Buhari’s pay rise

I was mildly surprised last Tuesday when newspapers reported that the federal government was considering an upward review of the salaries of workers this new year 2023. And reading through the stories I allowed myself a wry smile for the happy coincidence because just the day before on Monday, I had made the argument in these […]

I was mildly surprised last Tuesday when newspapers reported that the federal government was considering an upward review of the salaries of workers this new year 2023. And reading through the stories I allowed myself a wry smile for the happy coincidence because just the day before on Monday, I had made the argument in these pages that poor salaries and wages are perhaps the single most important cause of rising poverty in Nigeria. 

Although the argument was in the context of the UK government’s strategic attempt to empty Nigerian schools of its teachers by dangling an attractive visa scheme at them, the point still holds. Nigeria pays some of the lowest salaries and wages for work done, which accounts not only for the tendency among Nigerian professionals to seek to migrate elsewhere for work, but is also why we are still deep in poverty, by whatever metric it is measured. So, I thought news of a pay rise at some time in this new year would be good for the workers and the economy. But most importantly, it would be sound policy for the government itself.  

Unfortunately, just a few days later by Friday, the government demurred, with the Minister of Labour and Productivity, Senator Chris Ngige, who made the initial announcement only a few days earlier, now claiming that it was only “allowances and emoluments” that are being reviewed by the government and not the salary structure. I do not know the federal government’s reasons for the reluctance, but there are at least several reasons why such a policy would be good for the country at this point, and why the government needs to move ahead with the pay rise.  

First, as newspapers reported Dr Ngige himself to have said during his “clarification” on the federal government’ plan, “It’s hoped that this rightful step, which the federal government had embarked upon on compassionate grounds without any prodding or threat to strike will help to cushion the debilitating effects of spiraling inflation, especially that which affects food and energy prices (Electricity and Petroleum product)”. It is sad that a minister of the federal government will see salary increase by an elected government for its own workers as something to do “on compassionate grounds”, rather than as rightful entitlement of workers as if President Buhari were some emperor ruling over a conquered people, not a leader Nigerians freely elected.  

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But we can ignore Ngige’s sycophantism for the moment. Salary increases are due because the consequences of galloping inflation in the last year has pushed even people who used to live decent lives into poverty. The prices of food has increased every single month consecutively for most of last year. The lingering fuel crises have also not helped and today, Nigerians have to spend the same monthly salaries they have been receiving five or more years ago on consumer goods and services that now cost up to five times more. That is a legitimate reason for pay rise.   

Second, whenever the federal government raises the pay of workers, it tends to cascade right across the entire economy as state governments and the private sector tend to follow also, even though the federal government doesn’t have any control over what states and private companies can pay their workers, except for the ineffective minimum wage system. This generally helps to increase wages across the board and by implication puts more income at the hands of working households. This in turn also reduces poverty, at least, to some degree, since better income is one of the most effective ways of reducing poverty.  

There is an alternative argument to this which we must explore. If the federal government raises the pay of its workers, it puts pressure on the private sector and poorer states to do the same. This often results in loss of jobs as many companies may be forced to lay off workers in order to meet up with the demand for more pay. State governments, particularly those in the north, are also often compelled to lay-off staff to accommodate the new pay, or as is mostly the case, they simply refuse to pay the new salaries. While this may be true, the counter argument is that even where companies and subnational governments are forced to lay-off staff, the overall positive effects of pay increase tend to outweigh the negative effects of lay-offs.  

Moreover, like most African countries, culture is intricately linked to the economy in Nigeria, in such a way that most workers who earn any kind of income are compelled to “share” it with others in the form of “gifts” or “allowances” to siblings in school, parents, relatives, friends, neighbours or townspeople. Very few people spend their salaries on themselves and their immediate families alone in Nigeria, regardless of how much they earn or in what sector of the economy they work. In fact, with increasing digitisation of the economy, this culture has also become digitised through electronic transfers of cash from income earners to those who earn less or nothing.  

By contrast, this culture does not exist anywhere in the western economic system for which our current “salary structure” is  modelled. If you work and earn income in London or New York, chances are that after paying all forms of taxes to the central or local government, you will spend the balance for yourself and family alone. But if you work and earn an income in Lagos, Kano or Abuja, chances are that after paying taxes to the government, you will still need to make “transfers” to other people close to you in some way. This culture of “sharing” in Nigeria has been derided in tons of books and it is one of the main complaints you will hear from almost all income earners above the poverty level.  

But it is not a bad culture at all. More than anything else, it helps to cushion the negative effects of high unemployment and underemployment in our context. An unemployment rate of even 10-15 per cent is enough to cause a major uprising in many western countries. In Nigeria, our governments remain stable with unemployment rates often above 40 per cent among certain demographics, such as youths. It is this cultural-economic system of “sharing” that makes the difference. And if our governments and economists had any independence of thought, it should be factored into our salary structures as a matter of deliberate policy.  

Thus, if the federal government were to increase salaries for federal workers today, it will not only cascade down to workers in the private sector and in the employ of state governments, but it will also benefit others who are unemployed or underemployed, and by implication, it will trickle down to the economy as a whole and help revive it. The counter-argument that salary increase at this point will increase inflation is feeble because we have had inflation rising over the past five consecutive years that was not caused by pay rise. Much the same applies to the argument that it will increase the government’s debt stockpile. The debts have stockpiled anyways without salary increases, and in any case, it is local debt in a currency owned by the government itself. A pay rise for workers right now is the best thing a government desperate to finish on a high will do.