There is a high possibility of massive job losses within the Organised Private Sector, (OPS), should employers of Labour be compelled to comply with the upward review of the national minimum wage to N70, 000.
Recall that on Thursday, President Bola Tinubu, and the Organised Labour, comprising the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC), led by their presidents, Joe Ajaero and Festus Osifo respectively, agreed to N70,000, as the new minimum wage during their meeting at the Presidential Villa, Abuja.
The National Assembly is scheduled to get an Executive Bill on the new national minimum wage today, Tuesday, which will replace the N30,000 minimum wage that expired on April 18, 2024.
However, analysis shows that mass retrenchment can only be averted in an event of immediate and drastic actions by the Government to address prevailing economic realities that have left businesses struggling with high production cost and low patronage.
Hinting at an economic revamp by strengthening the Organised Private Sector at the third edition of the Nigeria Employers’ Consultative Association (NECA) summit recently in Abuja, the President reiterated that he has embarked on economic reforms since he assumed office.
Recall that after cancelling petrol subsidies in his inaugural speech, Tinubu administration went further to merge the naira exchange rates. In April, the government also cancelled subsidies for Band-A electricity consumers.
On the monetary policy side, the Central Bank of Nigeria (CBN) has moved the benchmark interest rate by 150 basis points from 18.50% in May 2023 to 26.25%, after three consecutive hikes in 2024. This totals 750 basis points since February, which has triggered alarm bells in the ranks of the Organised Private Sector.
The CBN’s Monetary Policy Rate (MPR) hikes this year entrench its hawkish stance, which has seen 11 rate increases since May 2022, as it struggles to contain the inflation rate and the more recent exchange rate volatility.
However, analysts do not see government matching words with action in the area of boosting the capacity of the private sector anytime soon to be able to pay the new minimum wage.
According to pundits, the reforms have not instigated economic revival in reality. As the naira depreciates to record levels, energy costs have spiralled out of control. From N68 per kilowatt-hour, the tariff for the Band-A segment climbed to N225/kWh before dropping to N206.80/kWh in May.
Headline inflation stood at 34.19 percent in June 2024, according to data released by the National Bureau of Statistics (NBS) on Monday, July 15, 2024, compared to 22.22% a year ago. Food inflation grew to 40.87% in June from 40.66% in May 2024. The naira has plunged from N460/$ in May 2023 to N1,500/$ now, with no stability in sight.
All these have combined to make the business environment too harsh for most organisations to remain in business. Little wonder the Organised Private Sector of Nigeria (OPS), which comprises the Nigeria Employers’ Consultative Association; Manufacturers’ Association of Nigeria, (MAN); National Association of Chambers of Commerce, Industry, Mines and Agriculture, (NACCIMA), and Nigeria Association of Small and Medium Enterprises and the Nigerian Association of Small-scale Industrialists, has attributed the current socio-economic crises in the country to hasty Government policy shifts implemented without adequate mitigation plans.
The associations expressed their concerns separately, with NECA highlighting the negative impact of major policy shifts undertaken by the government in 2023.
Reacting to the new minimum wage announcement, the OPS commended the President for ending the protracted national minimum wage negotiations; however, the NECA Director-General, Adewale-Smatt Oyerinde, stressed the need for Government to facilitate compliance with the necessary incentives.
While noting that consultation was ongoing within the OPS, the NECA Director-General explained that the minimum wage agreement was premised on the understanding that the government would take definite steps to reduce the current economic burden on the private sector, including the reversal of the electricity tariff hike, among other supports.
Oyerinde stressed that the ability of the OPS to pay remains a fundamental consideration, urging the President to implement the incentives the government promised the private sector.
