, the legislators seem insensitive to the plight of the common man. The Nigerian masses are not asking for more than uninterrupted supply of water and electricity, good roads, functional schools and hospitals which is obtainable within the available natural resources.

How should this intractable problem be resolved? The realistic solution to this problem is for the tinkering with the constitution that would devolve more functions to the States. This would mean reduction in the revenue to the federal government. It would enable states to conveniently pay the minimum wage. Beyond that, the state should seriously look inward to generate additional income. There are many tourist attractions in Nigeria to earn states income. In addition when many people are engaged they would be made to pay tax which is another source of income. In Osun State, there is no thriving businesses except the self-employed and the civil servants. It is difficult to generate income from unemployed people.

In his campaign promise in 2007, Mr Rauf Aregbesola promised to increase the IGR to at least one billion naira in his first year. This he said would be got from tourism, forest reserves and other avenues. What he needs is the support of everybody. He knows that the state government cannot depend solely on the paltry sum from Abuja. Aregbesola has promised to look inward. But for the mess he met on ground, he had promised to make the private sector more enticing and alluring to tempt people away from the public sector.

The issue of minimum wage should be looked at holistically. Some commentators have argued that increase in minimum wage should be predicated on productivity. Sound and plausible as this argument may be, organised labour is also asking how do you assess the productivity of a legislator that hardly attends legislative meetings not to talk of contributing to matters on the floor of the House.

The organised Labour is of the strong opinion that it is inhuman and smacks of callousness for a country that cannot afford N18,000 as a minimum wage to give room for a situation where an individual or a team of legislative leaders is alleged to have obtained a loan of N40 billion from a commercial bank to further their nest. In effect their argument is that adequate remuneration is not been paid which gives room for embezzlement and corruption in the system. Conclusively I am of the strong opinion that the a national minimum wage by the National Assembly foisted on the states can no longer hold. Granted the fact that it had been in practice in the past does not make it right not should it continue.

Unfortunately the parliament that could have intercede between the labour and the executive is seen as cornering a large chunk of the society’s resources. Rather than some legislators insisting that the Governors should pay the minimum wage as passed, they should look at it critically and offer useful constitutions. Finally both labour and government should look at ways of increasing REAL and not NOMINAL wages. Real wages is the goods and services which money can buy while the nominal wage is the amount being paid. One does not need a prophet to predict that by the time the new wage is implemented and the price of rent, food, clothes transport and all the basics increase, the value of the money received in terms of increment would have amounted to nothing.