Following the removal of the fuel subsidy, fuel costs have tripled leading to resultant increases in business operating costs and the cost of living. The Labour laws regulate the relationship between stakeholders in the workforce who are affected by both business operating costs and living costs. In this interview with Ose Okpeku, Partner, The Law Crest LLP and a labour, employment and immigration law expert, BusinessDay’s Onyinyechi Ukegbu discusses the role of the Nigerian labour laws in navigating the current economic terrain.
1. How responsive should labour laws be to the economic situation of a country?
Labour laws and the workforce do not work in isolation and should have a holistic point of view in responding to the economic situation of a country. So yes, they have to be responsive, flexible and dynamic enough to respond to the changing economic situation, especially with a country not being in control of other external factors, for example, what happens in other countries, then you must have a framework that is responsive and dynamic to the changes. And that’s the primary role of governance.
2. On a scale of 1-10, how responsive would you say Nigerian labour laws are?
Our labour laws are not responsive or dynamic enough. However, I can’t use the same brush to paint the entire value chain in the employment and labour space. There has been some very progressive movement following the amendment of the Constitution in 2010, and that movement is being driven by the Nigerian Industrial Court. The principal act is over 40 years old and was created to address issues within the blue-collar workforce. At that time, the white-collar workers who were mostly civil servants had the Civil Servants Rules which was progressive for the day. The world of work today has evolved so rapidly to include variations of the typical blue and white-collar jobs, as well as other atypical forms of work – platform, seasonal, gig workers etc. So even though there has been progress here and there, the labour laws are not flexible enough to deal with issues in the current workforce.
3. Do you think we are approaching or are we in a cost of living crisis in Nigeria?
I don’t know about you, but I’m in a cost-of-living crisis. That puts it in perspective. We’re trying to run away from it but we are. For example, let’s talk about transportation because that has a trickle-down effect on everything. Someone who earns the minimum wage of N30,000 and used to spend N500 on transport a day, between January and today, now spends N2000 and his salary has not gone up. Not only that, the cost of transportation now affects the price of food, which has also tripled. Bread has gone from N300 to N900. And he still has to go to work 5 times a week. So in a week, he has done N10,000. In a month N40,000. He still has to feed, perhaps pay for rent; pay taxes, several if he drives a bike; pay school fees, if he is married, and medical bills. So whether we like it or not, we’re in a cost of living crisis.
If we are still thinking of what to do with 1 trillion Naira, when the administration knew it would remove the subsidy once in office, then this is a knee-jerk reaction.
4. Should our labour laws be adjusted in this situation? If so, what should these adjustments be?
There has to be a holistic review of our labour laws. The mechanism for arriving at the minimum wage is far removed from the Labour Act itself, and it has to be factored into the Labour Act. All the Labour Act specifies is what should be in your terms of employment but again this was for blue-collar workers, not employees. So, based on this, it is what the employer and employee agree on as remuneration that stands but it must be in line with the minimum wage which is set by another mechanism as a fallout from the Labour Act.
Perhaps, in reviewing the responsiveness of our Act we can consider an amendment that stipulates that the minimum wage must be reviewed at intervals, for instance, every 3 years, and in between there has to be a cushion that considers cost-of-living adjustment based on economic factors like inflation.
Another mechanism could be that in each sector depending on the work they do, and the impact on the economy, there has to be a specified increment at a specified time.
5. How do nations arrive at a minimum wage figure? And what should Nigeria’s minimum wage be?
The minimum wage is a figure that you can get by on. Thus, if a person works 40 hours per week, at a minimum what she earns should cover transportation to and from work and basic needs. So, the question I ask is how much does anybody need to survive on a basic level in Nigeria? This would include the cost of food, medicare, education in a public school, and inflation, and factor this to arrive at a minimum wage people can live on. Note, however, that in other climes, there is an efficient public sector with basic infrastructure, and social security fireworks that people can fall back on. So the minimum wage makes sense when you look at the various safety nets provided. In Nigeria we do not have that safety net except the family; so the minimum wage is not just for the recipient but all her dependents, through black tax.
