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Fear of Inflation Mounts as Buhari Approves New Minimum Wage

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  • Fear of Inflation Mounts as Buhari Approves New Minimum Wage

As workers and their unions celebrate the N30,000 new minimum wage approved by President Muhammadu Buhari yesterday, analysts have expressed fear that the fresh wage regime could put inflationary pressure on the already fragile economy.

Those who spoke said the 60 per cent minimum wage increase was likely to lead to a general increase in prices of goods and services in the short-term.

One of them, the Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, pointed out that the wage hike would lead to inflationary pressures.

He said, “Productivity growth in Nigeria is still minus 0.7 per cent. So, an increase in the minimum wage and all other increases that would follow and it means that basically inflation is likely to increase.

“Our projection is that inflation will go from 11.5 per cent to around 13 per cent because of the wage increase.

“If you add the election spending and the promissory notes the government has issued for contractor debt of N483 billion; when we add the money supply of the contractor note, the minimum wage and negative productivity, you have an inflation.”

When asked about the likelihood of an interest rate hike, he said, “Not really, because there is a transmission time lag between when money supply rises and when prices rise.

“The transmission time lag is between three and six months.”

Buhari had received the report of the National Minimum Wage Tripartite Committee yesterday in Abuja and approved the new figure, effectively ending the first phase of the workers’ struggle for pay increase.

Receiving the report of the committee from its chairman, Ms Amal Pepple, in the Council Chamber of the Presidential Villa, Buhari told members of the committee, the organised labour and government representatives that henceforth, he would put the machinery in place for the transmission of the new National Minimum Wage Bill to the National Assembly.

The president, who said he was committed to seeing the new wage come into fruition, chronicled all the events leading to the final resolution, saying he was regularly briefed on updates on the negotiations.

Promising that the government would continue to engage the organised labour wherever necessary, Buhari thanked all who participated in the process.

However, he counselled the organised labour not to allow themselves to be used as political weapons by politicians.

He said, “In a way, both arguments are valid. I want to assure you all that we will immediately put in place the necessary machinery that will close out these open areas. Our plan is to transmit the Executive Bill to the National Assembly for passage within the shortest possible time.

“I am fully committed to having a new National Minimum Wage Act in the very near future.

“Let me use this opportunity to recognise the leadership of the organized labour and private sector as well as representatives of State and Federal Governments for all your hard work. The fact that we are here today, is a notable achievement.

“As the executive arm commences its review of your submission, we will continue to engage you all in closing any open areas presented in this report. I therefore would like to ask for your patience and understanding in the coming weeks.

“May I therefore, employ workers and their leaders not to allow themselves to be used as political weapons.’

In her submission, Pepple narrated how the decision to finally peg the minimum wage at N30, 000 was arrived at.

She also reported that the draft of the New Minimum Wage Bill that would be sent to the National Assembly had already been produced.

Pepple explained, “To arrive at our recommendation, the committee carefully weighed the demand of the Nigerian workers, which was predicated on the high cost of living occasioned by unfavourable exchange rate and rising inflation over the past few years, among other factors.

“The committee also considered the overall macro-economic indicators, including the revenue and expenditure profile of government as provided by the Ministers of Budget and National Planning and Finance as well as the minimum wage proposed by some state governments in their memoranda submitted to the committee.

“Consideration was also given to the critical role of the informal sector in employment generation and the need for a realistic minimum wage that will not stifle the growth of the sector and the overall economy.

“After carefully weighing these critical factors and bearing in mind the overriding interest of the economy, the committee, while noting the offer of N24,000 by the federal government, is recommending an increase in the existing minimum wage from N18,000 to N30,000.

“We believe that the implementation of the recommended minimum wage, will, no doubt, boost the purchasing power of workers, increase consumption expenditure and ultimately stimulate business and overall economic growth.

“The committee has also produced a draft national minimum wage bill 2018 for condition by government.

“We strongly believe that the enactment of the draft bill into law is very critical to the operation and future reviews of the national minimum wage.”

National Assembly Receives Three-year MTEF

Meanwhile, the president has submitted a three-year (2019- 2021) Medium-Term Expenditure Framework and Fiscal Strategy Paper to the Senate for approval.

He also submitted the same proposal to the House of Representatives for expeditious consideration.

