Financial expert, Bismarck Rewane has called on Nigerian labour leaders to reassess their wage increase demands, warning that high wage hikes could lead to widespread job cuts, particularly in the private sector.
Rewane made these remarks during a speech at the 2024 Vanguard Economic Discourse, on Tuesday, in Lagos.
Rewane emphasized the importance of considering the impact of wage increases on business sustainability, and argued that high labour costs could pressure private companies, the main source of employment in Nigeria, to resort to layoffs as a cost-saving measure.
He said, “Inflation in 2019 was 11.4%. Inflation in 2020, the year after, came down to 6%. So, you can see that even though there was a wage review, which went from N18,000 to N30,000, inflation actually declined to 6 percent.
“So, it was well managed, anticipated, and the discussion was very thorough and it happened in the month of the election. The president signed on April 18th.
“So, if you now dollarise the minimum wage, because the inflation has already been factored in the exchange rate, you dollarise the income.
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“The national minimum wage is a law that affects both the private sector and the public sector. It is a policy; it is not an economic plan, not a public plan. The government’s contribution to the GDP is about 10 per cent. The private sector, and the employers, also have to pay the minimum wage.
“They can only pay the minimum wage from the revenue they generate and you know the situation in this country. And they don’t want a situation which would lead to a recession. So, what I’m saying is that you negotiate the minimum wage bearing in mind that it is not government and government workers.”
The call for moderation comes amidst ongoing negotiations between the Nigerian Labour Congress (NLC) and the government regarding a potential increase in the national minimum wage. The NLC has reportedly proposed adjustments that account for the depreciation of the Nigerian Naira against the US dollar.
Rewane cautioned that wage increases not aligned with economic realities could exacerbate inflationary pressures. He highlighted the need for institutional reforms alongside wage adjustments to ensure efficient price control.
This development underscores the delicate balancing act between improving worker compensation and maintaining business viability in a challenging economic climate.
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