Controversies over payment of minimum wage set Labour and state governments on a collision course and raise fundamental questions about the nature of federalism in Nigeria
Issa Aremu, vice president, Nigeria Labour Congress, NLC, is an angry man. Having been part of the Justice Alfa Belgore’s tripartite committee of labour unions, government officials and representatives of the private sector that in July last year recommended N18,000 as the national minimum wage, Aremu could not understand why governors in many states of the federation are now refusing to pay the new wage, which has become binding, having been signed into law by President Goodluck Jonathan.
Another cause of Aremu’s anger is his belief that by their action, the governors are stabbing Nigerian workers at the back after their success at the last April polls. Many of the governors, as candidates, had during their campaign for votes endorsed the new wage and assured workers that it would be paid. In some states, measures were put in place to begin payment from last month. To Aremu, the governors are taking workers for a ride. “It is sad and even sickening, that barely two months after their election into office, these governors are now complaining that they cannot pay the agreed amount,” he lamented.
For labour, the journey for the new minimum wage had been long and emotionally tasking. Labour had proposed N52,500 per month, to meet the reality of the high cost of living in the country. But after a long period of hard bargaining during which issues like whether available revenue could support the wage hike, implications of a wage increase on the economy, and increase in inflationary rate were discussed, Labour agreed that the amount be slashed to N18,000 per month.
Afraid that politicians could renege on their promise in this regard, labour ensured that the wage bill was signed into law sometime in March, one month before the April polls. Now with a twist in the tale, labour is warming up for a fight. And it has set the time bomb ticking. “I want to believe they (governors) are joking because their promise is backed by law and if they break it, then they should be ready to face the full wrath of the law. And NLC will not hesitate to call out the people for industrial actions,” Aremu warned.
Legally, labour may be right. But can the states be made to pay what they do not have in terms of available revenue in a federation like Nigeria? If they are compelled to pay the minimum wage, will they have enough funds to ensure good governance and provide infrastructure and socio-economic services to the people, particularly taking care of those that are not on government pay roll? This is the argument of the governors who are appealing to workers to look at the other side of the coin and consider the posers raised above. At the inaugural meeting of the Governors’ Forum where Chibuike Amaechi, governor, Rivers State, was elected as chairman, the governors expressed fears that payment of the new wage was not feasible because the states could not afford it. Amaechi said there are states with a monthly budget of N1.5 billion, while some have N2 billion, and so on. “Some of these states will need to go a-borrowing to be able to pay the new wage,” he explained.
Speaking for his state, Abiola Ajimobi, governor, Oyo State, whose predecessor Adebayo Alao-Akala had promised to pay the new wage shortly before he was voted out of office, claimed the financial position of Oyo State does not support payment of the N18,000 minimum wage. According to him, “Oyo State’s current income is N4.2 billion. We would need additional N200 million to pay the total N4.4 billion required to pay the minimum wage every month.” In a broadcast to the people of the state last Wednesday, Ajimobi said the new wage would castrate his government and hinder infrastructural development. But the governor paid the workers the new minimum wage for the month of May only, “to avoid industrial unrest”. Earlier, Ajimobi had said that the governors had asked the federal government “to give us more money so that we will be able to pay the wage, but they have not done that”.
The governors have called on the Revenue Mobilisation and Fiscal Allocation Commission, RMFAC, to review the revenue allocation formula in a way that will reflect the higher wage burden that states have to carry. To drive home its point, the Governors’ Forum set up a revenue panel headed by Babatunde Fashola, governor, Lagos State. The panel suggested that the federal government drastically reduce its own share of the revenue allocation, while increasing that of the states. According to the panel, the federal government should assign to itself 35 per cent from the federal purse, while states get 42 per cent and local governments 23 per cent respectively. “We need the federal government to reduce (its) current 52 per cent that it is holding. If governors have about 42 per cent, then it will be easier to pay the N18,000 minimum wage,” Amaechi, the forum’s chairman, added.
But labour appears unimpressed by the governors’ argument. “It beats my imagination that they are now pegging the payment on their allocation from the federal purse. They must realise that governance is not about what they can do, but what they must do. The payment of the wage bill is a must,” Aremu stressed.
In the same vein, Peter Esele, national president, Trade Union Congress, TUC, warned that flouting the wage agreement amounts to ridiculing the labour movement and beating the war drum. “What they are saying is absolutely unacceptable to us. A law is a law. The law must be respected, “ he said.
Abiodun Aremu, a labour activist, said, “Any governor that cannot pay the minimum wage is highly irresponsible and does not deserve to be in government in the first place,” adding that “Governance is about adding value to the lives of the people, it is not about going cap in hand to Abuja for revenue allocation. The challenge of governance is to enhance the productive capacity of the people and generate income and savings to better the lives of the people.”
Supporting the stance of labour, Itse Sagay, professor and Senior Advocate of Nigeria, SAN, said in agreeing to pay the new minimum wage, which already forms part of the law, the governors are compelled to pay the wages. “They have no choice in this matter. It is high time Nigerians particularly the political elite began to distinguish between when they have discretion, and when they are compelled. On this matter, they are compelled to pay, whether they like it or not, even if they have to sell their trousers and houses to pay. It is a legal issue and they must adhere to it.”
On the governors’ call for a review of the revenue allocation formula, Sagay wondered why any tier of government in a federation should demand or rely on any other tier for money. “States should not be collecting money from any other source; it is a sign of laziness on their part. It is idleness amongst these governors to be relying on the money from Abuja to pay salaries of their workers. It is a sign that they have failed in their responsibilities as government and they do not deserve to constitute a government, if they cannot pay their workers.” To him, the various governors can conveniently pay the new minimum wage.
