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Economy

Report: Raising Minimum Wage Long Overdue

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Roofers work on new homes at a residential construction site in the west side of the Las Vegas Valley in Las Vegas
  • 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.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Economy

Lagos Loses N1 Trillion to #EndSARS Protest, a Year Budget – Gov

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Lagos Needs N1 Trillion to Fix Vandalised Infrastructure, a Year Budget – Gov

The Governor of Lagos State, Babajide Sanwo-Olu, has puts the total economic cost of past week destruction and vandalism in the state at about N1 trillion.

Sanwo-olu, who spoke with the speaker of the House of Representatives, Hon. Femi Gbajabiamila, that was on a fact-finding visit to Lagos on Sunday, said the state may spend up to N1 trillion to fix damages done to infrastructure.

Speaking on the situation, Femi Gbajabiamila, said “The House of Representatives will do all it can to compensate all those who suffered brutality including policemen that lost their lives in the process.

“Also whatever the house can do in rebuilding Lagos and other states it will do. We are now in a state of reconstruction. What must be done will be done.

“I learnt from the governor of Lagos State that it will take N1.0 trillion to rebuild what had been lost and I asked him what is the budget size of the state he said about N1.0 trillion. You can see we are moving backward.

Rotimi Akeredolu, Chairman of the South West Governors, who was part of the visit, stated, “We are indeed surprised at the extent of damage to lives and properties in Lagos. We will be right to say Lagos was turned into a war zone.

“We are deeply concerned with the ease with which public buildings, utilities, police stations and investments of our people have been burnt despite the proximity of security agencies to those areas. However, while responding to the total number of government’s buildings burnt among others,” Lagos State Commissioner for Information and Strategy, Mr Gbenga Omotoso, stated.

We are still counting. The state is still taking inventories of all that happened and not until all that is concluded we can’t not ascertained for now the total number of burnt structures. But I can tell you it’s very huge.

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Economy

Experts Recount Nigeria Losses Ahead Possible Rebuilding, Recovery

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Made in Nigeria Textile

Economic Experts Recount Losses Incurred from the #EndSARS Protest Ahead Possible Rebuilding, Recovery

Economic experts have started releasing reports on the size of the damage done to the nation’s economy following the #EndSARS protest that was hijacked by hoodlums and criminals.

The most affected state, Lagos State, will need about $1 trillion, an equivalent to its annual budget, to recoup the economic value of what was lost to the destruction and looting perpetrated by thieves masquerading as protesters.

A Senior Economist/Head, Research & Strategy, Greenwich Merchant Bank, Ayodeji Ebu, said the unrest and the 24 hours curfew that was later imposed by Lagos State to restore order could cost the state at least N54 billion per day.

He explained that the protest would hurt the nation’s foreign direct investment in the remaining part of the year and as well as the first quarter of 2021.

His words: “While it may be difficult to estimate the exact loss so far, based on the significant contribution of Lagos State (approximately 30%) to Nigeria’s total Gross Domestic Product (GDP) and as over 50 percent of Nigeria’s non-oil industrial capacity is located in Lagos, the impact of the crisis will be enormous.

“This was further compounded with the 24hours curfew that lasted for about four days. Estimating using the Q2’2020 GDP data and assuming there was a total shut down, each day will cost Lagos alone about N54 billon.

Speaking further, Ebu said: “With Lagos the centre of the civil unrest, which account for 70 percent or $1.1 billion of total capital importation in Q2’2020, we expect this to further impact on direct investment in Q4’2020 and Q1’2021.

He expects that insurance claims to also rise in line with the damages done on lives and properties.

Similarly, analysts at Cordros Capital, a Lagos based investment banking firm, reacted to the negative impact of the unrest on the nation’s economy.

The analysts said the nation’s economy could contract by as much as 6.91 percent year-on-year in the final quarter of the year due to the unrest. Therefore, they projected a negative growth rate of 4.15 percent year-on-year for the 2020 fiscal year.

