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Report: Raising Minimum Wage Long Overdue



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  • Report: Raising Minimum Wage Long Overdue

The federal government has been advised to speedily reach a consensus with the labour unions and increase the minimum wage for civil servants in the country.

The Financial Derivatives Company Limited, which gave this advice in its latest economic bulletin, pointed that although there are strong arguments in favour of and against raising minimum wage in the country, the benefits outweigh the costs.

While the report noted that in “a perfect world,”it would be ideal for employee wages to be determined by market forces, it however explained that a minimum wage helps mitigate the imbalance of power between employers and low-wage workers.
With the absence of a wage floor, employers would exploit workers, thus hampering the purchasing power of low income earners, the report stated.

The first National Minimum Wage Act (1981) had recommended a monthly minimum wage of N125.

This was revised upwards in 1991 to N250 monthly, and again in 2000 to N5,500.

In 2011, under the administration of President Goodluck Jonathan, it was raised to N18,000 per month. The minimum wage has been a hotly contested issue between the organised labour and the federal government in the last two years.

The Nigerian Labour Congress (NLC) and other labour union factions have been urging the federal government to increase the minimum wage to N56,000 from the current N18,000 (the minimum wage applies to organisations, which employ at least 50 workers).

It appears the government is beginning to yield to the demands of the labour unions as the President recently inaugurated a 30-member tripartite committee to negotiate the revision of the National Minimum Wage for workers in the country.

The committee’s members represent federal, state and private sector interests.

The labor unions had cited deteriorating economic conditions as a major reason for the demand for higher wages.

The last minimum wage review was in 2011 when the economic landscape was radically different from current economic realities. The law requires that the minimum wage be reviewed at least once every five years; this review is two years overdue.

According to the FDC report, in 2011, the minimum wage was equivalent to $111 monthly and $3.71 per day, which was above the international poverty line of $1.9 per day stipulated by the World Bank.

“Today, the current minimum wage is approximately $45 monthly and $1.49 per day, leaving all minimum wage earners living in extreme poverty.

“To worsen the situation, some states still owe their workers’ months (sometimes years) of salaries and pensions.

“In the same vein, the purchasing power of fixed income earners, particularly the minimum wage earners, has halved as the consumer price index (CPI) and, in essence, headline inflation has almost doubled,” it added.

Also, it showed that average consumer price index (CPI) in 2011 was 120.73 but jumped by 92.29 per cent to an average of 232.15 in 2017.

Similarly, headline inflation jumped by 53.5 percentage points to an average of 16.55 per cent in 2017, compared to 10.9 per cent in 2011.

“It is relatively more expensive to borrow from financial institutions today than it was in 2011. Additionally, the exchange rate which averaged N161.63/$ in 2011, depreciated to an average of N403.30/$ in 2017, which further eroded purchasing power.

“It is not coincidental that suicide rates have spiked in the last few years. Although we cannot establish causality at this time, anecdotal evidence suggests that there is a correlation between the deterioration in the macro economy and high suicide incidences.

“All these factors point to the fact that an upward wage review is not only justified, but should be done swiftly,” it stressed.

While advocates for higher wages argue that the socio-economic situation in the country has changed drastically from what it was six years ago, and that higher wages would help workers make ends meet and reduce inequality, among others, opponents argue that high minimum wages will reduce labour demand, hurt small businesses, reverse the positive inflation gains and create a huge budget deficit.

“What is certain is that a higher minimum wage will boost the purchasing power for low income earners, which will in turn increase their demand for goods and services and engender economic growth.

“Furthermore, it will increase access to basic health care and primary education. In effect, higher minimum wages could lead to economic growth. If the federal government agrees to increase the minimum wage to N56,000 a month (or more likely a lower amount following negotiations) this would be equivalent to $138, which translates to $4.63 per day and is above the international poverty line stipulated by the World Bank,” it added.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq,, Investorplace, and many more. He has over two decades of experience in global financial markets.

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South Africa’s Inflation Rate Holds Steady in May



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South Africa’s inflation rate remained unchanged in May, increasing the likelihood that the central bank will maintain current borrowing costs.

According to a statement released by Statistics South Africa on Wednesday, consumer prices rose by 5.2% year-on-year, the same rate as in April.

The consistent inflation rate is expected to influence the decision of the six-member monetary policy committee (MPC), which is set to meet in mid-July. The current benchmark rate stands at 8.25%, a 15-year high, and has been held steady for six consecutive meetings.

Central Bank Governor Lesetja Kganyago has repeatedly emphasized the need for inflation to fall firmly within the 3% to 6% target range before considering any reduction in borrowing costs.

“We will continue to deliver on our mandate, irrespective of how our post-election politics plays out,” Kganyago stated earlier this month in Soweto. “The only impact is what kind of policies any coalition will propose. If the policies are not sustainable, we might not have investment.”

While money markets are assigning a slim chance of a 25-basis point rate cut in July, they are fully pricing in a reduction by November.

Bloomberg Africa economist Yvonne Mhango anticipates the rate-cutting cycle to begin in the fourth quarter, supported by a sharp drop in gasoline prices in June and a rally in the rand.

The rand has appreciated more than 3% since Friday, following the ANC’s agreement to a power-sharing deal with business-friendly opposition parties and the re-election of President Cyril Ramaphosa.

In May, the annual inflation rates for four of the twelve product groups remained stable, including food and non-alcoholic beverages.

