Economists advises the federal government to make provision in the 2019 budget and ensure productivity is increased before signing the new minimum wage bill
By Anayo Ezugwu
AS Nigerian workers await the signing of the N30,000 minimum wage into law by President Muhammadu Buhari, economic experts have again cautioned the government to make provisions on how to pay the new minimum wage before signing it into law.
They are of the view that when too much money is chasing too few goods it can lead to inflation if there is no corresponding increase in productivity. The experts advised the government at all levels to increase productivity before approving the minimum wage.
In an Interview with Realnews, Johnson Chukwu, managing director, Cowry Asset Management Limited, said unless government increases productivity, they will struggle to pay the new minimum wage. “Both the federal government and the states will struggle to pay the new minimum wage giving that most them are finding it difficult to pay salary regularly and meet their wage bills.
“So any increase in the current wage bills could impose additional higher burden on the government. So with this minimum wage, we will see more unpaid arrears of salaries lead to workers dissatisfaction and possibly industrial actions. It is not enough to pass the bill but the government must make provisions on the payments,” he said.
Also, Chukwu believes that the new minimum wage will also lead to increase in currency in circulations. He said that if the new wage would lead to increase in demand and consumption that would spur the economy.
“On the positive side, the new minimum wage will inject more liquidity into the hands of consumers which will lead to increase in aggregate demand and consumption. It is also expected to spur higher level of economic activities,” he said.
On his part, Osaze Omoragbon, an economist, is concerned that many states will find it difficult to pay the wage. He also alluded to the fact that new wage will definitely lead to inflation, noting that the wage will increase the cost of living in the country and possibly push more people into poverty.
“The problem is that if you pay minimum wage today, many states would not be able to pay the wage. And for those like the federal government that can pay, you will see that cost of living will increase because the market women will tell you that they have increased your salary. Likewise the landlords and transporters will do the same and at the end of the day, we are back to square one.
“Although your money have increased nominally but the effect of it has not improved. It might increase inflation and of course the Central Bank of Nigeria, CBN, will come down on us with stiffer measures to control it. So at the end of the day we are back to square one,” he said.
The passage of the bill by the Senate coincided with the submission of the report on the new national minimum wage by the Presidential Technical Advisory Committee Buhari set up to advise the federal government on how to pay a wage increase above the current N18,000. The panel, which was chaired by renowned economist and businessman, Bismarck Rewane, submitted its report to Buhari on March 25.
The Senate had on March 19, passed the bill, approving N30,000 as the new national minimum wage. By its action, the Senate agreed with the earlier decision of the House of Representatives, which passed the bill before the National Assembly shut down its operations to enable lawmakers participate in the 2019 general elections.
Recall that the Senate, while passing the bill, had asked that the current revenue sharing formula should be reviewed to make more funds available to the other tiers of government. It said this was to enable the other tiers to cope with paying the N30,000.
Realnews reports that many states are owing backlog of salaries at the present N18,000 minimum wage. Some of the states received bailouts from the federal government multiple times but still could not clear the salary arrears owed workers. Most state governors had consistently opposed the N30,000 on the excuse that they could not afford it.
– Apr. 5, 2019 @ 15:59 GMT |