Civil servants waking up on Wednesday morning will have been surprised at a new term being flung around in news media and accredited to the Vice President, Yemi Osinbajo. The term is ‘selective minimum wage increase’. According to a transcript of Osinbajo’s speech during a session titled, ‘Conversation with the Vice-President’ at the 2017 Nigerian Bar Association National Conference made available by his Senior Special Assistant on Media and Publicity, Mr. Laolu Akande, this term may be the new approach of the Federal Government to the constant clamor of better remuneration for civil servants. What though is selective minimum wage increase?
What selective minimum wage increase is
The norm in Nigeria is a situation whereby whenever the Federal Government decides on a minimum wage increases as well as payment scales, the increase applies to all workers across all Federal Government parastastals, agencies and bodies, regardless of how efficient they are. However, with selective minimum wage increase, the Federal Government is considering increasing workers’ remuneration package, especially bonuses of certain government agencies, instead of increasing wages across board. Thus, while workers in some agencies will be fortunate to receive increments, others will no be so fortunate.
Why this selective increase?
As many people will have already guessed, the dwindling revenue of the Federal Government is the main reason behind this new development, a fact that the Vice President did not hide. The stated that any increase in salaries must be matched by increase in revenues or else the FG may find itself unable to pay regularly. He explained that the 70:30 current expenditure structure in favor of recurrent expenses such as salaries was not sustainable, and could therefore not be worsened.
To put this into proper perspective, employees of government agencies that have consistently been efficient, met its revenue targets and declared multi year surpluses are not rewarded for their efforts via an increase in salary or minimum wage. Because of the current minimum wage policy, they are often bundled with agencies that are not efficient and as such do not get to earn wage increases. This negates the very essence of healthy competition among government agencies.
Thus the government is saying, we will only increase the minimum wage of agencies that meet revenue targets and post surpluses.
Issues around selective increase
The first issue around this selective increase is how beneficiary ministries and parastatals will be selected. Osinbajo already gave a hint at the FG’s thought pattern in this matter. “I think that what we are probably going to end up doing is what we have done with some of the parastatals; in other words, identifying certain government services that must be remunerated differently in order to increase efficiency. One of the revenue generating agencies, for instance, is the Federal Inland Revenue Service.” he said.
However, looking at efficiency in terms of revenue output could be detrimental to the society at large. For example, in what monetary terms can we quantify the work done in the health sector? Frankly speaking, all government bodies will lay claim to the fact that they can be more efficient if adequately funded. This leaves a conundrum for FG to resolve when selecting beneficiaries.
Another very likely outcome in this scenario is an industrial action by workers of agencies that do not make the beneficiary list. These workers will claim that increasing the remuneration of their peers in other agencies while leaving them out is simply unfair and unacceptable. A related result may be the weakening of the country’s labor body, the Nigerian Labor Congress (NLC) as parties on either side seek their respective advantages.
Whatever he case, the concept of selective increase is definitely still new to Nigerians and the FG itself. If it is to work, there are several considerations that need to be taken care of. Or else, the FG may face an implosion of greater financial loss than even continuing the broad minimum wage increase presently in place.
Oil & Gas: DPR announces 2020 marginal field licensing round
While we see the need for these asset sales to generate much-needed revenue for the Federal Government, we are concerned that a bidding process under the current environment will be fraught with difficulties.
The Department of Petroleum Resources (DPR) on Monday announced the commencement of the 2020 marginal field bid round. This bid round is coming 18 years after the last bid round in 2002 and is open to indigenous oil & gas companies and investors interested in participating in the exploration and production business in Nigeria. Marginal fields are known oil or gas discoveries on an IOC-owned block and where there has been no activity in at least the last 10 years. With the agreement of the IOC, the DPR carves-out a piece of land surrounding the discovery and this becomes a Marginal field. On this occasion, there are 57 marginal fields available for bidding, including 11 fields revoked by the DPR.
The exercise would be conducted electronically and would include expression of interest/registration, pre-qualification, technical and commercial bid submission, and bid evaluation. The process is expected to be completed in six months. The first bid round that was formally organised by the FGN began in 2001 and was concluded in 2003. At the end of the bid round, 24 licenses were awarded to 31 indigenous companies. Another bid round was proposed in 2013 with a lot of preparation and guidelines released. Unfortunately, it never held.
Flagging off this bid round under the current economic situation points to the government’s urgent need for funds. According to the DPR guidelines, interested bidders will be required to pay a total of US$115,000 and N5m in non-refundable statutory fees comprising an application fee of N2 million per field, Bid Processing Fee of N3million per field, Data Prying fee of $15,000 per field, Data Leasing fee of $25,000 per field, Competent Persons Report of $50,000 and $25,000 for Fields Specific Report.
While we see the need for these asset sales to generate much-needed revenue for the Federal Government, we are concerned that a bidding process under the current environment will be fraught with difficulties. Firstly, the current fluctuations in oil prices may mean that intending investors may base their valuations on pricing models that can become unrealistic in the near term and then are unable to develop such fields acquired. Many local companies have been hard hit by the effects of covid -19 and the ensuing significant decline in oil prices, hence they may not have sufficient cash flows nor be able to raise needed funds from both local and international banks.
