Nigerian workers are hard hit by the inflationary pressure on the economy. Henry Falaiye, in this piece, writes that government workers are struggling to afford the basic things of life
Nigeria’s minimum wage of N30, 000 cannot meet the needs of average Nigerians, especially workers or those in the fixed income bracket.
The spiraling inflation is hurting several Nigerian workers as many struggle to afford basic items such as food, shelter and clothing.
According to the Nigeria Bureau of Statistics, the food inflation rate in September 2022 was 23.34 per cent on a year-on-year basis, marking an uptick from the 23.12 per cent recorded in the previous month. The increase in the food index was attributed to the increases in prices of bread and other food products.
On a monthly basis, food prices went up by 1.43 per cent, slowing from a 1.98 per cent rise in the previous month, attributed to a reduction in prices of some food items.
The annual inflation rate in Nigeria accelerated for the eighth straight month to 20.77 per cent in September of 2022 from 20.52 per cent in the previous month.
It was the highest reading since September of 2005, even after a recent 150 basis point interest rate hike by the Central Bank of Nigeria, largely due to a weaker currency that has raised the prices of imported products.
According to the report, this was the highest inflation rate in the last 17 years. The major rise in the cost of products and the poor state of the economy presently have imposed hardship on Nigerians and threaten to raise the level of poverty among citizens in the country.
The minimum wage in Nigeria has remained unchanged at N30, 000 monthly in 2022.
According to the NBS, the maximum rate of the minimum wage for employees is N30,000 monthly while minimum is N18,000 monthly.
In April 2019, President Muhammadu Buhari signed a new minimum wage bill. The law ushered in a new pay structure for Nigerian workers with the Federal government commencing implementation almost immediately.
The bill makes it compulsory for all employers of labour in Nigeria to pay their workers the sum of N30, 000.
Some state governors opposed the N30,000 minimum wage, with many of them saying they would be unable to pay their workers. On the other hand, private entities have refused to implement the law.
The law, however, excluded persons who are employing fewer than 25 workers; persons who work in a ship that sails out of Nigeria’s jurisdiction, and other persons who are in other kinds of regulated employment which are accepted by the Act.
However, workers are the hardest hit, with many of them struggling to afford the basic things of life.
The Director-General, Nigeria Employers’ Consultative Association, Adewale-Smatt Oyerinde, said, “The inflation has eroded the purchasing power and, unfortunately, those who are involved, especially people who are earning fixed incomes, are the most impacted. Since their incomes are fixed, there is no mechanism to hedge it against the steady rise in inflation.”
“For the private sector, basically wages are increased every year for most organisations. At the industrial level and at the collective bargaining level, most have collective bargaining every two years, which most times also translates into salary increases.
He explained that employers in the private sector had always come up with different schemes in order to assist workers to mitigate the effect of the inflation.
“It is nobody fault, but we still must find a way to motivate and keep our staff members productive. Many do it either with cash transfer or in kind. Some give products, while some others give four-day working week, amongst others. The economy is not friendly for a business to have all the cash to deal with all those issues, but businesses are doing the best they can do.
“Also, for the government, they are increasing the salaries of political office holders. So, what is good for the goose is good for the gander. They should also look at the salaries of the civil servants and do likewise to assist them. As they say, the civil service is the engine of the government. They should be able to oil that engine so that they can deliver effectively.”
A Lagos-based civil servant, Ope Oni, said, “The joy of the minimum wage only lasted for a short time because it gave the market men and women the opportunity to increase the cost of goods and services. So, automatically, it had no direct positive effect on the lives of the workers.”
He said it was just a case of the government increasing salaries and traders raising the prices of goods and services.
“At the same time, workers should get a few things from the government every 3-6 months. They can be given some food items, basic things that they need to survive so that there won’t be too much pressure on their salaries while trying to buy other things.
“Recently, the Lagos State government said it will increase salaries of workers by a 100 per cent. I can assure you that 34 states won’t be able to cope with that. Some states are still paying N18, 000 as the minimum wage and are lamenting that they cannot afford to pay N30,000.
