Labour’s Unending Clamour for Living Wage

The Organised Labour Centre led by the Nigerian Labour Congress and the Trade Union Congress has been negotiating for a living wage for Nigerian workers with the federal government. However, considering the fact that the negotiation is taking much more time than necessary, the union should reach a reasonable compromise and put the matter to rest. Adedayo Akinwale reports

For more than a year, the organised labour led by the Nigerian Labour Congress (NLC) and the Trade Union Congress (TUC) have engaged in negotiation with the federal government over a new minimum wage.

Interestingly, after one year, the organised labour is still locked in the negotiation room with the government. At the moment, it is not yet certain when an agreement would be reached in order to put the matter to rest.

However, the decision of the organised labour to demand a new living wage was because of the removal of petrol subsidy, which has led to the highest inflation in the history of the country.

THISDAY checks revealed that during President Bola Tinubu’s inaugural speech on May 29, 2023, he declared that ‘fuel subsidy is gone’. According to him, the country could no longer sustain the subsidy regime due to drying resources. 

“Subsidy can no longer justify its ever-increasing costs in the wake of drying resources. We shall instead re-channel the funds into better investment in public infrastructure, education, health care and jobs that will materially improve the lives of millions,” he had said. 

The decision to remove the subsidy, however, immediately led to a spike in the prices of the products and spiralling inflation across board. 

Justifying his decision to remove the subsidy, Tinubu said Nigeria would have gone bankrupt if his administration had not discontinued fuel subsidy payments. He admitted that though the policy came with economic pains, it was in the best interest of Nigerians. 

Initially, there was no plan — short term, medium, longer term— for palliatives to cushion the effect of subsidy removal on Nigerians not until the organised labour threatened and subsequently embarked on strike before the federal government decided to roll out measures, which are not having immediate effect.

Checks revealed that when the current administration came into office a year ago, inflation was at 22 per cent. At the moment, it stands at 33 per cent with food inflation higher than 40 per cent.

Apparently, these are not the best of times for Nigerians, as they  bear the brunt of these increases daily at markets across the country. Many families have had to cut their expenditure to fit the times.

Against this background, the organised labour demanded for a living wage in tune of  N615,000 in line with the current reality. 

However, after rounds of negotiations, the organised labour moderated to around N200,000. This was against N60,000 proposed by the federal government which the organised labour vehemently rejected.

In the thick of the negotiation, the state governments cautioned the federal government against negotiating minimum wage on its behalf with the labour union.

Some governors were of the opinion that states should be allowed to determine their minimum wage based on their financial capacity. They also demanded a review of the revenue allocation formula to enable them implement the proposed national minimum wage.

Expectedly, the labour leaders rejected the proposal to decentralise minimum wage negotiations to state governments. 

The union described the proposal as “unfriendly and anti-worker”, noting that allowing states to determine their minimum wages would be detrimental to workers’ welfare.

While organised labour is adamant about its N200,000 minimum wage demand, the state governors said that paying even the N62,000 proposed by the federal government would plunge many states into debt.

While the federal government may be ready to accept N65,000 as the new minimum wage, governors and the organised private sector were against paying as high as N60,000. They insisted that any figure above N57,000 may not be sustainable.

Recently, a Nigerian civic organisation, BudgIT, said in a report that the implementation of the proposed minimum wage was currently not feasible given the horizontal fiscal imbalance among the 36 states of the federation.

BudgIT, in its “Wage Bill of States” report, explained that though the 36 states of the federation earned N7.85 trillion in 2023, 51 per cent of the cumulative revenue went to the top eight states including: Lagos, Delta, Rivers, Akwa Ibom, Bayelsa, Oyo, Ogun and Ondo. It added that 15 percent of the amount was earned by Lagos alone. This means  that several states of the country are unable to pay the uniform minimum wage being demanded by the labour unions. 

To this end,  BudgIT recommended that each state would have to negotiate its own minimum wage based on its economic reality.