Buhari had in an October 29 letter titled ‘Submission of 2019-2021 Medium-Term Expenditure Framework And Fiscal Strategy Paper’ addressed to Senate President Bukola Saraki and read at plenary by Saraki yesterday stated that he was sending the fiscal strategy paper based on the provisions of the Fiscal Responsibility Act, 2007.

According to the president, the preparation towards submission of the 2019 budget to the National Assembly is progressing well.

The Medium Term Expenditure Framework, MTEF and Fiscal Strategy Paper, the President explained, “were prepared against the backdrop of a generally uncertain global economic environment; as well as fiscal challenges in the domestic economy to ensure that planned spending is set at prudent and sustainable levels and is consistent with government’s overall developmental objectives and inclusive growth”.

While canvassing for an expeditious approval of his proposal, Buhari said, “I hereby forward the 2019-2021 MTEF and FSP to the Distinguished Senate and trust that it would be expeditiously considered in order to bring the 2019 FGN budget preparation process to timely closure.”

At the House of Representatives, Speaker Yakubu Dogara, read a similar letter at yesterday’s plenary

The MTEF, which was approved by the Federal Executive Council (FEC) meeting of Wednesday, October 28, had proposed a $60 oil price benchmark, 2.3 million barrels per day at $305/$1 exchange rate and 3.01 per cent GDP growth rate for the 2019 budget.

The FEC, according to Minister for Budget and National Planning, Senator Udo Udoma, approved a proposed N8.73trillion budget for 2019 fiscal year, which is N400 billion less than the N9.12trillion approved for 2018 fiscal year.

Also yesterday, Saraki read out a letter dated October 24 from Buhari requesting for the confirmation of the appointment of Hon. Abike Dabiri-Erewa, as the Chairman/ Chief Executive Officer of Nigeria Diaspora Commission in compliance with Section 2(1) of the Nigeria Diaspora Commission (Establishment) Act, 2017.

The president also sought Senate confirmation of Mr. Chidi Izuwah as Director-General of Infrastructure Concession Regulatory Commission and the substitution of Chief Olabode Mustapha with Mrs. Ronke Sokefun as Chairman of the Nigerian Deposit Insurance Corporation, (NDIC).

A six- man governing board of the National Bureau of Statistics (NBS), headed by Dr Kabiru Nakuara was also presented to the Senate by the president for confirmation in compliance with Section 8(2) a & j of the Statistics Act, 2010.

The Senate also yesterday approved the establishment of two federal polytechnics and two colleges of education in various parts of the country.

This was sequel to the presentation of the reports of the Chairman of the Senate Committee on Tertiary Institutions and TETFUND, Senator Jibrin Barau (Kano North), calling on the Senate to approve the establishment of the higher institutions.

The institutions include Federal Polytechnic in Aba, Abia State and another one in Selami in Sokoto State.

The others are Federal College of Education in Gumel, Jigawa State and Sabon Birini in Sokoto State.

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

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Guinness Nigeria Postpones Spirits Importation Exit, Extends Deal with Diageo

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Guinness - Investors King

Guinness Nigeria Plc has announced a delay in its plan to halt the importation of spirits as it extended its agreement with multinational alcoholic beverage company Diageo until 2025.

The decision, communicated through a corporate notice filed with the Nigerian Exchange Limited on Tuesday, cited a longer-than-expected transition period for separating its business from Diageo’s.

Initially slated for discontinuation in April 2024, the importation of premium spirits like Johnnie Walker, Singleton, Baileys, and others under the 2016 sale and distribution agreement with Diageo will now continue for an additional year.

The extension comes as the process of business separation between Guinness Nigeria, a subsidiary of Diageo, and Diageo itself faces unexpected delays.

In October, Guinness Nigeria had announced plans to cease importing spirits from Diageo, a move aimed at reducing its foreign exchange requirements.

However, the separation process has encountered unforeseen hurdles, necessitating the extension of the importation agreement.

The notice, signed by the company’s Legal Director/Company Secretary, Abidemi Ademola, highlighted the ongoing efforts by Guinness Nigeria and Diageo to implement the separation, originally scheduled for completion by April 2024.

The extension underscores the complexity of disentangling the businesses and ensuring a smooth transition.

Guinness Nigeria reaffirmed its commitment to the long-term growth strategy, aligning with Diageo’s decision to establish a new, wholly-owned spirits-focused business.

