Nigeria: Experts Identify Strengths, Pitfalls for N30,000 Minimum Wage

16 November 2018

The proposed N30,000 minimum wage being considered by the Federal Government may have its obvious highs and lows in shaping the immediate economic.

Daily Trust reports that governors at a meeting on Wednesday picked holes in the increment arguing that paying the amount could lead to the sack of civil servants.

However, some experts have provided their viewpoints on this.

The Managing Partner, Trispeed Consulting, Mr. Rislanudeen Muhammad, in a chat with our reporter on the issue, said, "Definitely the present minimum wage is not realistic and is out of tune with any economic reality."

Mr. Muhammad said, "The continued use of the present minimum wage is like adopting social service payment and not wages, which is a price for labour."

He also said the proposed minimum wage should not necessarily lead to retrenchment of government workers.

He said there is "no need for any retrenchment provided the workers are optimally utilised."

He noted that the private sector had already been paying well above the minimum wage and that if government refused to pay, labour might go on strike that would destabilise the economy even more.

Some public commentators said the pay raise would come but that it would still be wipped away almost immediately by other economic agents like traders, service providers and landlords who would naturally increase prices of their products and services.

This is because, in the other times when public pay raise was achieved, it left high inflation for the CBN to worry about.

Thus, speaking in monetary policy terms and with the stand of the CBN that unless inflation rate is at least 200 basis point below the MPR, benchmark interest rate will not drop below 14 per cent. So manufacturers and others who need credit will continue to borrow at high interest rates to the detriment of real sector growth.

A Professor of Finance at the University of Uyo, Leo Ukpong, said Nigeria would record a rapid rise in inflation rate if the Federal Government implements N30, 000 as the country's minimum wage.

Speaking to Daily Trust yesterday, Prof. Ukpong said a mere announcement of the implementation would push up inflation rate.

The don said high inflation rate would be unavoidable as government's deliberate monetary policies would not stop the rise in inflation if the proposed minimum wage is implemented.

He said government should have resisted the push to hike the minimum wage and instead invested the money in building factories in communities that would produce essential commodities that would push down prices in markets and give workers more value for their current pay.

He said once the new minimum wage is announced, petty traders, transporters and primary commodity producers would jerk up their prices.

He added that while prices of bigger items like cars and houses might remain unchanged in the short run, small spending would rise, and that based on historical data, a 30 per cent rise in minimum wage would lead to over 100 per cent rise in inflation.

On the contrary, the expert said it would be better if the Federal Government deliberately initiates policies and programme that would lead to 15 per cent drop in prices of commodities in markets than to increase wages by 50 per cent.

Meanwhile, the Abuja Chamber of Commerce and Industry (ACCI) has expressed support for an increase in the nation's minimum wage to N30, 000.

Speaking to Daily Trust on the position of private employers in Abuja, the Director General of ACCI, Tonia Shoyele, said the minimum wage was already due for upward review considering the high inflation rate in the country.

Commenting on the ability of private employers to pay if the minimum wage is increased, Shoyele said the minimum wage in ACCI was already above the current minimum wage in the country and that this was an indication that private employers could pay a minimum wage that was competitive in the private sector.

She further said an increase in minimum wage would impact the private sector positively as most of the monies paid to government workers would trickle down to the private sector.

She called on all parties involved to intensify effort to arrive at a minimum wage that will enable workers eke out decent living despite high inflation.

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