“It is only Lagos State that has the capacity to pull that string. I really do not agree that the government should increase it by 100 per cent. They can increase it by 20-30 per cent or at a maximum by 50 per cent. I doubt they will survive if they want to increase by a 100 per cent.”
But the prices were not basically raised by traders but by the rising production and operational cost in the economy.
A civil servant, Shola Okikiola, said, “The economy is in a bad state. It has affected civil servants in a way that they cannot afford to bear basic transportation costs.
“I can assure you that most civil servants that I know don’t go to work from Monday to Friday. It is either they go three times in a week, or they do half a day so that they can beat traffic and save cost.
“This is a situation where we are unable to pay for transportation, or the transportation is even way higher than what we earn is not good enough. The transportation allowance is not even enough when we spend almost N30,000 on transportation in a month.
“If you don’t leave the office early, by evening the transport fare will double with the constant traffic problem. If I am spending an average of N2000 on transportation daily, how much is my salary? Prices of food items have increased in the market drastically. An average person eats in the morning and night but not three times a day anymore.”
Okikiola said she was hoping to enjoy the salary increase as promised by the state governor, Babajide Sanwo-Olu.
She said in some states, taxes were high for civil servants, noting that several categories of people often would not pay taxes except civil servants.
Associate Professor of Economics, Pan Atlantic University, Olalekan Aworinde, said, “Inflation means the continuous increase in prices of goods and services. Overtime, the prices of goods and services, especially in Nigeria, have been on the increase. One of the implications of this is that the standard of living of the people will be affected because when prices of goods and services are on the increase, the quality of life of the people is likely going to reduce. “
“Another effect is in the aspect of consumption. When prices of goods and services increase, the tendency is that you are likely to use all your income on consumption. So, we are likely to have a period whereby consumption in relative terms, in monetary value, is likely to increase.
“In terms of the quantity, the amount of goods and services that is consumed will fall because your income is not increasing, everything is constant, and prices of goods and services are increasing.
“Therefore, the fact that you spend all your income on consumption does not mean that you will have increased consumption. When prices increase, the tendency is that you are likely to consume fewer goods.”
“Also, in the level of savings, when you spend your income on consumption expenditure, the implication is that the level of savings will also drop. Once the level of savings drops, the implication of that on the economy is that the level of investments will drop. And once the level of investments drops, it will also affect the total value of goods and services that are produced in the economy. So, this is how it is going to affect the economy.
“The primary duty of the Central Bank of Nigeria is to ensure price stability and so recently, they increased interest rate to maintain price stability so that the prices of goods and services can be relatively stable, but what we have is that the reverse is the case.
“So, CBN is increasing the interest rate. Once it increases, people are likely going to be encouraged to invest in government bonds, stocks and so on. By doing so, they will mop up excess money in circulation and at the end of the day we are not going to have a situation whereby money will be chasing few goods such that inflation is likely going to come down. That is the policy. So, the government can continue to do all of these, but the truth is that there is a time lag for the effective implementation of all these policies.
“We are not likely going to see the effect quickly, such that prices of goods and services can come down. The truth is also that it also depends on the form of inflation that we have. Is it cost-push inflation or demand-pull inflation? I tell you, we have both.”
“If there were to be a demand-pull inflation, you could see the effectiveness of that policy quickly. But apart from that, we also have cost-push inflation, where the cost of producing a particular good by a firm or industry is very high. It means that they are high-cost producers. So, if they are high-cost producers, there is nothing that you can do in that regard to reduce the level of inflation.
“The government can assist with electricity. These high-cost producers that we are talking about are crippled by lack of electricity. So, if all these infrastructures are in place, then things can get better.”
A manufacturer, Ike Ibeabuchi, said that the cost of production was rising among manufacturers, making price increases inevitable.
“So basically, the workers suffer most. All the government needs to do is to raise their pay or provide the basic items for them free of charge,” he said.
