The call from Joe Ajaero, the President of the Nigerian Labour Congress (NLC), for the government to review workers’ monthly wages is something a responsive government should consider, even without being prompted by the threat of strike actions, particularly given the over 100% year-on-year inflation rate in the country.
However, for the president of the labour union to advocate for a minimum wage of N1 million solely based on a $1 to N1,400 exchange rate, it suggests that he may not genuinely prioritize the interests of the union members. His argument appears to lack basic economic understanding.
In an interview on Arise TV with Dr Reuben Abati, Ajaero said:
“This N1 million may be relevant if the value of the Nigerian naira continues to depreciate; if the inflation continues unchecked because the demand of labour is equally dependent on what is happening in the society.
“You will remember that by the time we were contemplating N200,000 (as minimum wage), the exchange rate was about N800/N900 (to a dollar). As we talk today, the exchange rate is about N1,400 or even more.”
Even more than 50 percent of the states that agreed to pay the N30,000 minimum wage, almost five years after former President Muhammadu Buhari signed the new minimum wage bill into law on April 19, 2019, are yet to implement it, according to BudgIT, a nonprofit organization that monitors government policies and projects.
Some states that have begun paying the N30,000 minimum wage still owe their workers several months’ worth of salaries.
In 2023, the organized labour union demanded N200,000 as the lowest monthly salary after the administration of Bola Tinubu announced the removal of fuel subsidy. By January 2024, the union’s boss was pushing for N400,000, and now, they are demanding one million naira.
They deserve an upward review considering the unimaginable rate at which prices of goods have gone up between May 29, 2023 to present.
For instance, a crate of eggs at the time Tinubu took office was less than N1,000; now, it’s N3,600. The price of rice per measurement was between N750 and N800; currently, it’s N2,300. One kilogram of gas was between N350 and N400; now, it’s N1,400 per kilogram. Additionally, the price of premium motor spirit popularly called petroleum has surged to N650 per litre, compared to N175 a day before he took office.
It’s understandable that labor wants to adjust and keep pace with the country’s inflation rate. But using the prevailing exchange rate as a minimum benchmark is illogical, especially when the N30k minimum wage has not been fully implemented, and the government has disregarded the N200k proposal. This demonstrates that the Ajaero-led NLC is advocating for the wrong argument.
It is humane that he wants workers to have more disposable income, boost spending, improve their standard of living, afford basic necessities, and potentially save more money.
Sadly, the best the NLC president could come up with this time is to use the volatile index like USD/Naira foreign exchange. The rate at the Nigerian Foreign Exchange Market fluctuates; would the labor union agree to a pay cut if the Naira appreciates against the US Dollar?
Would the government take the labor union seriously when it has proposed a minimum wage increase three times without any being implemented, especially when its argument is based on the absurd exchange rate?
What about the negative impacts of increasing the national minimum wage from N30,000 to N1 million?
Nigerian markets are notorious for reacting to labour demands; each time the NLC makes demands, which are not even honoured by the government, market women increase the prices of their goods. Ajaero is calling for an “acute” hyperinflation rather than welfare of his members.
We support an increase in labour wages, but raising it to a million naira could lead to higher production costs for businesses, potentially resulting in price increases for goods and services. This could exacerbate Nigeria’s inflationary pressures.
This may lead to job losses because such a ridiculously high minimum wage will force employers to respond to higher labour costs by reducing their workforce, cutting hours, or automating processes, which could result in increased unemployment.
If the labour union is serious about achieving results from negotiations with the government, it should engage economists and negotiation experts to guide the arguments presented at the negotiation table.
What the Joe Ajaero-led NLC should be asking from the government during this crucial economic difficulty is to address the root causes of inflation, food shortages and cost of production, which is primarily insecurity and erratic government policies.