economy

Blog, Reverie

Anecdote: Deregulation Therapy.

No nation will make meaningful progress in development without an efficient energy sector. We need to deregulate and fully embrace a free market economy with limited government intervention.

Blog, Essays, Monishots

The minimum wage palaver.

To all you who believe we shouldn’t have a minimum wage — that the minimum amount you can be paid should be determined solely by your employer. We tried it once before: it was called SLAVERY ~Quentin R. Bufogle Analyzing the absurd in Nigeria is like trying to crack open a palm nut with an egg: fascinating but futile — yet time and again one is brought back to the same place by the seeming indifference of our leaders towards the daily struggles of the average Nigerian. Where will I start analyzing the fact that the so-called ‘Giant of Africa’ is still grappling with a minimum wage of $50 whereas poorer neighbouring countries like Cameroon and Chad have minimum wages of $75 and $115 respectively? Going by the International Labour Organisation (ILO)’s definition, a minimum wage is “the lowest wage that an employer is allowed to pay the employee, the price floor below which workers may not be willing to sell their labour”. In arriving at the figure consideration must be given to the prevailing inflationary trend, cost of living index and the employer’s capacity to pay the amount. It can, therefore, be deduced from the foregoing that any wage which falls below the minimum wage cannot guarantee a decent living for a worker or an employee. In other words, any worker that does not receive up to such stipulated amount after rendering services is more or less a slave. Last Sunday my Goddaughter popped in to say hi, she informed me that she has started work in a shop where she will be earning over €200 monthly for putting in a total of just 32 hours on Saturdays and Sundays. Add that to the pecks of child benefits accruing to her from the social welfare office and it will sum up to about €400. That is five times more than the N30,000 minimum wage that the government has agreed with the Nigerian Labour Congress. And she’s only 16! I am not one to compare Nigeria with ‘saner climes’ because even though I live in and feel both worlds I have always maintained that there is no magic wand to Uhuru in a developing nation which has been pauperized by decades of misrule from monumentally corrupt and visionless leaders. I am also an optimist, sincere optimism requires an appreciation of the rot to have realistic expectations of what is attainable but I just couldn’t help imagining how a €400 monthly salary will transform the life of an average Nigerian worker. Nevertheless, for the purpose of this piece, I will limit the juxtaposition to Africa. In 2016 the World Bank through its World Developers Indicators (WDI) released data which revealed that among a sample of 19 African countries, Nigeria was a runner-up from the bottom position (beating only Malawi) in the minimum wage rate addition but ranked 11th in the inflation rate (14.32%). Two years on the National Bureau of Statistics (NBS) put the inflation rate in the second quarter of 2018 at 11.23% with the exchange rate of Naira at approximately N362 in the parallel market. However, despite the gradual decline in the inflation rate witnessed since the last quarter of 2017, as an import-dependent nation, the over 100% increase in exchange rate actuated an increase in the Consumer Price Index (CPI), which is the weighted average of prices of consumer goods and services resulting in a huge reduction of the naira’s purchasing power. What all these jargon mean in layman’s terms is that the current value of N30,000 is less than what it was 3 years ago. As a matter of fact, the N30,000 minimum wage is more or less meaningless, it was long overdue even in 2015 and that prompted many economists to propose an amount ranging between N50,000 to N65,000 considering the prevailing indices or parameters. Paradoxically, one can equally understand those who objectively queried the verisimilitude of implementing the above figure or even the agreed N30,000. So how realistic and achievable is it in the face of the country’s current economic reality for workers to be paid this amount as at when due? Salaries still constitute a major part of the annual recurrent expenditure that gulps over 70% of both state and federal budgets. Moreover, 33 out of 36 states are currently owing workers arrears of salaries for up to 11 months in some cases going by what the NLC says. If state governors cannot pay N18,000 how can they scratch N30,000 let alone N50,000? Mind you this is in spite of the frequent bail-out funds doled out by the federal government. Certainly, a majority of the states cannot pay the new minimum wage as it is no secret that we have a serious problem of economic viability among many states. Are we then set for another era of random overseas trips by governors seeking foreign loans to cushion this pressure? And if the motivation is political for the federal government which retains a large chunk (52%) of the government revenue and recently weeded out over 50,000 ghost workers from its payroll, then how can it avoid a repeat of the Jonathan era mistake when the government which increased minimum wage could no longer pay salaries as oil prices dipped? Any government that borrows to pay salaries is tightening the noose and mortgaging the future of generations unborn. The situation is just a mess. There are more questions than answers. Ours is a country with limited social welfare and infrastructure, at N18,000 monthly the average Nigerian worker has been catering for feeding, clothing, transport, and shelter with only N600 daily. Isn’t that a miracle in a place where rent is paid annually and two years in advance for a new tenant? I think it is. Some have argued that service delivery is nothing short of pathetic and that most of our civil servants are idle servants who do not put in commensurate work to their wages. Yes, I agree. Our public institutions are notorious for being unkempt and often under-equipped working

