MINIMUN WAGE AND INEVITABLE BANKRUPTCY OF STATE GOVERNMENTS

 


Another economic war is about to start in Nigeria. The war will be about Minimum Wage, MW. The states want to renegotiate it, meaning reduce it. Labor also wants to renegotiate it, meaning increase it. Renegotiation seems to be the only point of agreement; it is also the battle ground. On the face of it, one
would assume that this is only “a matter of cash”. But, it is more than that. The very existence of states and local governments is threatened by this conflict.

 Sounds of the 2016 war involving the governments and Labor have already been heard from most of the state governors – minus three dissenters, namely Governors Wike, Fayose and Oshiomhole.
Wike, as everybody knows, faces another election and cannot be seen to be anti-labor. Self-interest is the motive here. Fayose, we know, loves to fish in troubled waters; while Oshiomhole is caught in the trap of his past as a labor leader.
The former labor leader cannot be seen to be forsaking the people who brought him into prominence. At any rate he has only seven months to go; he can leave his successor with the problem when he goes. That is the worst form of political cynicism.
Irrespective of how the three governors arrived at their current positions, they can be regarded as traitors to the cause of the other governments. They may eventually regret their dissent from the majority.
Let me declare, up front, that I strongly believe that the two sides are engaged in a war that would end up in mutual destruction — they will also destroy the states, economically, as we know them now. Most states are already tottering on the brink of bankruptcy with the current MW pegged at N18,000 per month. Many will grind to a halt by the second quarter of 2016 if they continue to pay the current MW without retrenching staff. Any increase in MW will only hasten the day of doom.
The case for the governors had been made explicitly by the Chairman of the Nigeria Governors’ Forum, NGF, and Zamfara State Governor Abdulaziz Yari when he said: “What we said is that the when the National Assembly enacted the law of paying N18,000 minimum wage, oil was about $118 per barrel and today oil is sold for $41 per barrel…So, if it continues, definitely we will find it difficult to continue….The receipts from Federation Account show that some [states] received N400 million, N500 million; some others received N55 million…Not even the salary [can be paid], their pension is over a billion. So how can we continue borrowing..?”
The states and the Federal government ran into trouble very early this year.    In a report titled “FG records N1.3tn revenue shortfall in three months” by Ifeanyi Onuba, in PUNCH, May 7, 2015, Nigerians were told that “The persistent drop in oil prices and low receipts from non-oil sources may have led to N1.3tn shortfall in revenue accruable to    the federation in the first three months of this year. The report further pointed out that “the National Assembly, while passing the 2015 budget last week approved a benchmark oil price of $53 per barrel.” Meanwhile, the revenue generated for the first three months of 2015 were as follows:
January        N416.09bn
February       N401.46bn
March         N315.05bn
According to Dr Ngozi Okonjo-Iweala, Minister of Finance, “in April, we had to borrow to cover up some gap.”    The chief reason for borrowing was the depletion of the Excess Crude Oil Account, ECA, by November 2014. From January till now, the price of crude oil had stayed below $53 per barrel and in the last quarter of this year, it had averaged just about $42 per barrel. The consequences of this were made clear in the September 2015 revenue aggregates which came to N389.94bn, less than the January and February figures and far off from the budgeted N815bn per month.
Things can only get worse in 2016 as the price of crude is set to decline even further below $40 per barrel and volume is also likely to drop. States of Nigeria will be collecting about 40% of the average monthly allocations for 2014, which was our second best year in history. Compared to 2013, the states will be fortunate to receive 35% of that glorious year. With many states depending on the revenue allocation from Abuja for close to 95% of their income, it is clear that Governor Yari had spoken the truth.
But, sadly, that is not a truth which labor and their mindless sympathizers want to be told. Forgetting that organized labor constitutes less than five per cent of the population of any state, they insist that the states must go bankrupt just to please them. Civil servants are threatening to close down states. That only demonstrates how desperate the situation has become. Shutting down a state will not produce money which the states don’t have. At any rate, where were the civil servants when some of their governors were incurring huge debts to fund “innovative” projects?

SOURCE: VANGUARD