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Does Buhari’s new minimum wage approval mean “Nigeria is broke”?

After months of eager anticipation, hopes were not entirely dashed after President Muhammadu Buhari has finally approved the immediate implementation of N30,000 new minimum wage to lowest cadre workers. 

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President Muhammadu Buhari, loans, Oil price, FG, Solar vehicles, P&ID firm, Nigeria's GDP, Debt Servicing: Nigeria pays $1.12 billion to World Bank, others in 10-month , How the latest Fitch report affects you in 2020 , Nigeria’s credit rating faces downgrade by Fitch, Nigeria’s fiscal crisis looms, oil hits $32, S&P downgrades Nigeria to junk rating, as India cuts interest rates

After months of eager anticipation, hopes were not entirely dashed as President Muhammadu Buhari finally approved the immediate implementation of N30,000 new minimum wage to lowest cadre workers.

The development was confirmed by the Chairman of the National Salaries, Income, and Wages Commission, Chief Richard Egbule, who spoke to journalists during a press conference in Abuja. Meanwhile, according to the directive from the Presidency, not all civil servants would get paid at the moment.

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The President’s directive: The President gave a directive to the Accountant-General to begin processing payments for only civil servants who currently earn below N30,000 minimum wage.

  • The President’s directive entails that the new salary payment will be backdated to April 18, 2018. This will only affect the salaries of government workers under five salary structures.
  • This implies that only workers who are within the grade level 1-5 will benefit from the approval, at least for now.
  • Basically, the new payment will cut across the Consolidated Public Service Salary Structure, Consolidated Health Salary Structure, the Consolidated Research, and Allied Institutions Salary Structure.

[READ: 2019 Budget: FG may borrow more to close N102.8 billion funding gap]

Nigeria might just be broke: Many people are probably wondering why the Government cannot just implement the salary increment for everyone at the same time. Well, this is probably because the Government is short on cash at the moment.

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Recall that President Buhari signed the N8.91 trillion 2019 budget in May. At the time, people’s expectation was that the budget signing would facilitate the implementation of the new minimum wage. But two months later, the implementation lingered until now.

  • A breakdown of the 2019 budget shows that 25% will go into debt servicing, which amounts to as much as N2.14 trillion.
  • Latest debt stock data reveals that Nigeria’s debt rose to N24.9 trillion, which is about 19% of the country’s Gross Domestic Product.
  • Debt stock rose significantly under Buhari (between 2015 and 2019) by N12.3 trillion.
  • Specifically, Nigeria’s revenue in 2018 stood at N3.96 trillion. This means to fund the 2019 budget, the country would have to source for over 50%.

To say the least, the 2019 budget does not have the capacity to provide the billions of Naira required to facilitate the new minimum wage implementation. What this means, therefore, is that either provision is made for a supplementary budget or the country incurs more debt.

Even financial expert, Kalu Aja, has pointed out that the government cannot afford to pay the N30,000 without a massive tax hike.

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https://twitter.com/FinPlanKaluAja/status/1151149696158580736

https://twitter.com/FinPlanKaluAja/status/1151206219257790464

[READ: President Buhari signs N8.91 trillion 2019 Budget into law]

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In the meantime, the Presidency is in limbo over the new wage implementation. This is because the country appears broke in the face of building debt stock and dwindling national income.

Will the Presidency’s approach work? The Presidency’s plan to first implement the minimum wage for low-cadre workers appears to be more of a bottom to up approach. The aim may be to test-run how the economy would react, considering the government’s cash constraints.

There is already mounting tension among several organized labour groups. The latest strategic move by the presidency to start with the bottom-up approach to minimum wage implementation may just heighten tension. This is because:

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  • Senior-level civil servants may not greet the President’s move with smiles on their faces.
  • Recently, the Joint National Public Service Negotiating Council reportedly declared a nationwide mobilisation of civil servants in the country for a possible showdown with the government.
  • The council expressed displeasure after the deadlock negotiation on the consequential salaries adjustment for officers on grade level 7 and above with the Technical Committee set up by the President.
  • While the NLC has shelved the plan to embark on a nationwide strike, a possible lockdown on the economy is possible if the Buhari’s camp fails to act fast.

On the flip side, some analysts viewed the move by the Presidency to adopt a bottom-to-top approach as a strategic move aimed at avoiding exacerbation of the inflation rate in the economy.

Others have, however, argued that this is not true because they believe the new minimum wage is not expected to trigger inflation in the system. Instead, they believe it will boost the country’s economy and workers’ standard of living.