Blog, Essays

Why Nigeria had good reasons to delay signing Africa’s free trade deal

Much has been made of the embarrassing withdrawal by Nigeria from signing the African Continental Free Trade Agreement earlier this year having initially made the commitment to sign it. Its decision was criticised by many, including myself. These reactions were justifiable given the historical poor performance of Nigeria and other African states when it comes to their commitment to regional economic integration. But, Nigeria’s decision needs to be evaluated in the light of the reason it’s given for the delay. The government has subsequently explained that it’s decision wasn’t a rejection of the trade accord. Rather, it said, it wanted time to consult with key stakeholders in the country. This includes the Nigerian labour congress, the manufacturers association as well as other players in the private sector. Given the free trade area’s potential to reconfigure intra-African market and the continent’s relationship with global trading system, consulting Nigerians should play an important role in signing the agreement. The agreement is the first of its kind in Africa. It proposes creating a single market for goods and services, with free movement of people and investments across 55 countries. The agreement has a dispute settlement mechanism similar to the one set up by the World Trade Organisation. The deal promises to redefine trade relations among African states and beyond. It’s also expected to aid the coordination of trade liberalisation and improve interactions within existing regional economic communities. If implemented, it will draw together the largest number of countries within a free trade area in the world. Initially 44 countries signed the pact in March. The number has since risen to 49. In my view, the Nigerian government made a wise decision. Holding off on signing the agreement shows how seriously it’s taking the agreement. The consultative process The government is taking the consultations seriously. This bodes well for the future implementation of the agreement. For example, in May, six consultation meetings were held in the six geopolitical zones – North-West, North-East, North-Central, South-East, South-South, South-West – of Nigeria. The government has also consulted with think tanks as well as trade expert groups and institutions such as the Nigeria Institute for Advanced Legal Studies. It’s also set up sessions with civil society. The process has also involved engaging with the Manufacturers Association of Nigeria, poultry groups, the Nigerian Labour Congress, Rice Processors Group, Aviation Association Group, Fertilisers Producers Association of Nigeria, the Nigerian Association of Small and medium Enterprises and the National Chamber of Commerce, industry, mines and agriculture. Nigeria’s Chief Trade Negotiator & Director General, Nigerian Office for Trade Negotiations, Ambassador Chiedu Osakwe, recently stated that Nigeria is finally getting ready to sign While buy-in from everyone might not be achieved, the engagements are nevertheless important. More to gain than lose Nigeria’s governmenthas made it clear that it sees great merit in the free trade agreement. It has applauded the agreement’s potential to expand market access for Nigeria’s good and services. And that it will boost economic growth and job creation. The agreement will also improve competitiveness and the ease of doing business in Nigeria while it simultaneously provides a platform for the country’s continued leadership role in Africa. For Nigeria, the agreement’s dispute settlement mechanism would also be a major advance, providing protection against hostile and discriminatory trade practices. But it does have concerns. These include unfair trade practices, such as dumping – when a country lowers the sales of its exports below the cost of production to gain unfair market share. A rules based trade governance structure would give Nigeria greater access to invoking remedies for this kind of behaviour. The Nigerian government has expressly declared its confidence in the potential of the agreement’s dispute settlement mechanism. This contrasts with its scepticism of WTO’s dispute settlement mechanism which developing countries have generally viewed as expensive and unfair towards them. Perhaps, one way to explain the embrace of the dispute settlement mechanism under the agreement then is its uniquely African roots and the potential for “equal” access among its members. For Africa: More Free Trade and less protectionism is the way It’s only fair that the government is allowed time to examine issues like this closely. But, it’s also important that Nigeria doesn’t allow the consultation to cripple, jeopardise or undermine the process. Not signing the free trade agreement is not an option for Nigeria, particularly given the rise in protectionism, nationalism and backlash against free trade in the global multilateral trading system. Past experiences with economic integration on the continent aren’t that encouraging. Nevertheless, the free trade pact offers African states the opportunity to build a formidable market in these unsettling global economic times. Olabisi D. Akinkugbe, Assistant Professor, Schulich School of Law, Dalhousie University, Halifax, Canada., Dalhousie University published this article initially on theConversation.

Join our essay competition.

This will close in 13 seconds

Solverwp- WordPress Theme and Plugin

Scroll to Top