Despite the delay, both companies remain dedicated to managing the importation and distribution of international premium spirits in West and Central Africa, with Nigeria as a key hub.

The postponement comes amid challenges faced by Guinness Nigeria, including significant exchange rate losses, which amounted to N49 billion in the 2023 half-year operations.

Despite these setbacks, the company remains optimistic about its future prospects in the Nigerian market.

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Private Sector Warns: Interest Rate Hike to Trigger Job Cuts and Inflation Surge

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Private employers

As the Central Bank of Nigeria (CBN) announced a hike in the Monetary Policy Rate (MPR) from 22.75% to 24.75%, concerns have been raised by the private sector regarding the potential ramifications on job stability and inflationary pressures.

The move, aimed at curbing inflation and stabilizing the exchange rate, has prompted apprehension among business operators who fear adverse effects on the economy.

Representatives from the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) and the Nigerian Association of Small Scale Industrialists have voiced their worries over the increased difficulty in accessing affordable credit.

They argue that the higher interest rates will impede the private sector’s ability to borrow funds for expansion and operational activities.

This, they fear, could lead to a reduction in business investments and subsequently result in widespread job cuts across various sectors.

The Lagos Chamber of Commerce and Industry (LCCI) acknowledged the necessity of the interest rate hike but emphasized the potential negative consequences it may bring.

While describing it as a “price businesses would have to pay,” the LCCI highlighted the current fragility of the economy, exacerbated by various policy missteps.

They cautioned that the increased cost of borrowing could stifle entrepreneurial activities and discourage expansion plans critical for economic growth and job creation.

Experts have echoed these concerns, warning that the tightening monetary conditions could exacerbate inflationary pressures and hinder economic recovery efforts.

With inflation already soaring at 31.70%, the rate hike could further fuel price hikes, especially in essential goods and services, thus eroding the purchasing power of consumers.

However, CBN Governor Yemi Cardoso defended the decision, citing the imperative to address current inflationary pressures and ensure sustained exchange rate stability.

He emphasized the need to restore the purchasing power of ordinary Nigerians and expressed confidence that the economy would stabilize by the end of the year.

Despite assurances from the CBN, stakeholders remain cautious, calling for a more nuanced approach that balances the need for price stability with the imperative of fostering economic growth and job creation.

As businesses brace for the impact of the interest rate hike, all eyes are on the evolving economic landscape and the measures taken to mitigate its effects on livelihoods and inflation.

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Breaking Barriers: Transcorp Hotels CEO Shares Journey from Crisis to Success

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Dupe Olusola

Dupe Olusola, the Managing Director/CEO of Transcorp Hotels Plc, reflects on her remarkable journey from navigating the depths of a global pandemic to achieving unprecedented success in the hospitality industry.

Appointed in March 2020, amidst the onset of the COVID-19 pandemic, Olusola found herself at the helm of a company grappling with the severe economic fallout and operational challenges inflicted by the crisis.

Faced with a drop in occupancy rates from 70% to a mere 5%, Olusola and her team were confronted with the daunting task of steering Transcorp Hotels through uncharted waters.

Undeterred by the adversity, they embarked on a journey of transformation, leveraging creativity and resilience to navigate the turbulent landscape.

Implementing innovative strategies such as introducing drive-through cinemas, setting up on-site COVID-19 testing facilities, and enhancing take-away services, Transcorp Hotels adapted to meet the evolving needs of its guests and ensure continuity amidst the crisis.

Embracing disruption as a catalyst for growth, Olusola fostered a culture of collaboration and teamwork, rallying her colleagues to overcome obstacles and embrace change.

Through unwavering determination and a commitment to excellence, Transcorp Hotels emerged from the pandemic stronger than ever, breaking profit and revenue records year after year.

“It’s indeed been a great opportunity to learn and relearn, to lead and to grow. When you see success stories, remember it’s a journey with twists, turns, ups and downs but in the end, it will all be okay”, she said.

Olusola’s leadership exemplifies the power of adaptability and perseverance, inspiring her team to transcend limitations and chart a course towards unprecedented success.

As Transcorp Hotels continues to flourish under her stewardship, Olusola remains steadfast in her dedication to driving innovation, fostering growth, and breaking barriers in the hospitality industry.

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