Minimum wage in face of falling oil prices

The tripartite committee on minimum wage headed by former Head of Service Ama Pepple has since submitted its report to President Muhammadu Buhari. The committee proposed N30,000 as minimum wage, which many governors have said they cannot pay. What becomes of this proposal in the face of falling oil prices? OKWY IROEGBU-CHIKEZIE and TOBA AGBOOLA report.

THE falling oil prices seem to have added a twist to the proposed N30,000 minimum wage.  There are fears that the sharp fall in crude prices from $88 per barrel a month ago to $59.96 per barrel as at November 29 may impinge on negotiations.

The development poses a major risk to the Federal Government’s economic projections for 2019 and it may also hurt labour’s agitations.  Many governors have been citing the nation’s fragile fiscal position for inability to pay the proposed wage. According to the governors, their states won’t be able to meet other obligations, including provision of infrastructure and healthcare, if they agree to pay N30, 000. To them, the way out is either to review the revenue sharing formula or sack workers.

But, the governors’ position has not gone down well with the organised labour, which is  threatening  to shut down any state that refuses to pay. The workers insist that there will  only be industrial harmony when the states accept the proposed wage. They wonder why President Muhammadu Buhari has not sent a bill to the National Assembly after receiving the report on the minimum wage from the tripartite committee headed by former Head of Service Ama Pepple.

Nigeria Labour Congress (NLC) President  Ayuba Wabba said workers would use  all they have to fight for their due. He called on them to vote out any governor who is not ready to pay the proposed wage. He said the options being advanced by the governors were no options at all.  He implored the governors to reduce their spending, noting that the consequences of  retrenchment are too grievous for any political office holder truly elected by the people to contemplate.

Wabba said : “We hereby reiterate our directive to Nigerian workers to vote out any politician or political party that refuses to pay the proposed national minimum wage of N30, 000. They are not doing us any favour; it is our right with the backing of the law. If they say they don’t have money, they should reduce the cost of governance. They should stop the trillions of naira they are stealing.”

He reiterated that by law, every worker is entitled to salary or wage increment after a certain period of time so, the governors are not doing workers any favour. Some people are saying  the wage will lead to inflation.

“When those in government are stealing trillions of naira, nobody talks about inflation. It is now that we are talking of just N30, 000 that they are talking about inflation. It is not an excuse and there is no going back”.

He went on: “Few political office holders are bent on enslaving Nigerian workers with peanuts mislabelled as salaries. We urge such elected public officials to subject their humongous salaries and allowances, reputed to be among the highest in the world, to public perusal pro rata with the minimum wage they want to force down the throats of Nigerian workers.”

United Labour Congress (ULC) President Joe Ajaero said the governors and National Assembly members have no reason, whatsoever, to delay the implementation of the proposed wage. He wondered how the lawmakers would oppose the wage when a senator earns  almost N14 million monthly. Ajaero said labour would seek explanation on the millions of naira the governors get as security votes, while their salaries would be scrutinised. “It is like half of the job has been done with the level of consciousness and the explanation we gave.We have given enough explanation to the masses and unanimously, nobody has denied that N30, 000 is even enough. So, I am not expecting the National Assembly to act to the contrary. We will engage the states at the point of implementation. I think the kind of cooperation we showed in achieving this N30, 000 should be shown in the states.

“The national unions and centres should not leave the battle in the states to the state councils. It would be necessary without exception for all the unions and centres to descend on any state that will want to enslave workers through the payment of a minimum wage less than N30, 000,” Ajaero said.

A twist to the tale Despite these tough talks, developments in the international oil market, which are outside the control of the governors and labour may have added a new dimension to the controversy.

Oil prices, which recently started its gradual rebound, hitting an all-time high of $88 per barrel about a month ago, suddenly started a downward trend. According to the Organisation of Petroleum Exporting Countries (OPEC), oil prices trended down at $59.96 per barrel on November 29,  with analysts describing the slump as the equivalent of a tax hike and  cut in oil exporting and importing economics.

To Lagos Chamber of Commerce & Industry (LCCI) Director-General (DG) Muda Yusuf, the price slump is bad news for the economy, which remains fragile with a gross domestic product (GDP) growth of less than two per cent.

Yusuf said noted that the figure is below the 2019-2021 Medium-Term Expenditure Framework (MTEF) benchmark of $60 per barrel.

He said the declining  oil price poses a major risk to the  government’s economic projections for 2019, adding that it will  impact adversely on the MTEF if the trend continues.

The DG, in a statement obtained by The Nation,  said: “GDP in most of the Gulf economies and a slowdown of 1.5-2 per cent of GDP in Russia and Nigeria on an annualised basis is not good news for Nigerian economy, which remains fragile with GDP growth of less than two per cent.

“The domestic foreign exchange (forex) market is already responding to the recent sharp fall in oil prices. For instance, the local currency has dropped to N370 per dollar in the parallel market, from N363 per dollar that it traded for a better part of 2018. There are fears that the sharp fall in oil prices, if sustained, could lead to a shortage of the US$”.

Yusuf said as capital flow reversals intensify, as oil price weakens, and as foreign reserves come under pressure, there are worries that the capacity of the Central Bank of Nigeria (CBN) to sustain the current levels of intervention in the foreign exchange market will be tested, as reserves currently stand at $42 billion, down from $48 billion five months ago.

Giving more insights on the implications of the downward trend, the He said the improvement in liquidity and relative stability in the forex market witnessed by businesses in 2018 would come under threats due to declining receipts from oil.

This, he said, would have profound impact on the prices of imported goods and services leading to likely increase in the rate of inflation, which will adversely affect fiscal operations and further threaten the ongoing discussion around the minimum wage.

According to Yusuf, despite sustained efforts by government to improve the business environment, foreign direct investment (FDI) inflows remain stagnated. The capital account faces significant uncertainty, as external portfolio investors exercise further caution due to developments in the global financial markets and the forthcoming general elections.

Given these challenging economic conditions, he said, key policy reforms would be imperative to support and sustain the stability of the macro-economic environment.

These are, among others, a foreign exchange management framework that reflects the market fundamentals, the acceleration of the economic diversification agenda, normalisation of Lagos ports environment,  oil and gas sector reform, especially the Petroleum Industry Bill (PIB).

He called for a better debt management strategy to ease the burden of debt service, reduction in the cost of governance at all levels; improvements in the domestic revenue to reduce volatilities in government revenues.

To labour, the proposed wage will not have any negative impact on the economy. Quoting the CBN,  Wabba said the implementation of the wage would stabilise the economy.

According to him, the CBN Governor Godwin Emefiele had noted that other countries, such as South Africa, recently approved a new minimum wage for its citizens despite the recession in that country.

“The CBN recently made us to understand that the implementation of N30, 000 minimum wage will strengthen the economy by empowering and putting resources in the hands of the working class,” Wabba said.

He said the workers were getting impatient, stressing that they expected government to communicate to them and at least, give them a timeline by now. But, in the face of the falling oil prices, how will labour now marshal its argument?