Yesterday, 22/January/2019, president Buhari gathered some old rich men to approve a minimum wage of N30k for the poor young Nigerians. Apparently, the Nigeria’s constitution permits so, which it calls council of state meeting.
These old men were past Nigerian presidents, past Chief Justices of Nigeria, etc. The past presidents included Obasanjo and Jonathan excluding Yar’Adua (RIP) – the faces of PDP 16 years misrule. Does it really make sense?
Anyway, agitation for the increase in minimum wage occurs when inflation erodes the purchasing power of minimum wage. The current minimum wage is 18,000 naira.
In 2015 when president Buhari’s administration started, Nigeria’s rate of inflation was 9.01%. Today, Nigeria’s rate of inflation is 16.5%. This shows that the purchasing power of 18,000 naira diminished during Buhari’s administration.
Increases in rate of inflation, rate of unemployment, etc. are as a result of bad economic policy. Obviously, Buhari’s government has no clear economic policy and that is why Nigeria’s economic activities under Buhari will continue to stall.
As the council of state (including presidents from PDP 16 years misrule) has approved the increment of minimum wage to 27,000/30,000 for Buhari’s administration, how would Buhari tackle its matching rise in inflation? If president Buhari couldn’t control inflation when minimum wage was 18,000 naira, is it when it has gone up to 30,000 naira that he will do so?
In fact, increasing minimum wage from 18k to 30k will increase spending that will lead to increase in money supply, which will thereafter, increase the rate of inflation. In no time, the Nigerian workers will, once more, start agitating for another increase in wage because inflation has eroded the purchasing power of the new minimum wage. This is an example of inflationary spiral.
Besides, an Igbo/African proverbs says: it’s easy to shoot a fly, but can you pick up the pieces? Therefore, why shoot the fly in the first place if you can’t pick up the pieces. Thus, to avoid inflationary spiral, Buhari’s government should form economic policy that will tame inflation. It will serve better than increasing wages.
By the way, did Nigerian worker gain value from 18,000 to 30,000 minimum wage? Let’s look at the figures.
In 2015 when Buhari became the president of Nigeria, minimum wage was 18,000 and Naira/Dollar exchange rate was 200/1. Hence, 18,000/200 = $90. Presently, the minimum wage remains 18,000 while Naira/Dollar exchange rate is 360/1. Therefore, 18,000/360 = $50.
Since Buhari became president of Nigeria in 2015, the real value of the Nigerian worker’s income (18,000 minimum wage) decreased from $90 to $50. The Nigerian worker lost $40 in real income.
Today, Naira/Dollar exchange rate is 360/1. New minimum wage of 30,000/360 = $83.33. As you can see, although there’s an increase in minimum wage, but the real income of the Nigerian worker has not increased. The Nigerian worker has become poorer in this Buhari’s administration.
I stated the above example to point out that taming inflation is better than increasing wages, both to the worker and to the Nigerian economy.
If Buhari can miraculously decrease the rate of inflation to 9.01% as it was in 2015, at 18,000 naira ($90) minimum wage, no worker would ask for 30,000 naira ($83.33) minimum wage.
Unfortunately, these old men who control the affairs of Nigeria see the rest of the population as fools. And they will never stop fooling the fools.