Pyrrhic victory
The Punch reported that Nigeria’s government may add an additional ₦315 billion ($316.6 million) to its wage bill in the next six months…
The Punch reported that Nigeria’s government may add an additional ₦315 billion ($316.6 million) to its wage bill in the next six months for the newly introduced allowance for federal workers. This report followed the main unions agreeing to suspend their proposed nationwide strike for 30 days following the signing of an MOU with the Federal Government after another meeting. The resolution followed more than five hours of deliberations between the Federal Government and the unions at the Presidential Villa, Abuja.
A famous saying is that the road to hell is paved with good intentions. Nigeria’s military regimes introduced petrol and FX subsidies decades ago as a way to make citizens believe that they were sharing in the country’s economic wealth. However, these subsidies have been a significant source of corruption, waste and underdevelopment. They have forced prices of goods and services to be suppressed for decades, but this course has become unsustainable as foreign reserves have been depleted and public debt has ballooned. As a result, wages in Nigeria are now lagging behind those of other countries, making the country uncompetitive. One recurring theme in the conversation about Nigeria’s development path is the need to cut the cost of governance. President Tinubu has already set a record with his large cabinet. Any government intervention comes at a cost, so we are curious where the money for this raise will come from. The Nigerian government’s willingness to increase wages for public sector workers in response to rising inflation rates is a welcome development, but the effects of inflation on the private sector workforce should also be considered. To ensure that the benefits of a public sector pay raise are shared more widely, the government must introduce policies that will help the private sector workforce deal with inflation: giving businesses tax breaks, investing in education and training, reducing the regulatory burden on businesses, providing financial assistance to businesses, investing in new technologies and job creation and improving infrastructure to reduce transportation and logistics costs are the true path forward. Nigerian businesses also need to expand exports to boost investments, improve productivity and create new jobs. As businesses become more profitable through exports, they are better positioned to offer higher wages. This wage growth extends beyond exporting businesses and can positively impact workers across various sectors. When incomes eventually begin to rise, individuals will then have more purchasing power, which can help alleviate financial strains caused by inflation. Export-led growth can also mitigate domestic inflation and play a key role in boosting investments, improving productivity and creating new jobs. When businesses earn foreign currency through exports, they reduce their reliance on the domestic market for revenue. In conclusion, the Nigerian government must reduce the cost of governance and support the private sector to create a more sustainable and prosperous economy for all Nigerians.