Why proposed salary review will worsen current precarious fiscal situation, by expert

A Development Economist, Dr Chiwuike Uba, has criticised the proposed move by the Federal Government to review salary of workers, saying that it would only worsen Nigeria’s current precarious fiscal situation.

He stated that any wage increase will swallow up any savings that may result from the removal of subsidies and lead to higher inflation and its attendant socioeconomic consequences.

The Chairman of Amaka-Chiwuke-Uba Foundation, who spoke to The Guardian in Enugu on the proposed salary increase following the removal of fuel subsidy, insisted that over the years, salary increases in Nigeria have been based on political correctness and labour union pressure, not on productivity, adding that the current move would be compounded by the fact that over 70 per cent of the annual budget is spent on recurring costs.

He said: “Consequently, 70 per cent of Nigeria’s total budget goes to less than five per cent of the country’s population, which are employed by government. In addition, over 60 per cent of capital expenditures are wasted through inefficiency and corruption by the same less than five per cent of the population. The implication of this is that over 88 per cent of Nigeria’s annual budget is spent (squandered) by five per cent of the total population (including political appointees).

“Moreover, labour productivity is virtually nil, with an average of 1.14 per cent, compared to Egypt’s average of 5.85 per cent, 4.74 per cent in South Africa and 4.15 per cent in Ghana. While it is acceptable for Nigerians to be hard working people, it is important to determine the extent to which the work is productive. Every effort placed in an activity that does not produce anything is futile. It is on this background that many have questioned the productivity of Nigeria’s working population. Over the years, Nigeria has failed to adequately compensate for the large number of workers when viewed in terms of labour productivity index and size of Nigerian GDP. Labour productivity in Nigeria is three times below the average of countries with economies similar in size to Nigeria”

For Uba, it is important that instead of raising the minimum wage, investment in the social sectors, human capital and infrastructure development should be made priority.

“They are important for creating the right and supportive business environment. The Nigerian labour union should therefore focus on getting the government to make the right investments to attract real investors. This could be done through dialogue or industrial action, not by the threat of a strike over the removal of the fuel subsidy.

“Making Nigeria the destination of investment would ultimately lead to an increase in the demand for labour, resulting in higher wages. This is true if the demand for labour is greater than the supply of labour. Furthermore, as a policy, the government should determine wage increases on the basis of productivity and performance and not as a political tool”, he said.