Minimum wage may not be less than N100,000 – Economist

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Chief economist at SPM Professionals, Paul Alaje, shares his thoughts on some of the recent economic policies made by the Federal Government among others

Recently, the Central Bank of Nigeria increased Nigeria’s Monetary Policy Rate known as interest rate from 22.75% to 24.75%. What implications will this have on the private sector?

What do you think of the Central Bank of Nigeria stimulating this programme at this point? I mean, initially at 15.75%, then to 22.75%, and then to 24.75%. This has tremendous implications for the private sector, individuals, the government, and most importantly the people of Nigeria. Well, it will be relatively difficult for the private sector to borrow money or to borrow new money and some banks will write the existing customer rates review because the baseline for lending has changed. So, when it changes and it goes up, it means that the cost of borrowing would also increase.

Again, this would mean a discouragement for investment, and in Economics, it is general for us to say that raising interest rates perpetually will cloud out investments and if it is, and by extension, it means it will cloud out employment. Unemployment is expected to increase, and the National Bureau of Statistics has reported that the Nigerian unemployment rate has increased from where it was to where it is now. The straight answer to that is that it will have adverse effects on the private sector.

What is your take on some people’s concern that it will further deepen the country’s inflation and as well lead to massive job loss across the country?

The goal of the Central Bank for increasing MPR is actually to combat inflation and to stabilise the economy because, according to the Central Bank, the money supply has increased. We just ended a regime where money was printed endlessly. We can print in such a manner and expect inflation not to surge. Unfortunately, inflation is now at over 33%. The CBN feels that by increasing rates, we are going to have a lower rate of inflation but unfortunately, while they think it will be reducing, it seems to be going high because we believe that the main cause of inflation is not just monetary reasons.

The authority must also take some level of responsibility in terms of what is inducing inflation because, in the real sense, institutional things are causing inflation in Nigeria, which, of course, most of them are supply shortages of farm outputs due to banditry and insecurity in the North to high costs and means of moving articulated vehicles from farm centres. These are real issues embattling our nation and this is why inflation is high. So, what are people saying? This will cause an increase, and technically speaking, in economics, we call it unemployment, because unemployment will increase if people don’t invest; they will not increase the number of employment.

But that does not mean that there will be no investment at all. There will be portfolio investments and we have started seeing them. When the interest rate is high, foreigners and locals, rather than putting money into building factories and farms or starting industries, will prefer to give the money to the government at a very high interest rate believing that whether they work or not, the government will pay back. The Nigerian Stock Exchange will be affected.

You can see that the stock has been affected since the new announcement because people prefer to put their money where there is a risk whether the share will go up or down. The rate at the dead market is so high and it is going to discourage even stock and expansion of employment because the Federal Government wants to control inflation through the CBN policies. The government also wants to borrow because anytime you hear that we are getting things abroad, it means we are borrowing. So, that is the real situation of things there.

The Organised Labour in its demand for a new national minimum wage, asked the Federal Government to pay N615,000. Is this amount attainable considering the current economic crisis in the country?

What Nigeria has paid over the years has been minimum wage, not living wage. They are two different things. Since time immemorial, Nigeria’s minimum wage has been pegged between $100 to $200. So, for the sake of convenience, what Labour should be looking at as minimum wage should be between N100,000 to N200,000 and I can tell you that the chances are very high that President Tinubu will announce that. He will announce between N100,000 and N200,000 on the 1st of May.

Why are you confident about that?

It’s because looking at the economy now, for a household that is living under the current electricity regime, let’s say a man who is a graduate is earning about N80,000. He has 180 units, and cooks with gas in his home. He is a Level 8 or Level 7 officer of the Federal Government, and he doesn’t have a car. He has to use a public bus. How much will such a man spend on electricity? If this man would spend N20,000 before now, he’s going to spend the whole of his salary to buy electricity units. This is the reality of now.

The Federal Government has now fallen by some percentage. What people have seen is about 400%. I wonder why people are not engaging with the Minister of Power because the policy is not working. People are paying over 400% for darkness. It is not working, and I think by now, the media will take a survey in areas that have been affected. So, saying that people will earn the same amount is practically unrealistic. A bag of rice is usually the benchmark most of the time.

When we were earning N18,000 as minimum wage, that could buy two units of 50kg bag of rice, which means a bag of rice was around N9,000. The economy became so bad that one bag of rice became N22,000, and then former President Muhammadu Buhari came up with a N30,000 minimum wage. Right now, we are still on N30,000 minimum wage when a bag of rice is about N70,000. So, what do we think President Tinubu will do? It’s between N100,000 to N200, 000.

Will the private sector be able to afford it?

They cannot. The private sector cannot afford it. How many private sector firms can pay over N600,000 to its people? How many CEOs are taking N600,000? Everything is expensive because subsidy removal has caused Nigerians economic dislocation. In the name of subsidy removal, there is fluctuation in the exchange rate. To some extent, yes, but not to a larger extent, and these are reasons why there seems to be some level of pricing within the economy. So, I can tell you that the minimum wage will stay within that peg of N100,000 to N200,000. I don’t see the minimum wage going to N1 above N200,000 or below N100,000 as the minimum wage, not maximum wage.