He has a supporter in Ismail Bello, NLC secretary, Lagos State, who said “the problem in Nigeria is massive corruption by members of the political and administrative elite, and not lack of resources. To be sure, paying the new minimum wage will require members of the political class to cut down what they take from public funds.”
Akintunde Maberu, chief executive officer of a finance and investment consultancy firm, also believes that the states should be able to pay the minimum wage with the money accruing to them on a monthly basis from the federation account, if they reorganise their priorities. “If you take a critical look at what constitutes the total wage bill for a particular state, you’ll find that a large chunk of it is made up of political wages; that is, the salaries and emoluments of the legion of political appointees they co-opt into their cabinets,” he argued.
Anthony Cardinal Okogie, Archbishop of Metropolitan See of Lagos, shares that view. He called on government to drastically cut down the remuneration of political office holders to reflect the current realities. According to him, “unless this was carried out, the incessant agitations for upward review of salaries by NLC and other stakeholders would continue unabated. It is very disheartening to note that in a country such as ours, where the average worker is paid less than N20,000, their counterparts in the Senate and House of Representatives are smiling home with over N15 million.”
Many Nigerians are aware that politically exposed persons in the country approved for themselves mouth-watering salaries and emoluments. From the councillor at the local government level to the President, including an army of aides, public funds are always available at the press of a button. And that is why many Nigerians are of the opinion that government should be able to pay the N18,000 minimum wage.
Solomon Akinboye, professor and head of department, political science, University of Lagos, said the problem we have in Nigeria is that the resources are not well managed and so “we always re-prioritise our priorities.” Nevertheless, he supports an upward review of the revenue allocation formula in favour of the states. “We have a revenue mobilisation commission that can look into that. This will help them to take care of the additional budget. In other words, there is no reason why the government should not increase the revenue on the account. It’s like a kind of subsidy to those state government,” Akinboye stressed.
But Tanko Yakassai, a Second Republic politician, insists that the states are wrong in asking for an adjustment in the revenue sharing formula because “this is done on the basis of the responsibility of each level of government. If they are asking the federal government to reduce its share of the revenue, how do they expect the centre to cope with the level of responsibilities assigned to it by the constitution? Do they want the federal government to reduce the number of people in the armed forces, the number of policemen which is not even enough?” Yakassai said altering the revenue sharing formula would be almost impossible under the present dispensation, because members of the National Assembly who are required to alter the law, would not be willing to accept a pay cut. “You know, once that is done, the federal government would not be in a position to pay for all the constituency and sitting allowances that they are currently enjoying,” he added.
Francis Njoku, a legal practitioner looks at the issue from the prism of pervasive corruption in the country. According to him, there are so many leakages that are siphoning states’ resources. “The governors can afford to pay the wage and still execute capital projects. Economic and Financial Crimes Commission’s investigation has shown that many of these governors siphon billions into their pockets and private projects. These monies can pay the minimum wage. There is no state in Nigeria that cannot pay the minimum wage”, he insists. Citing Lagos State as an example, Njoku also suggests that state governors should strive to increase their internally generated revenue, IGR, to enable them tackle the problem of inadequate resources without going caps in hand to the federal government.
For Alaba Olusemore, public policy analyst, there are many states whose IGR cannot fund the wage increase. And so, he is of the view that states should be allowed to negotiate independently with labour unions. “If the states are forced to pay the minimum wage of N18,000, some of them may be forced to reduce or rationalise their staff size.” Olusemore prefers a situation where the wage increase is done in phases so that the current employment level can be maintained.
This is a warning most people tend to ignore. It also raises the need for Nigeria to operate full federalism, which in this instance allows states to run their economies the way they know best and fulfil their obligations to the people. The present situation where their hands are tied by a federal law they cannot disobey amounts to a throw back to the military days of unitary system of government. Olusemore also raises the issue of inflation that the increase in wages can inflict on the economy. He argues that unless there is a quantum increase in the level of productivity, there is possibility of price levels rising. “Wage increase will increase inflation in the short run. But in the long run, labour will be motivated to increase its marginal productivity, which will further reduce prices in the eventually. In Nigeria, it is doubtful if any wage increase has ever increased the level of productivity particularly among civil servants. Most civil servants are perceived as idle lot who are a burden to the economy.
But Bello debunks the notion that wage increase could trigger off inflation. Said he, “The reality is that our economy itself is already showing an inflationary trend, we are import dependent and with an unstable naira, your bet is as good as mine in terms of prices of goods. “For Joe Ajaero, general secretary, National Union of Electricity Employees, “if the economy can accommodate the huge amounts spent on political office holders, it can accommodate a general upward review of wages and salaries. Aremu too points out that the payment of new salaries will help the economy, rather than wreck it. “We are talking about increasing the purchasing power of the masses here. When that is done, productivity will improve, as demand for products will trigger off supply, which will grow the economy. Many of these governors forget that if you increase the wages of the workers, they are altogether increasing the personal income tax that is accrued to government,” he said.
With labour and governments appearing not to yield grounds, the fear in most quarters is that the ticking time bomb may sooner than expected be detonated to the chagrin of millions of suffering Nigerians. The Action Congress of Nigeria correctly read the mood of the nation last week when it warned that the wage increase, which it described as a time bomb is capable of hurting the economy if not well managed. Although the party may be playing politics with the issue, its warning is no doubt timely.
Additional reports by
RAYMOND MORDI, FOLASHADE ADEBAYO,
AYODEJI ADEYEMI and ARUKAINO UMUKORO