According to local reports, the newly elected President of the Trade Union Congress (TUC), Quadri Olaleye, disclosed that the union would issue an ultimatum for an industrial action if the Federal Government continues to delay the implementation of new N30,000 minimum wage.
More Issues: Meanwhile, representatives of the Joint National Public Service Negotiating Council on the technical committee set up to negotiate consequential adjustments arising from the new minimum wage had disagreed with the government’s proposal of 9.5% salary increase for employees on Grade Levels 07 to 14 and 5% cent for those on Grade Levels 15 to 17. The council’s demand is for a 30% increase for officers on grade levels 7 to 14 and 25% increase for grade levels 15 to 17.
The Delay: President Buhari had, on 18 April 2019, signed into law the Minimum wage repeal and enactment act 2019 which increased the minimum wage for a Nigerian worker to N30,000 from N18,000 previously. According to the SSA to the President on National Assembly matters, the effective date of the new bill was 18th April 2019.
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What we think: In our view, we think it is highly unlikely that there will be full implementation of the new minimum wage across all states governments of the federation. At the previous minimum wage of N18,000 wage rate, states like Ekiti, Osun, and Oyo have struggled to pay their workers promptly owing to their low income generating ability amidst high level of dependence on FAAC allocation- which is subjected to volatilities in crude oil revenue.
At the federal level, the government is currently spending a significant chunk of its revenue on wages and salaries of workers- the approved 2019 national budget, for instance, allocates N2.28tn (c.26% of the budget size of N8.92trn) to personnel costs. In our opinion, an upward review in wages and salaries of federal workers might further worsen the financial situation of the federal government given that its fiscal deficits have been financed with borrowings-a condition that has led to high debt servicing cost.
The Way forward: That said, we note that a Presidential Technical Advisory Committee (PTAC) has been set up to advise on ways to ensure that the new minimum wage, and attendant wage adjustments for those already over the Minimum Wage, can be funded without increasing the level of borrowing. While the recommendations of the PTAC is currently been reviewed by the Vice President and the details are yet to be made public, we struggle to see how full implementation across MDAs will be carried out at the federal level without resort to borrowings.
Overall, we expect the implementation of the minimum wage to linger as governments across all levels attempt to find ways of meeting the new wage obligations, however, we do not rule out the possibility of compromise with labour unions on implementation across salary cadres currently above the minimum wage.
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