The Minister of Labour and Employment, Dr. Chris Ngige, last week, hinted of a pay rise for Nigerian workers in the public service to cushion the effects of global economic downturn and rising inflation. Ngige, who admitted that high inflation had eroded the purchasing power of workers, dropped the hint in Abuja during the public presentation of a compendium of Nigeria Labour Congress (NLC) at 40 entitled, Contemporary History of Working Class Struggles. The minister reasoned that the current national minimum wage of N30,000 a month would no longer meet the monthly needs of a Nigerian worker.
Arising from the foregoing, an upward review of the 2019 Minimum Wage Act has become imperative as it contains a clause for review. We advise that the state governments should also think along the same line as the Federal Government as both the federal workers and their counterparts in the states are adversely affected by the same inflationary pressures and other economic issues. In fact, as Nigeria’s headline inflation accelerated to 20.54 per cent in August, the highest since 2005, Nigerians would find it difficult to cope with the rising prices of food items.
From a month-on-month perspective, inflation and other economic complexities have been rising across all parameters. This underscores the fact that inflation remains a major challenge to investors and the citizens. It is unfortunate that inflationary pressures have remained unabated since October 2019 when the government shut Nigeria’s porous borders with the aim of enhancing production of food and curbing smuggling.
However, the aim was never achieved, even as Forex scarcity, insecurity and the devaluation of the naira, have contributed to food demands outweigh production. Inflation remains a big accelerator of poverty, and Nigeria has assumed the poverty capital of the world due to mounting economic challenges. In last year’s report on Expenditure and Income Gross Domestic Product(GDP), the National Bureau of Statistics (NBS) revealed that Nigerians spent N54.84trillion on household consumption in the first half(H1) of 2021.
The figure was higher than N48.22trillion recorded in the first half of 2020. It stood at N49trillion and N44trillion in the first half of 2019 and 2018, respectively. Household expenditure is the amount of final consumption expenditure made by households to meet their daily needs, such as food, clothing, house rent, energy, transport costs, durable goods, health cost, leisure, and miscellaneous services. In real terms, the expenditure for households’ consumption has increased by 8.90 per cent in the first quarter (Q1) and 19.08 per cent in Q2 of 2021. It has doubled in the H1 of 2022. The NBS report shows that Nigerians are spending more on utilities.
This has reduced the disposal income available for savings and investment necessary to grow the economy. The rise in household spending is also a clear signal that Nigerians are spending more as a result of an increase in prices of goods and services. For example, the cost of 12.5kg cooking gas which sold at N3,800 in October 2020, now costs between N9,500 and N10,000 across the country. It is likely to cost N10,000 by year end if government fails to intervene. Also, prices of major food items like rice, beans, egg, bread, have continued to rise.
A new survey shows that prices of essential food items have gone up by over 50 per cent. Across the states, the Consumer Price Index (CPI), which measures inflation, shows that food inflation has increased beyond the reach of many Nigerians. NBS recent report shows that most Nigerians are groaning under rising cost of food items. There is need for urgent measures to bring down food inflation and make food available and affordable. While an upward review of the minimum wage is welcome, insecurity must be tackled.
Also, the misery index, which helps to determine the economic wellbeing of an average citizen, has worsened. Nigeria may be the largest economy in Africa, but the average Nigerian is more miserable than his peers in other countries on the continent. Nigeria’s misery index is 50.6 per cent higher than nine other economies in Africa. South Africa 35.7 per cent, Angola (32.7%), Ghana (14.8%), and Kenya (13%). With higher unemployment rate, citizens are bound to be miserable, regardless of a seemingly positive GDP outlook.
These impact negatively on savings of Nigerians. According to the International Monetary Fund (IMF), Nigeria has one of the lowest savings rates globally. For instance, in 2019, the gross savings rate in Nigeria stood at 13.9 per cent. This is far below China at 45 per cent, and much more below South Africa (15.8%), Tanzania (24.8%) and Togo (21.2%). Higher savings help to finance higher levels of investment, which will boost productivity and economic growth. Recently, the World Bank reported that surging inflation is undermining the recovery of Nigeria’s economy.
It is currently far short of the four components of GDP; household consumption, private investment, government spending and net exports. These components need to be improved upon for any salary increase for workers to be meaningful and for the economy to grow.