• Tuesday, July 23, 2024
businessday logo

BusinessDay

Minimum wage: Why Labour must be realistic on its demand – Committee

How many Nigerian workers will benefit from the new minimum wage?

As Nigerians await the Federal Government’s final decision on the new minimum wage, the tripartite committee has advised the Organised Labour to take a holistic look at its request in relation to the realities on ground and the efforts of government so far.

Many states across the federation may not be able to pay anything above N60, 000 to their workers, according to a report seen by BusinessDay on states’ Federal Account Allocations Committee (FAAC) earning and expenditures before and after the removal of fuel subsidy last year.

Labour had flatly rejected the Committee’s N62, 000 proposal to the government and it is demanding at least, N250,000 minimum wage. It has also insisted not to accept any lean addition by the government.

The government has however, said the amount reflected the prevailing economic considerations and its non-monetary incentives the implementation of which has started since the beginning of the year.

A report attributed to the tripartite committee Chairman, Goni Aji last weekend disclosed that any wage increase above N60, 000 for most states in the country is unsustainable and many states and local governments may have to sack workers to be able to pay anything above that amount.

The report stated that the implication of the Federal Government agreeing anything more than N60,000 minimum wage was that most states and local government would spend almost all of their Internally Generated Revenue (IGR) and FAAC allocations on salaries and even borrow to pay their workers who are less than one percent of their population.

Consequently, this could result in most state governments facing serious financial difficulty and unable to meet the needs of their citizens, especially in carrying out its obligations, govern their states effectively and provide infrastructures, education, healthcare, security, among others.

Presently, despite the increased FAAC allocation, some states are facing financial constraints, resulting in them not being able to pay the N30,000 minimum wage agreed with Labour since 2019 by the Muhammadu Buhari administration.

Although the report revealed that FAAC allocations to states have increased significantly since President Bola Ahmed Tinubu removed fuel subsidy last year upon assumption of office, experts say removing subsidy and the floating of the naira policy led to an increase in nominal FAAC revenues, coinciding with a surge in headline inflation.

The report also stated that although the real value of FAAC net deductions increased marginally, rising from N1.39 trillion in the first half of the year to N1.52 trillion in the second half of 2023, that this indicates that the additional revenues, in real terms, have shrunken with the increase in monthly inflation that followed both policies.

Furthermore, the subsidy removal and exchange rate float only led to the state’s earning additional nominal revenue of N231.7 billion from FAAC in the second half of 2023 compared to the first half.

This excludes foregone revenue through a debt swap. The financial statements of the state governments show a notable average recurrent revenue growth rate of 9percent and a relatively lower average personnel growth rate of 6percent.

The report further stated that the 3percent difference between the average revenue growth rate and average personnel cost growth rate means that any significant revenue shock or rise in personnel costs could pose financial challenges for most state governments in the country.

The report also pointed out that there would be challenges in any major wage increases given the current revenue levels of states across Nigeria, which have necessitated careful consideration of fiscal constraints and their impact on future wage policies.

According to the report, “The real value of additional revenues has shrunken due to the surge in inflation, restricting the response options for states to the current socio-economic crisis and emphasising the delicate balance states must maintain.

“It is crucial to recognise state governments’ limitations in addressing today’s socio-economic situation. While the state government can influence fiscal policy, it requires complementarity of fiscal and monetary policies at the federal level to achieve the much-desired results.

“Any wage increase approach should align minimum wage adjustments with economic realities at the subnational level, prioritising the fiscal sustainability of states.”

The Committee listed some of the incentives so far provided by the Federal Government, which are intended to benefit, not only government workers, but the entire Nigerian people, to include the ₦35,000 wage award for all treasury-paid federal workers, ₦100 billion for the procurement of gas-fuelled busses and conversion to gas kits, the ₦125 billion conditional grant, financial inclusion to small and medium scale enterprises, and the ₦25,000 each to be shared to 15 million households for three months.

The report also mentioned the ₦185 billion palliatives loans to states to cushion the effects of fuel subsidy removal and the N200billion to support the cultivation of hectares of land to boost food production, the ₦75billion to strengthen the manufacturing sector and the ₦1trillion for student loans for higher education.

The Committee further pointed to the release of 42,000 metric tonnes of grains from strategic reserves and the purchase and onward distribution of 60,000 metric tonnes of rice to the millers association, among others.