For example, last year, Kano spent nearly half of its revenue on personnel cost at 40.91 per cent, Imo 37.64 per cent and Adamawa 37.32 per cent. States’ (excluding Taraba) 2023 personnel actual (salaries, allowances and social benefits including pensions and gratuity stood at N1.94 trillion to 1.16 million workers while monthly average personnel cost per state employee stood at N4.74 billion to the same number of beneficiaries, according to BudgIT.

THISDAY investigation revealed that in 2019, when minimum wage was raised to N30,000, as at May 2022 — three years after adoption, seven states were yet to implement the minimum wage.

This was because states do not generate enough revenue internally to be able to implement the minimum wage, as well as the adjustments across all cadres that often results. Most states still depend on the monthly federal allocations to function. 

According to BudgIT, only three states – Lagos, Ogun and Akwa Ibom – generate more in internal revenue than they receive in federal allocations. 

In BudgIT’s 2023 State of States report, Lagos generates N43,386 billion in Internally Generated Revenue (IGR) per capita, more than double the figure of Rivers State in second place with N21,422 billion. As far as that measure is concerned, Rivers is closer to Zamfara (N1,191 billion) than it is to Lagos.

These wide disparities mean that any minimum wage discussion that does not consider the ability of all the 36 states to pay, will only result in a pyrrhic victory that benefits far fewer workers than first thought.

As it stands today, only  ten states can afford the proposed minimum wage of N62,000. The states are: Lagos, Edo, Delta, Akwa Ibom, Bayelsa, Cross River, Rivers, Ogun, Kano, and Kaduna.

For instance, Edo State is already paying N70,000 minimum wage to workers in the state, which commenced in April. This is an example of a state government looking at its finances and arriving at a proactive solution to address the cost-of-living crisis. 

Therefore, it won’t be out of place for the organised labour to focus on a sustainable minimum wage that all states can pay.

Failure to do this will lead to the federal government giving budget support to states who cannot afford the new wage. When that budget support runs out, default will become the norm and workers in many states will go back to square one.

It should be noted that the minimum wage adjustment is contentious not because of the wage itself, but because of the consequential adjustment that results. The new wage applies to civil servants on Grade levels 1 to 6, but Grades 7 to 17 also get an adjustment as well, leading to a significant effect on the personnel costs of the states. 

At the last increment, civil servants from Grades 7-17 got increases ranging from 10-23 per cent.

Under a scenario of a N70,000 minimum wage, the wage bill of states is expected to increase by 70 per cent on average, a huge jump. In a N150,000 scenario which will be more appealing to Labour, that wage bill will go up three and a half times or 250 per cent.

The reality is that a relatively small percentage of people get a significant portion of the state’s revenues as salaries and pensions, leaving little for things like infrastructure, education and healthcare.

This shows that an increase in the minimum wage would ensure that a fraction of the population gets an even larger chunk of revenues at state and federal levels. Recurrent expenditure — of which wages are a central component — is already sky-high. 

As of 2022, recurrent expenditure as a percentage of total revenue averages 89 percent for the 36 states, leaving little for important capital expenditure that is necessary to drive governance outcomes.

A new minimum wage with the current fiscal reality would only worsen this picture. It will mean that states exist to pay salaries and pensions, with little fiscal space for anything else.

Aside from this, remittances from the NNPC have dried up because petrol subsidy is back. This means that the states have less funds to satisfy the minimum wage demands.

The current petrol subsidy is around N500 per liter ex-depot, one of the biggest differentials in the subsidy scheme’s history. Sustaining it comes with costs at every level.

Above all, despite calling on the organised  labour to be reasonable in its demands, political office holders should cut their flamboyant lifestyles and desist from making unreasonable appointments.

A situation where governors appoint more than 200 aides, all earning outrageous salaries and allowances, as well as the ‘jumbo’ salaries of legislators, and other appointees of government should be reduced dramatically.