The Bismarck Rewane committee appointed by the Federal Government will not be recommending any particular minimum wage for the federation but would instead study and recommend ways that an agreed minimum wage can be implemented with the barest disruption to the economy, BusinessDay has learnt.
The Technical Advisory Committee on the Implementation of an Increase in the National Minimum Wage was inaugurated by President Muhammadu Buhari on Wednesday and many began to claim that it was up to the team to be led by leading economist and CEO of Financial Derivatives Company, Rewane, to come up with an acceptable minimum wage for Nigeria.
However, our correspondent who has been given insight into the work of the committee reports that the way the work of the committee has been structured, it was clear that the committee would be concerning itself with determining what level of revenue gap will ensue on the basis of the implementation of the national minimum wage and how this will impact on the nation’s revenue structure.
The committee, once it has determined the resulting revenue gap, will aim to figure out how to fund this gap, whether by debt, asset sale, or other means.
According to a senior government official, the third area of work for the committee is to “to study the impact of the possible revenue gap on Nigeria’s macroeconomic stability and how the issue of a national minimum wage can be leveraged to link productivity measurement as well as other measures of efficiency in government”.
Fourthly, the committee members will also come up with how “the identified revenue impact could play out in the time of oil price collapse so that the nation does not assume a false sense of security at a comfortable oil price level”.
Organised Labour and the Federal Government have been at loggerheads over a new minimum wage. Current minimum wage is N18,000 ($50) and has remained so since 2011 when it was last reviewed. The Nigerian Labour Congress (NLC) and other labour unions are asking the Federal Government to increase the minimum wage to N30,000.
The minimum wage issue has divided the tiers of government, with state governors saying they would not be able to pay the N30,000 minimum wage. They are pressing the view that states should be permitted to determine their own minimum wage outside the parameters to be set by the Federal Government in the proposal it plans to send to the National Assembly on or before January 23.
There are also concerns about how to ensure adoption of the new national minimum wage by the private sector, especially given the different layers and sizes of the private sector organisations.
The committee has four weeks within which to submit its report and it is working with global experts from professional firms like PwC and KPMG, who will be helping to validate some of the assumptions and data that the committee may want to use.
Charlie Robertson, global chief economist, Renaissance Capital, is concerned that a dramatic wage hike could mar the country’s competitiveness.
“It could make Nigerians more expensive to employ than the Vietnamese ($145) or Russians ($163),” Robertson said, even as he admitted there was a strong case to be made for a higher minimum wage following a 50-percent currency devaluation and an 80-percent hike in petrol prices since the last wage change.
Inflation rate, at 11.28 percent, erodes income, just as misery index, a metrics used in ascertaining how well an average citizen lives, is 34.4 percent.
“However, Nigeria’s wages must be lower than Vietnam’s to remain competitive, because Vietnam has better adult literacy and 10 times more electricity per person and higher investment as a percentage of GDP. This is leaving aside the issue of whether Abuja can afford to dramatically increase wages,“ Robertson said.
Fuelled by the possible minimum wage review, Nigeria could spend about the same amount paying workers’ salaries and running its various ministries, departments and agencies in 2019 as it did on capital projects, debt servicing and recurrent expenditure combined in the whole of 2014.
That’s after President Buhari presented a 2019 Appropriation Bill that reveals the Federal Government’s plan to spend a whooping N4.04 trillion ($13.2 billion) on non-debt recurrent expenditure this year, only $2 billion shy of Ghana’s total budget of $15 billion.
The amount is also 12.5 percent higher than the N3.59trn budgeted in 2018, following increases from salaries and pensions and provisions for implementation of a new minimum wage.
Although no specific figure has been provided yet, BusinessDay estimates the largest increase could come from personnel costs, which could be up an extra N1.25 trillion, if the 66 percent review in the minimum wage is implemented.
In 2014, Abuja spent exactly the same amount (N4.04 trillion) on capital and recurrent expenditure combined.
The implication of committing so much to non-debt recurrent expenditure in a period of disappointing revenue is that Africa’s most populous nation could be left with little or no cash to invest in critical infrastructure, which has put a cap on economic growth and impoverished tens of millions of its people.
Though a noble idea, analysts say a wage increase at this time could leave Abuja no choice but to borrow more, a frightening prospect for a country whose debt-to-revenue ratio is above 60 percent.
Already, the 2019 budget shows that the government plans to spend N2.1 trillion on debt servicing, 24 percent of total spending and five percent higher than in 2018.
