EDITORIAL: Resolving the minimum wage debacle and fiscal headwinds

There is no agreement thus far on a new national minimum wage, barely a month after a Tripartite Committee set up for it began to deliberate seriously on the matter. It raises a spectre of uncertainty. This is further worsened by the governors’ rejection of the Federal Government’s N62,000 offer, amid the 7 June meeting of the committee with organised labour, which was deadlocked, yet again.

Such dissonance is undoubtedly unsettling. It is also distressing that the authorities in Abuja have remained silent over it. An insipid assurance by President Bola Tinubu that an executive bill will be forwarded to the National Assembly on the new national minimum wage without a consensual amount, does not soothe the nerves of either the organised labour or the governors. From its high horse, labour finally came down to N250,000 from its original N615,000 demand. On the contrary, the Federal Government had moved from N48,000 to N54,000, then N58,000, and later N60,000, until it tacked at N62,000.

The argument of the governors is that even N60,000 as a minimum wage is not sustainable and therefore will not fly, citing the lean financial resources of their states, competing demands and the indebtedness of many of them. “It will simply mean that many states will spend all their allocations on just paying salaries, with nothing left for development purposes,” the NGF emphasised in its media statement. Some have argued that if a wage figure is forced on states, over 40 per cent of the workforce in many of them will be laid off.

One of the governors, Chukwuma Soludo, a former governor of Central Bank of Nigeria (CBN), who has a full grasp of the issues involved, in a subtle dissent at a recent public forum, said he pitied the President if he approved a minimum wage that was not sustainable. When the consequences begin to cascade, he stressed, “it will all be on his head.” Clearly, some states in the country still struggle to pay the two previous national minimum wages of N18,000 and N30,000.

What then should be the win-win pact for all the parties involved with the extant complex variables is the conundrum. Indeed, there is no easy solution. However, blame nobody but the president, with his dual policies of fuel subsidy removal on 29 May, 2023, which the government however still pays, and a badly managed liberalisation of the foreign exchange market. Inflationary pressures have defied CBN’s monetary policy measures to tame them. The National Bureau of Statistics’ (NBS) economic indices for May that showed food inflation at 40.66 per cent, from its April rate of 40.03 per cent, and headline inflation, which ramped up from 33.69 per cent to 33.95 per cent, are ominous. They will get worse when the new wage order becomes operational.

CBN Headquarters in Abuja

The bitter truth is: whatever figure is agreed to has consequences. This means that both the state and federal governments have to fashion out good governance templates to cope with the inherent fiscal challenges or realities they are facing. It would not be easy either for the organised private sector, with many companies folding up as the operating environment becomes more prohibitive. For the public sector, minimum wage hikes always transcend what they are made to appear as. In fact, this is an anticipated general wage overhaul, involving workers on levels 1 to 17, with huge financial implications to follow.

After barely three months in office, the President, in no uncertain terms, decried the humongous size of the monthly federal payroll, as the need to implement the 2012 Steven Orosanye report on right-sizing the workforce was evoked. That report, which was forwarded to the National Assembly for legislative action, has not gained any traction. A bureaucracy in which 24 drivers are attached to a pool of five vehicles, as being alleged to exist in Abuja, carries many deadwood. It deserves to be re-jigged for efficient service delivery.

Paying Nigerian workers living wages or salaries wouldn’t have been too difficult, if the authorities had been responsible and responsive to the imperatives of holding public office and managing the economy well. It is not cheery at all that the Nigerian state cannot enforce its writ or law. This has gravely undermined the public treasury and delivery of infrastructure and social services to the people. No area of our national life has this been so criminally manifest than in the failure to collect oil and gas revenues from international oil companies making billions of dollars annually here.

A recent audit report of the Nigeria Extractive Industry and Transparency Initiative (NIETI) shows that a staggering sum of $1.4 billion in gas royalties and flaring penalties for 2021 remain uncollected. Details of these anomalies for 2022 and 2023 are not yet known, amid the country’s borrowing binge from the World Bank and other international creditors.

Nigeria’s debt, as of 31 December, 2023, was N87.3 trillion. The first quarter of 2024 borrowings, according to the Debt Management Office (DMO) data released last week, has spiked to N121.67 trillion. And, an additional $2.5 billion has been secured from the World Bank. Repaying these debt obligations will at some point hamper the welfare of Nigerians generally, if the President, who is also the Minister of Petroleum Resources, closes his ears to the recovery of stolen billions of dollars of oil revenue, as his predecessor, Muhammadu Buhari, did. Some international oil companies indulge in crude oil theft with utter disregard for our laws, such that $17 billion worth of crude was stolen between 2011 and 2014. The parliament investigated it and a former Attorney-General of the Federation, Abubakar Malami, attested to it. There are many more of such acts.

World Bank

These leakages and misplacement of fiscal priorities, typified in the recently inaugurated N21 billion official quarters of the Vice-President, amidst mass hunger and poverty in the land; the $12 billion official admission of annual loss of solid minerals revenue to rogue operators; and the ostentatious lifestyle of public officials, if not addressed will conflate with inflation to erode whatever gains workers might benefit from the wage review. President Tinubu has spent a year in office without the refineries and Compressed Natural Gas (CNG) buses functioning, as he had promised. There is a limit to propaganda as a tool of governance. Getting these facilities to work will add value to the minimum wage and reduce suffering in the land.

States can lessen their financial burdens by aggressively weaning their payrolls of ghost workers. Dealing with a bloated workforce to remove personnel without any work schedule, office space or tables is inevitable now. It is unthinkable that in one of the South-west states, a commissioner recently appointed 273 advisers. Some governors have about 1,000 aides – an overreach in imprudence, which the administrations of Ben Ayade and Isah Yuguda of Cross River and Bauchi states, respectively, were notorious for.

An overhaul of the internally generated revenue mechanism is crucial in the emergent fiscal regime with the new minimum wage, to ramp up the revenue base. Many of the states have suspect revenue accounting or returns systems that undermine their treasuries, which should not be condoned. If all the states can increase their IGR by 100 per cent the way Governor Siminalayi Fubara of Rivers State has done, under one year in office, from N13 billion monthly to N27 billion, it would boost their fiscal profiles and mitigate the challenges to be posed by an enlarged payroll.

READ ALSO: Minimum Wage: Why FG, governors must agree with Labour & NUJ

The key issue is that henceforth, all levels of government must be held to account for their improved monthly revenue allocations from the Federation Accounts Allocation Committee (FAAC), since subsidy was partially removed. The country has had enough of ex-governors being prosecuted over N100 billion or more, amassed while in office.

It can’t be said enough, cutting costs by reducing the number of vehicles in the convoy of public officers, avoiding white elephants and employing best practices in public procurement are unavoidable strategies in withstanding the headwinds inexorably linked with a progressively mismanaged economy such as ours.