The method of deciding on a minimum wage must be thoroughly interrogated. We have to conceptualise it in our peculiar situation and factor that into a minimum wage figure. So we have to be clear on the thought process that went into arriving at this. When estimating transportation costs, for instance, was a median fare used or the longest distance fare? How much does it cost to feed one individual a month if they mostly eat staple foods? School fees in a public school for a term, broken into months? How much to treat the most common diseases at the government hospital, and after this, add an allowance of say 10% for unpredictables. I doubt anyone survived on a minimum wage of 30,000 in 2019, not to talk of today.
6. Some employees believe that corporations have a duty to respond to the rising cost of living and adjust remuneration accordingly. What would you say to this?
I agree, but I am not a fan of just throwing money at a problem. If you think about it, as the cost of living increases, so does the cost of doing business. As an employer, I’m not able to charge my clients more, but my costs have gone up. So, yes we increase salaries but in my firm, we also evaluated how can we increase to cover these new costs. Perhaps, we can bring them back to where they were before the removal of the subsidy; reduce the in-office work days so they can save the transportation costs, and the employer saves on the cost of running the office for a few days, and the employees also have some sort of mental health balance safety from the not being in transit. So I think that employers where they can afford to – because some employers just can’t afford it – should increase salaries because it is the reasonable, prudent and fair thing to do. That said, employers have to start thinking out of the box about what to do to improve the lot of the employees. For instance, if you pay medical insurance, you’ve taken away a huge cost. You could be paying the employee a high wage and one illness will wipe out the salary, but health insurance gives comfort to both the employees and employees. Also, the employees must make strategic decisions. They can carpool and share the cost of fuel which can result in savings. So we have to think holistically about how to improve the lot of everyone without simply throwing money at the problem.
7. What do you make of the work of Soludo’s TWG?
Everything the TWG has been set up to do is what should have been done before removing the subsidy. So what is the aim of the Working Group? This was established in June, it’s two months now, what have they achieved? All Presidential candidates knew what they would like to do once in office. We all knew that the removal of subsidies was always going to create a cost-of-living crisis tsunami and could have prepared for it through a think tank. That said, I would be happy if something is done in terms of palliatives no matter how late it is. But ideally, it should have been done before now.
8. Sometime in July, President Tinubu mentioned that as of July, the nation had saved over a trillion Naira from subsidy removal, and some of this would be rechanneled as low-interest loans to small, medium and micro enterprises. Do you think this would have a discernable effect of alleviating the frustrations being experienced by the residents?
One of the biggest issues I have with Nigeria is that we always forget how to go back to the basics, and we struggle with data. Most of the data that has been captured are not as reliable as we want them to be. We often look at the urban areas. The informal sector which makes up more than 60% of the population is rarely captured. Who has the data on the small and medium enterprises? A small enterprise could be a father, mother and 4 children that have a farm in the village. All they do is produce cassava and move it to the urban areas to sell. Are they captured in the data for MSMEs? I was excited about the proposed population census last year because this would have given us a clear picture of those in the urban and rural areas and informed a strategy on how to support them.
Another question is, what is the strategy for implementation? Are you going through cooperative societies? Farmer’s associations? Microfinance banks? Are you going to put it into the creative industry? Mass transportation? Is someone going to sit down and calculate the return on investment and the impact on the entire ecosystem? It’s one thing to say it will done and quite another for people to see that it has resulted in the expected impact. These are things that should have been thought about before the subsidy removal, and implemented before or alongside the removal. If we are still thinking of what to do with 1 trillion Naira, when the administration knew it would remove the subsidy once in office, then this is a knee-jerk reaction.
9. In August, a spokesperson for the president reported that the President would like the minimum wage of N30,000 doubled. What steps do you expect President Tinubu to take to achieve this?
The President cannot by Presidential Fiat increase the minimum wage. The last minimum wage we had was in 2019 with the Minimum Wage Act. To change that the Act must be amended and is due for review every 5 years. The law is also clear that at least 6 months before the review date, there must be negotiations.
Also, Nigeria belongs to the ILO and member states are required to set up a tripartite committee when a minimum wage is set. The committee should include reps of government – federal and state, employees and employers. So if this is his intention, negotiations should be ongoing within the tripartite committee to trash out a minimum wage that will take effect in May 2024.
If he is doing anything in the meantime, it can only be awards or palliatives, but again the numbers and the impact must be worked out. And these processes must be transparent. We have a trust deficit as a nation because the social contract has been broken several times by the government and so to curate trust government must be transparent about these processes. What people want is reassurance that it is bad but that the right steps are being taken.