In addition, we see regulatory difficulties hampering interest in the fields. For example, the lack of passage of the long awaited Petroleum Industry Bill (PIB) remains a significant deter. Furthermore, the recently passed Deep Offshore and Inland Basis Production Sharing Contracts (Amendment) Act (DOA) has made investments in Nigeria oil & gas assets less attractive. These negative regulatory sentiments has led to many IOCs decreasing investments in the Nigerian oil & gas industry. Overall, we think this may result in many of the fields ending up in the hands of individuals with cash but with no industry expertise. Again, with the current economic crunch, many of the fields may be sold significantly below their fair value.
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May Output Cut: OPEC+ records 86% compliance as Nigeria beats expectation
Some of the non-OPEC member countries recorded less than impressive compliance rates. Kazakhstan, Brunei, and South Sudan recorded 47%, 22%, and 13% compliance respectively.
As OPEC+ pushes for an extension of the current output cut of 9.7 million barrels beyond June, a new report suggests that the alliance may have achieved a fairly impressive level of compliance in May, the first month of the biggest global effort to curtail oil production.
Energy Intelligence estimates that the alliance achieved an 86% compliance rate (in May) with the production cut of 9.7 million barrels per day that was agreed for both May and June. This contradicts the 74% compliance rate that was earlier reported by a Reuters survey.
The massive output cut is intended to counter the dramatic slump in global oil prices which was triggered by the coronavirus pandemic and supply glut. The output cut has since helped to move up prices well above the April lows.
Meanwhile, some West African OPEC members fell short of their pledged output cuts, with Angola and Congo recording compliance rates of 54% and 20%, respectively. Gabon’s May output actually exceeded its volumes in October 2018, which was chosen as the baseline month against which the cuts are measured.
However, the compliance by Nigeria for the month of May was better than the expected 83% after its output fell by around 260,000 barrels per day between April and May. This is, however, at variance with 52% compliance that was disclosed by Nigeria’s Minister of State for Petroleum, Timipre Sylva.
The OPEC+ alliance’s overall compliance rate was lifted by the performances from four of its top five producers, which were close to 100%. Among these heavyweights, only Iraq lagged well behind with a compliance level of less than 50%.
— Amena Bakr (@Amena__Bakr) June 3, 2020
Russia failed to live up to its obligations under previous OPEC+ deal. But after removing condensate, which is not counted as part of its current quota, its oil output is 8.6 million barrels per day in the month of May; indicating an impressive 96% compliance rate.
Compliance is expected to improve in the month of June.
COVID-19 palliative: Sanwo-Olu concludes Homegrown School Feeding Programme
The homegrown school feeding programme, was targeted at providing food packages for 37,589 households of pupils in Public Primary Schools years 1-3
The modified homegrown school feeding programme, launched on May 21, as part of palliatives offered by the Lagos state government to cushion the economic impact of the COVID-19 pandemic, has been concluded.
The programme, which basically modified the already existing school feeding programme, was targeted at providing food packages for 37,589 households of pupils in Public Primary Schools years 1-3.
According to an official tweet from the Lagos state government, the programme was concluded on Tuesday, June 2, 2020.
The Modified Homegrown School Feeding Programme, which was flagged off in Lagos on the 21st of May, 2020 and targeted at 37,589 households of pupils in Public Primary Schools years 1-3, has been concluded@jidesanwoolu @lagossubeb#LASG #ForAGreaterLagos #CovidLASG pic.twitter.com/lWrQscf6NW
— The Lagos State Govt (@followlasg) June 2, 2020
The Executive Chairman of Lagos State Universal Basic Education Board, LASUBEB, Mr. Wahab Alawiye-King, noted that the distribution of the packages to the beneficiary households took off on May 21, and was spread across 202 centres across the 20 Local Government Education Authorities in the State.
Items contained in the Take-home rations:
Each beneficiary of the packages received a take-home ration made up of “5kg Bag of Rice; 5kg Bag of Beans; 500 ml Vegetable Oil; 750ml Palm Oil; 500mg Salt; 15 pieces of eggs and 140gm Tomato Paste,” which is expected to assist the parents and guardians feed the children as they remain at home during the prolonged holiday.
He explained that each beneficiary received a Take-Home Ration made up of 5kg Bag of Rice; 5kg Bag of Beans; 500 ml Vegetable Oil; 750ml Palm Oil; 500mg Salt; 15 pieces of eggs and 140gm Tomato Paste@jidesanwoolu @lagossubeb#LASG #ForAGreaterLagos #CovidLASG
— The Lagos State Govt (@followlasg) June 2, 2020
What you should know:
The Federal government also introduced a modified homegrown school feeding programme on May 15 to be coordinated by the Honourable Minister of Humanitarian Affairs, Disaster Management and Social Development, Sadiya Umar Farouq.
Farouq noted during one of the Presidential Task Force media briefings that the distribution of Take-Home Rations (THR) to the households of the children on the programme as a feasible method, after exploring several options of reaching children in vulnerable households.
Each Take-Home Ration is said to be worth N4,200, although the Minister has not released full details of the programme.
According to the World Food programme, there are 17 countries currently distributing Take-Home rations to school children. In Liberia, Take Home Rations have been distributed since 2019.