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[READ FURTHER: Evidence that Sanusi is right about Nigeria ‘going bankrupt’]

Patricia

Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

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Hospitality & Travel

Passengers can now arrive 90 minutes before departure for domestic flights – FG

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international passengers, Coronavirus: FG enforces immediate screening of travellers at airports with new directive

The Federal Government has announced the reduction of arrival time for passengers from three hours to one hour and a half before departure for domestic flights.

This was disclosed in a tweet post by the Minister for Aviation, Hadi Sirika, through his Twitter handle on Monday, July 13, 2020.

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The minister said that the decision was arrived at after they have reviewed passenger facilitation at the airport while noting that passengers should check-in online.

In the tweet post, Sirika said, ‘’My colleagues and I have reviewed passenger facilitation at our airports, consequently I am happy to announce that, henceforth travellers are to arrive one hour and half before their departure time for domestic flights. Travellers are advised to check-in online, please.’’

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It can be recalled that the Federal Airports Authority of Nigeria (FAAN) had earlier in June issued flight resumption protocol for both international and local passengers across the country, advising passengers to arrive at the airport three hours before their time due to the new COVID-19 safety checks for domestic flight operations and five hours for international flight operations.

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Economy & Politics

Seyi Makinde Proposes N3 billion investment plan for water supply

The local governments in Oyo are advised to submit a list of 10 faulty boreholes in the LG. 

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Seyi Makinde Proposes N3 Billion plan for water supply

The Governor of Oyo State, Seyi Makinde announced the proposal of a N3 billion investment plan dedicated to water supply in rural and urban areas of the state.

Speaking through the Chairman of Rural Water Supply and Sanitation Agency (RUWASSA), Mr. Najeem Omirinde in Ibadan on Monday, he added that N500 million of the N3 billion would be used for repairing broken and faulty state-owned boreholes.

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All Chairmen of each of the Local Governments in Oyo are advised to submit a list of 10 faulty boreholes in the Local governments.

The Oyo State governor also ordered that all new boreholes must be compliant with solar-powered pumps, to enable their longevity and save costs.

Urging residents to patronize the agency if they need to dig up boreholes for water, citing that it would be cheaper if done through the state agency than with private drilling companies.

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Minister of Finance, Zainab Ahmed stated last year that Nigeria needs an estimated N36 trillion annually for the next 30 years to solve Nigeria’s infrastructure problem. The investment, although a tiny fraction of what Nigeria needs is a bold step by the Oyo State government.

 

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Economy & Politics

FG asks UK court for more time to appeal $9.6 billion arbitration judgement

Malami stated that the Evidence of P&ID’s highly orchestrated scam had only recently come to light. 

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FG asks UK court for more time to appeal $9.6 billion arbitration judgement

The Federal Government has approached a UK court to appeal for more time to appeal the $9.6 billion arbitration award against it over the breach of contract with Process & Industrial Development (P&ID) Ltd.

Nigeria has said that it needs more time to pursue its argument that the 2010 gas supply contract with Process & Industrial Development Ltd was a sham.

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The legal dispute with P&ID is coming against the backdrop of the huge drop in the country’s revenue due to the collapse in oil prices globally. Nigeria had applied to US courts in March seeking for documents from 10 banks which includes Citigroup Inc. and JPMorgan Chase & Co, in a bid to prove its corruption allegations.

P&ID, however, has denied any wrongdoing in the whole transaction, arguing that Nigeria missed its opportunity to appeal.

The Nigerian Lawyer, Mark Howard, on Monday, the first morning of a 2-day hearing, said ‘’It is very unusual in a fraud case to discover a single smoking gun. By its very nature, fraud is conducted in secret, which makes it hard to detect and justifies an extension.’

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READ MORE: The effect of the United States’ Shale Oil on Nigeria?

The legal representatives for Nigeria are seeking another hearing for the judge to decide whether any misconduct has taken place and whether it justifies overturning the contract

The Attorney General and Minister for Justice, Abubakar Malami in a statement said, ‘’Evidence of P&ID’s highly orchestrated scam had only recently come to light.’’

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It can be recalled that last year, a UK judge upheld an earlier arbitration award to P&ID, which had accumulated to about $9.6 billion. The arbitration decision was over a failed contract to build a gas processing plant in the Southern city of Calabar.

The Nigerian lawyers disclosed that they have uncovered alleged bribes to government officials and their family members dating back to 2009.

Malami in his court filing on March 24, submitted that ‘’There is good reason to believe that ministers at the highest level were involved in a corrupt scheme to steal money from Nigeria.’’

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