The Organised Labour is also challenging the hike in electricity tariff, saying relevant stakeholders were not consulted before the decision was made. Is the recent electricity tariff hike justified?

I am really worried about the current Organised Labour, and I can tell you that I don’t think I’m as confident in them as I was because of the highest level of inconsistency in the comments coming from Organised Labour. How can we, in our lifetime, see increments up to eight times without any form of improvement? I will tell you before power was given to the private sector, Nigeria’s distribution was up to 3,000 or 3,500 megawatts. We have now privatised and we are now able to generate more but the transmission lines keep collapsing.

There was a year when it collapsed nine times. What is the essence of having a big fish if you cannot eat fish, let alone meat? What are we still distributing to homes and factories today? Since it is the same 3,500 megawatts; what then is the extent of the privatisation? I’m telling you that we do not have privatisation. What we have is a monopoly and that is very dangerous for our economy, and that is what the Minister of Power needs to understand.

What is a monopoly? In Abuja, you have (Abuja Electricity Distribution Company) AEDC. If you don’t want to use AEDC, which other power can you use? It’s a monopoly. In Ikeja, on the mainland, you have to use the Ikeja Electric. If I don’t want to use Ikeja Electric, which other alternative do I have that will provide electricity for me? And on the Island, it is Eko Electric. So, these are real issues we have to deal with. You must make sure that we have alternatives because we cannot suffer for what we must pay. It is not economics. In Economics, the tax price cannot determine the quantity. It is a monopoly; it is not possible.

What advice do you have based on that?

The government must review the contract of the Discos. If I say, marry my daughter, and I see that every day and night, you are beating the girl black and blue, as a good father, I will say I’m not giving you my daughter again. I don’t think Nigerians deserve the quality of power and the prices we are paying. Whatever the band, whether Band A, B, or Z, the rate is unfair compared to the output Nigerians are getting.

The Economic and Financial Crimes Commission is cracking down on currency speculators and cryptocurrency platforms manipulating the naira. Will this have a positive impact on the economy?

Honestly, I’ve never believed in crypto trading, and I’ve never believed in all these trading that are not transparent, and I have my reasons. The reason is that even though it is not all crypto that is doing this, some people may use it for terrorism financing. We have said that if people trade in crypto, they should apply through the Securities and Exchange Commission.

Again, for people who are running pyramid schemes or some schemes of some sort, the government needs to be involved so that people’s funds are not stolen. Over the years, I’ve seen people lose their money with schemes that cannot be explained. The EFCC says it is shutting down accounts of individuals who are trading some of these things, but the truth is that as they are shutting them down, new ones are coming up daily. Can we now make platforms where we can regulate some of these things?

I know which ones are genuine and the fake. So, the matter with the decision of the EFCC is neither here nor there because I can tell you that I’ve seen people who have truly lost their money. So, when our people are putting their money in crypto and they are converting to other currencies, it’s further putting the naira under pressure, and anything that will put the naira at a disadvantage, I will never support because I’m spending naira; I’m a Nigerian and I live in Nigeria.

But don’t you think there is a need for the Federal Government to adopt the ways cryptocurrency is being used in advanced countries in terms of regulations rather than EFCC clamping down on these platforms?

For me, I strongly advise that the government put regulations in place. I strongly advise that the government regulate the cryptocurrency business and anyone who wants to do such a business in Nigeria should also pay the necessary taxes that are due to the government. My concern about crypto and other schemes is that transparency is an issue.

People have been duped over some time and some websites will just disappear and people’s money will vanish, but I’m putting a caveat because this is not the reality of raw crypto. For the genuine ones, can we now study the model and their countries of origin and see the policies we can put in place if our people must participate in it?

What policy do you think the Federal Government can make to ensure that the existence of cryptocurrency platforms in Nigeria is to the advantage of the country’s economy?

Now, we have seen gambling companies trick people. They will say they want to pay X amount. You know they were not paying people; they changed their rules in the middle of the game. The Federal Government came up with a board to regulate that. If that has happened, such an effect has reduced drastically. I know the government has the competence to do this. Again, can we look at countries where this has worked? For me, regulating and supporting the process is important.

The International Monetary Fund forecasts that Nigeria’s economy, which ranked as Africa’s largest in 2022, will slip to fourth place this year after a series of currency devaluations. How can this be prevented from happening?

Well, I have engaged with those in authority before on my Twitter page. I predicted that Nigeria would lose its position if we continued with the probation policy. Unfortunately, we continued. The only way we can reverse the IMF’s prediction, which of course, is reversible or we can make sure that it does not come to reality, is to ensure that the naira has sufficient value. Naira should go back to between N500 and N1,000 at best, and by so doing, we’ll be looking at the third position.


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