Managing Director of Financial Derivatives Company (FDC), Mr. Bismarck Rewane has advised the Nigerian Labour Congress (NLC) against linking wage demands to the dollar exchange rate.
Rewane stated this while contributing to the Panel session at the 2024 Vanguard Economic Discourse, themed “Reforms in the Era of Global Economic Uncertainties: Whither Nigeria?” held in Lagos.
He noted that this approach is ineffective without considering inflation rates in the United States.
Rewane argued that dollarizing the minimum wage would burden the private sector, a major employer, and could lead to job losses.
“Benchmarking wage demand on dollar exchange rate without taking cognizance of inflation in the United States of America would not work.
Dollarisation of the minimum wage would put more pressure on the private sector, which is a major employer of labour, and would eventually result in job losses,” he said.
Referring to the reduction in inflationary pressure in 2020 following the increase of the minimum wage to N30,000 from N18,000 the previous year, Rewane noted that, if managed properly, an increase in the minimum wage might not necessarily lead to higher inflation.
Price reforms
He asserted that price reforms currently pursued by President Bola Tinubu’s administration will not yield economic benefits without corresponding institutional reforms.
Commenting on the administration’s efforts to stabilize prices in the foreign exchange (forex) market, Rewane emphasized that institutional reforms are essential to ensure that qualified individuals are placed in positions of authority to implement credible policy and price reforms.
He stated, “Institutional reform is crucial because it prevents corruption and ensures the right people are in the right places. Implementing policy and price reforms without institutional reform risks lobbying and inefficacy. Reforming institutions, including the Central Bank, is essential for sustainable economic progress.”
Government’s policies exacerbating poverty
NLC President Joe Ajaero, speaking at the event criticized the Federal Government’s policies for exacerbating poverty in Nigeria arguing that, since taking office a year ago, the government has not implemented any reforms that would improve the economy.
Ajaero pointed out that policies such as the floating of the naira, subsidy removal, and tax base expansion have not benefited the economy or the Nigerian people. Instead, he claimed, these policies have diminished the economic gains previously enjoyed.
“The purpose of any government is to serve the welfare of the people, including workers. Prioritizing reserves, savings, and economic policies while people suffer and sink deeper into poverty is counterproductive,” Ajaero stated.
He emphasized that despite the President’s pledge to eradicate poverty, more people have fallen into poverty since May 29th of last year.
Ajaero questioned the nature of the reforms being implemented, citing increases in electricity tariffs and the floating of the currency as examples that do not qualify as genuine reforms. He criticized the expansion of the tax net as another burden on workers, who are the primary taxpayers with no option to evade deductions.
Impact of the hike in premium motor spirit
He highlighted the significant impact of the hike in Premium Motor Spirit (PMS) prices from N185 to about N700, which triggered increases in the cost of food, education, housing, and transportation. Ajaero noted that food inflation is over 40% and overall inflation exceeds 30%.
When the PMS price increase was announced, Ajaero recounted, the NLC urged the government to reverse it due to its widespread impact on living costs. However, the government refused, instead advising Ajaero to negotiate wages.