However, transport, alcoholic beverages and tobacco, and recreation and culture saw higher rates. Food prices increased by 4.3% in May, slightly down from 4.4% in April, while transport costs rose by 6.3%, up from 5.7% and marking the highest rate for this category since October 2023.

The central bank’s cautious stance on monetary policy reflects its ongoing concerns about inflation.

Governor Kganyago has consistently voiced worries that the inflation rate is not decreasing as quickly as desired. The MPC’s upcoming decision will hinge on sustained inflationary pressures and the need to balance economic stability with fostering growth.

As South Africa navigates its economic challenges, the steady inflation rate in May provides a measure of predictability for policymakers and investors alike.

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Ghana Reports Strong 4.7% GDP Growth in First Quarter of 2024



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Ghana’s economy showed impressive growth in the first quarter of 2024 with the Gross Domestic Product (GDP) expanding by 4.7% compared to the same period last year, according to Government Statistician Samuel Kobina Annim.

This represents an increase from the 3.8% growth recorded in the previous quarter and should provide a much-needed boost to the ruling New Patriotic Party (NPP) as the nation approaches the presidential elections scheduled for December 7.

The positive economic data comes amidst a challenging backdrop of fiscal consolidation efforts under a $3 billion International Monetary Fund (IMF) rescue program.

The government has been working to control debt through reduced spending and restructuring nearly all of its $44 billion debt.

This includes ongoing negotiations with private creditors to reorganize $13 billion worth of bonds.

The latest GDP figures are seen as a vindication of the NPP’s economic policies, which have been under fire from the main opposition party, the National Democratic Congress (NDC).

The opposition has criticized the government’s handling of the economy, particularly its fiscal policies and the terms of the IMF program, arguing that they have imposed undue hardship on ordinary Ghanaians.

However, the 4.7% growth rate suggests that the measures taken to stabilize the economy are beginning to yield positive results.

Analysts believe that the stronger-than-expected economic performance will bolster the NPP’s position as the country gears up for the presidential elections.

“The growth we are seeing is a testament to the resilience of the Ghanaian economy and the effectiveness of the government’s policies,” Annim stated at a press briefing in Accra. “Despite the constraints imposed by the debt restructuring and IMF program, we are seeing significant progress.”

The IMF program, which is designed to restore macroeconomic stability, has necessitated tough fiscal adjustments.

These include cutting government expenditure and implementing structural reforms aimed at boosting economic efficiency and growth.

The government’s commitment to these reforms has been crucial in securing the confidence of international lenders and investors.

In addition to the IMF support, the government has also been focused on diversifying the economy, reducing its reliance on commodities, and fostering sectors such as manufacturing, services, and technology.

These efforts have contributed to the robust growth figures reported for the first quarter.

Economic growth in Ghana has been uneven in recent years, with periods of rapid expansion often followed by slowdowns.

The current administration has emphasized sustainable and inclusive growth, seeking to ensure that the benefits of economic progress are widely shared across all segments of the population.

The next few months will be critical as the government continues its efforts to stabilize the economy while preparing for the upcoming elections.

The positive GDP growth figures provide a strong foundation, but challenges remain, including managing inflation, creating jobs, and ensuring the stability of the financial sector.

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World Bank Commits Over $15 Billion to Support Nigeria’s Economic Reforms



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The World Bank has pledged over $15 billion in technical advisory and financial support to help the country achieve sustainable economic prosperity.

This commitment, announced in a feature article titled “Turning The Corner: Nigeria’s Ongoing Path of Economic Reforms,” underscores the international lender’s confidence in Nigeria’s recent bold reforms aimed at stabilizing and growing its economy.

The World Bank’s support will be channeled into key sectors such as reliable power and clean energy, girls’ education and women’s economic empowerment, climate adaptation and resilience, water and sanitation, and governance reforms.

The bank lauded Nigeria’s government for its courageous steps in implementing much-needed reforms, highlighting the unification of multiple official exchange rates, which has led to a market-determined official rate, and the phasing out of the costly gasoline subsidy.

“These reforms are crucial for Nigeria’s long-term economic health,” the World Bank stated. “The supply of foreign exchange has improved, benefiting businesses and consumers, while the gap between official and parallel market exchange rates has narrowed, enhancing transparency and curbing corrupt practices.”

The removal of the gasoline subsidy, which had cost the country over 8.6 trillion naira (US$22.2 billion) from 2019 to 2022, was particularly noted for its potential to redirect fiscal resources toward more impactful public investments.

The World Bank pointed out that the subsidy primarily benefited wealthier consumers and fostered black market activities, rather than aiding the poor.

The bank’s article emphasized that Nigeria is at a turning point, with macro-fiscal reforms expected to channel more resources into sectors critical for improving citizens’ lives.

The World Bank’s support is designed to sustain these reforms and expand social protection for the poor and vulnerable, aiming to put the economy back on a sustainable growth path.

In addition to this substantial support, the World Bank recently approved a $2.25 billion loan to Nigeria at a one percent interest rate to finance further fiscal reforms.

This includes $1.5 billion for the Nigeria Reforms for Economic Stabilization to Enable Transformation (RESET) Development Policy Financing, and $750 million for the NG Accelerating Resource Mobilization Reforms Programme-for-Results (ARMOR).

“The future can be bright, and Nigeria can rise and serve as an example for the region on how macro-fiscal and governance reforms, along with continued investments in public goods, can accelerate growth and improve the lives of its citizens,” the World Bank concluded.

With this robust backing from the World Bank, Nigeria is well-positioned to tackle its economic challenges and embark on a path to sustained prosperity and development.

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