In their words, they said “The transportation, trade, and manufacturing sectors are expected to be the hardest hit.

“On transportation, we expect reduced domestic and international flight operations pending when normalcy is restored.

“Similarly, we expect compliance with curfew directives to hinder the free movement of people and goods across the country, further compounding the woes of the transport sector, which is yet to recover from the COVID-19 induced decline.

“While the manufacturing sector is currently being hampered by FX related issues and an unfriendly business environment, the imposition of curfews will further exacerbate the challenges of the sector.

“For the trade sector, the decline in household consumption brought about by higher food prices and shrinking consumers’ income will cascade into weak wholesale and retail trade in conjunction with the pre-existing supply chain constraints.”

Analysts at Fidelity Securities Limited also added their voices and said the protest may cost the nation more than the N700 billion estimation previously estimated by the Lagos Chamber of Commerce.

They said “The EndSARs protest and eventual escalation of the protest would cost the Nigerian economy way more than N700 billion initially estimated by the Lagos Chamber of Commerce. With the current level of destructions, it may take a while for business to run at full capacity as the government as well as the private sector will first have to channel funding into the destroyed infrastructure in a bid to restore things back to the way it was, before even thinking of further improving on the infrastructure.

“Given the level of destruction, more businesses have been affected, more jobs would be lost, and more families would further fall below the poverty line as a result of the looting and burning of business. This is expected to further worsen the economic situation of the country which was already suffering from the impact of Covid-19. The government at this point would need to think out of the box, if it aims to revitalise the economy in the shortest time, else our GDP growth rate may remain negative even into the new year.

Accordingly, the Electricity Distribution Companies of Nigeria (DISCOs), on Sunday said the destruction of equipment it uses to deliver power and service operations will hurt its revenue generation and service delivery in October and the rest of the fourth quarter.

The DISCOs said “I tell you, assets are been destroyed, which is a significant impact on the industry. The DISCOs are expected to give power and how will it be achieved when our facilities including cables, poles, buildings are destroyed.

“That, however, transcends to money because the DISCOs cannot collect money for bills due to the unrest. Who would want to pay when everybody is angry.

“This means the remittance will be low to the Government on power we have collected. The protest has empowered Nigerians to fight back and the threat to lynch officials collecting bill are high. The properties and cables would have to be fixed on whose account?

“Seriously we are at a crossroad but we have signed an agreement to deliver power and that we would do.”

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Economy

Nigeria Mulls Selling Electricity to Republic of Chad

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power

Nigeria Considers Selling Electricity to the Republic of Chad

The Federal Government is presently considering selling electricity to the Republic of Chad after a request was made by the neigbouring nation.

The federal government-owned Transmission Company of Nigeria disclosed this on Sunday, adding that a meeting was held last week to discuss the possibilities of plugging the Republic of Chad to the nation’s grid.

Nigeria presently exports electricity to three neighbouring nations, Benin, Togo and the Republic of Niger despite struggling with power supply at home and failed to up its power generation more than the current level of 3,000 -4,500 megawatts in recent years.

On Sunday, the total power generated declined to 3,474.5MW as of 6am, down from 3,776.5MW on Saturday, according to the latest data from the Nigerian Electricity System Operator.

The total number of idle plants rose from 8 on Saturday to 11 on Sunday. These idle plants were Geregu II, Sapele II, Alaoji, Olorunsogo II, Omotosho II, Ihovbor, Gbarain, Ibom Power, AES, ASCO and Trans-Amadi.

A total of twenty-seven plants were presently connected to the national grid, which is being managed by the TCN.

Meeting between Ministry of Power, TCN, and the Chadian Minister of Energy, Mrs Ramatou Mahamat Houtouin, to discuss the possibilities of connecting the Republic of Chad to the Nigerian national grid [was held] on Wednesday, October 21, 2020,” the TCN said on its Twitter handle on Sunday, alongside pictures of the meeting.

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