The signing of the New Minimum Wage Bill into law which stipulates N70,000 as the new threshold for the lowest-paid workers in both the public and private sectors is a win-win development for the government and organised labour. However, coming at a period of a serious revenue challenge to the government, especially at the states' level, and amidst strident complaints by the organised private sector, it means there is still more to be done to lay the matter to rest, writes Festus Akanbi
The federal government may have scored a good point by resolving the crisis over the new minimum wage as President Bola Tinubu signed the minimum wage bill into law last week, ending months of deliberations between government authorities, labour unions, and the private sector.
The National Assembly had earlier passed the New Minimum Wage Bill ahead of the current nationwide protest dubbed "10 days of rage," to address the country's soaring cost of living and economic hardship.
New Minimum Wage
After several months of back and forth, President Bola Tinubu and the two major labour unions, the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC) came to a compromise two weeks ago, pegging the new minimum wage at N70,000. The president's approval followed wide consultative meetings with governors, the organised private sector, and the labour bureaucrats.
Labour, however, conceded by accepting the new wage increase when Tinubu promised to ensure that wages would be reviewed every three years, rather than the once in five-year-old order.
And in what looked like a stamp of support, the Senate and House of Representatives swiftly passed the National Minimum Wage Act 2019 (Amendment Bill).
The bill, which went through second and third readings in both legislative chambers of the National Assembly within minutes of being transmitted by President Bola Tinubu, was approved separately by the Senate and the House of Representatives on Tuesday.
Shortly after President Bola Tinubu cancelled petrol subsidies in May 2023 and prompted the CBN to float the naira, the urgency of another review became apparent. Initially, labour proposed N615,000 monthly and later settled at N250,000. The tripartite committee of the government (federal and state), labour, and the organised private sector pushed N62,000 after lengthy negotiations and a two-day labour strike.
Analysts pointed out that despite the steps taken so far, only a stable economy will make wages sustainable and meaningful.
By law, there should be a wage review every five years. The last one was in 2019 under President Muhammadu Buhari. That review hiked it to N30,000 from the N18,000 set under President Goodluck Jonathan. These reviews generated rancour and default.
Pyrrhic Victory
Although the labour leaders have launched into a celebration of the 133 per cent increase, industry analysts described the victory as pyrrhic, given the fears expressed by some state governments over their lack of the capacity to pay the new minimum wage.
Though some state governments indicated they would pay the new wage, the reality is that many states are not financially viable with indications that some could go bankrupt when they start paying the new wage. States owe backlogs after every review. Despite the windfall from the removal of subsidies, the states need to cut their coat according to their cloth to be able to pay and still fund capex.
As Organised Private Sector Awaits FG's Bailout
The organised private sector which was part of the negotiation is not comfortable yet as it earnestly awaits the promise of President Tinubu to assist the private sector to meet the new minimum wage threshold.
In his remark, the Director-general of the Manufacturers Association of Nigeria (MAN), Mr. Segun Ajayi-Kadir, said the private sector will be looking unto the president to deliver on his promise to bail them out. "On the side of the private sector, we should hold on to the promise of Mr. President that the federal government will find a way to assist us in paying the minimum wage agreed with Labour. In this regard, I would assume that reference would be made to the demands made by the Organised Private Sector at the concluding stage of the tripartite negotiations.
"We had intimated to the committee the challenges confronting businesses in the private sector and that there was the need to ameliorate those challenges to improve the capacity of our members to pay the minimum wage that we offered. We maintained that those binding constraints may constitute impediments to the full compliance of our members when the minimum wage is signed into law.
"So, the assumption is that Mr. President will give expedited consideration to those challenges and take necessary steps to address them. This will go a long way in onboarding the private sector in the new agreement on the minimum wage."
One issue on its list of demands is the call to exempt SMEs and MSMEs from compliance given their incapacity and prevailing operational challenges.
The MAN chief also calls for the CBN redemption of all validly transacted outstanding forex forwards for companies in the productive sector.
Others include the reversal of the increase in electricity tariffs or only a 100% increase in electricity tariff for a minimum of 20 hours of supply, duty exemption on imported conversion kits and government subsidy on procurement of same, and a freeze on the introduction of new taxes on businesses for the next five years, among others.
Aligning himself with the position of the organised private sector, Founder and Chief Executive of the Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf explained that the reality is that the current operating environment for most businesses is extremely challenging, adding that this is more pronounced with the real sector and small businesses.
According to him, "There are macroeconomic headwinds, there are structural impediments, there is the challenge of soaring energy costs, especially the hike in electricity tariff; there are multidimensional supply chain challenges, among others. The profitability and sustainability of many businesses are at risk. In truth, the plight of workers amid the cost of living challenges is a cause for concern.
"But the difficult operating environment or businesses is equalling very troubling. These two considerations matter in this conversation and require some delicate balancing. It is only a business that is thriving that can retain jobs or create new jobs. Or even pay taxes. It is a tricky situation."
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Analysts warned that the wage increase may trigger upward price adjustments in the market, thereby compounding the inflationary situation in the country.
A lawyer, Mr. Bayo Akinlade, the Convener of the Fight Against Corruption in the Judiciary and former NBA chairman of the Ikorodu branch was quoted as saying "But increasing salary would only just provoke other market forces, you know, to justify the decision to increase goods and services. So we need some form of standard price structure in Nigeria. Otherwise, if you increase somebody's salary, then the cost of goods and services will automatically go up in equal value. So that's the problem."
Speaking further on the issue, he said, "I don't think our issue is increasing salaries. I think our issue is in market regulation and consistency in the market structure. We do not have any discipline in Nigeria in terms of what our price is for certain goods and services. So unless we have some structure and stability in our pricing structure and a regulatory system that works in such a way that people cannot arbitrarily increase the prices of any goods and services, then that is where the beginning of getting it right will start."
One hopes the government will be able to avert the planned protest and settle down to clear all the grey areas in the new minimum wage bill so that the economy can bounce back in the overall interest of the country.
