IT would be heartless to ignore organised Labour’s demand for
upward review of the N18,000/month minimum wage, which was established in 2011,
when this income wa
s well over $100 i.e. above $3/day and well above the
international poverty bench mark of less than $2/day.
Regrettably, as Naira crashed from N155 to the current
N360=$1, the purchasing power of N18,000 minimum wage has, now sadly, dwindled
to barely $50.00 i.e less than half its former value! Worse still, this value
will further diminish, if annual inflation rates between 10-17%, since 2011,
are also factored. It is undeniable therefore, that dependence on N18,000
monthly salary has since shunted
millions of Nigerians down the poverty drain.
Invariably, the reduction in consumer spending, forcibly
caused by the devastating crash in real income value, would simultaneously
constrain optimal capacity utilization in factories and other commercial
houses; ultimately, massive layoffs will become inevitable, with serious social
and economic consequences, as indeed, presently amplified by the palpable level
of insecurity, arguably fuelled by the growing number of unemployed youths
nationwide.
In reality, oppressive Naira devaluation and unyielding
double digit inflation rates, will invariably compel, severe belt lightening in
most Nigerian homes, especially where income levels rise more slowly than the
rate of inflation. Arguably, the constant inability to successfully stretch
depreciating incomes through each calendar month, may unfortunately, induce the
temptation for workers to engage in corrupt enrichment. Sadly in such
circumstances, an otherwise upright citizen may begin to rationalise any
opportunity for corrupt enrichment, in their establishment, as ‘divine’
provision. The preceding is not intended to justify any brazen act of
corruption in offices and workplaces, but, such temptation to engage in corrupt
practices would, probably be more courageously resisted, if the legitimate
wages of workers, commanded values that could sustain some level of dignity in
lifestyles. In retrospect we may recall that before government’s Structural
Adjustment Programme in 1986, middle level administrative officers, including
teachers built their personal homes and funded (often with significant
sacrifice) their children’s education,
even up to tertiary level, from their legitimate salaries, and other income
support from enterprising spouses. Regrettably, it is presently impossible, for
a Nigerian white collar executive, with an exceptionally handsome N1m, monthly
salary package, to acquire a standard 3 bedroom apartment, from their
legitimate salary, after making the usual deductions, such as taxes and other
existential commitments. Thus, in view of the obvious social and economic
significance of paying realistic living wages, it would be truly inconceivable,
to challenge Labour’s increasing and pressing demand for an urgent significant
upward review of the minimum wage to N56, 000/month, (i.e. approximately
$150/month with N360=$1 exchange rate) so that the new minimum wage will exceed
the $2/day international poverty benchmark. Although, a monthly income of
N56,000 may not provide any surplus, as savings, to acquire a car, let alone a
house, nonetheless, the expectation that N56k would triple the present spending
capacity of workers and adequately fund several pressing domestic and other
existential needs, may regrettably not materialize. The following is a summary
of a piece titled “N56, 000 minimum wage or a stronger Naira?”(First published
on 2nd May 2016) please read on: “Nigeria Labour Congress (NLC) president,
Comrade Ayuba Wabba told a news conference last week (April 27, 2016), in
Abuja, that even though it is true that the economy is not doing well, but the
law states that wages for workers must be reviewed after every five years”.
Nonetheless, in reality, any significant wage increase will regrettably,
certainly, cripple the economies of several states, as the salary bill will
become tripled to worsen, the already, heavily lopsided recurrent government
budgets, to erase any hope of infrastructural development, and invariably
increase the already worrisome present debt burden in several states.
Furthermore, the joy of a N56, 000 minimum wage will be quickly threatened by a
rise in the general price level, and inflation may well exceed 20% from the
current volatile springboard of 15.6%. Invariably, spiraling inflation, significantly
reduces consumer spending, discourages domestic production and ultimately fuels
an already combustible unemployment rate, with unsavory and horrendous social
and economic consequences. Unfortunately, the very high cost of borrowing, that
is aggressively instigated by the albatross of surplus Naira supply and
spiraling inflation, will, ultimately, also restrain the productive sector’s
capacity to create jobs and produce price/quality competitive goods for export.
Instructively, reprieve from this cyclical bondage may however come, only if
inflation is tamed to best practice rates below 3%; unfortunately, the
significant increase in money supply, which will be, inevitably, triggered by a
300% rise in workers’ wages, would however, make such desirable goal in
monetary management, impossible to attain. Furthermore, any significant
increase in money supply would also compel CBN to quickly step up its,
compulsive counterproductive, high interest borrowings with T/bill auctions, to
reduce the perceived systematic Naira excess values and restrain
inflation. Ironically, such CBN
interventions would in turn propel higher borrowing rates and crowd out the
real sector from ready access to the cheaper funds, required to expand domestic
production and create jobs, even when, ironically, the funds mopped up despite
the oppressive cost, will simply remain sterilized from any practical use in
CBN vaults! Consequently, if high
inflation rates fuelled by persistent and increasingly excess money supply
remains untamed, government would need to carefully examine how successful
economies everywhere, sensibly and sensitively manage money supply so that
systematic excess money does not become problematic to push inflation beyond,
say 3%, so that cost of borrowing will also fall well below 10%. Conversely, in
economies where socially sensitive monetary management is practiced, commercial
banks, are made to pay a penalty fee to their respective Central Banks to
warehouse any stock of surplus funds. CBN does not deny that the monetization
of distributable dollar revenue (read as unilateral substitution of Naira for
dollar denominated revenue) is actually the primary cause of, persistently,
excess Naira supply which triggers disenabling, and counterproductive monetary
indices, such as, unusually high inflation and interest rates and a weaker
Naira, as evidently recognised in the “Monetary Policy Thrust Statement” of
Government’s Vision 2020. Instructively, astute, best practice management of
money supply, particularly in the forex market, will gradually strengthen and
sustain Naira below N100=$1. In such event, the present N18, 000 minimum wage,
without much ado, would then command the current dollar equivalent of almost
$200, without the usually abrasive negotiations for wage increases.
Fortunately, excess Naira liquidity will become better managed when CBN breaks
its stranglehold monopoly in the forex market and ceases to auction the dollar
for the highest Naira bids. SAVE THE NAIRA,
SAVE NIGERIANS!
Vanguard
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