Salary Increase Or Stronger Naira?

Dr. Gimba
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By Hassan Gimba

For five years now, I have been advocating for our currency to be strong rather than for salaries to be increased. Not because those collecting salaries from the government are a minuscule few or because of the tendency that makes the prices of everything skyrocket. No. and not because the implication will push a lot of small and medium-scale businesses to death because they cannot afford it or because even big businesses and the government itself must retrench a lot of staff to accommodate salaries in a growing budget.

No. My primary fear is that the more salaries are increased, the more the naira loses its value as long as we do not produce what we eat and what we use. We are aware of some countries in the past where one needed millions of currency to buy a loaf of bread. In another country, a thief would empty a wheelbarrow filled with that country’s currency and run away with the wheelbarrow because it was more valuable than the money in it.

Therefore, what we need right now is a strong currency. The government and labour ought to have that as their concern. Just imagine that ten naira is equal to a dollar. This will mean a person collecting ₦30,000 as salary will have an equivalent of $3,000. $3,000 today is over ₦3,000,000.

It is, though, not news that the chairman of the Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC), Mohammed Bello Shehu, had since hinted that the commission had concluded arrangements to review, upwards, of course, the remuneration of public officers in Nigeria. The last time such was carried out for these categories of Nigerians, he stated, was in 2008, which makes it even overdue for review.

The RMAFC boss lamented what he described as the poor remuneration of public, political and judicial office holders “which has exposed them to corrupt tendencies.”

The move, he said, was underpinned by paragraph 32(D) of part 1 to the third schedule of the 1999 constitution of the Federal Republic of Nigeria, as amended, which empowers the Commission to determine the remuneration appropriate to political, public and judicial officeholders in the country.

But Shehu’s statement did not just come out of the blues. It was like icing on the cake – after putting sugar in the mouths of other workers. In August last year, former President Muhammadu Buhari said there was a need for an urgent salary review in the federal civil service owing to the high inflation rate across the world. The country’s inflation rate surged to 19.64 per cent in July 2022, up from 18.60 per cent in the previous month, according to the Consumer Price Index (CPI).

On August 31, Ekpo Nta, chairman of the National Salaries, Income and Wages Commission, issued a circular to the effect that the president had approved an increment in duty tour allowances (DTAs) for ministers, permanent secretaries and civil servants on grade levels one to 17 with effect from September 1.

According to the circular, duty tour allowances applicable to the permanent secretary/equivalent moved from N20,0000 to N70,000, while those for minister/SGF/HCSF/equivalent rose from N35,000 to N80,000. The raise went down all the way to level 1 officers.

A duty tour refers to an official trip embarked upon by a public servant.

As a result of the withdrawal of fuel subsidies, President Bola Ahmed Tinubu believes salaries should be doubled. He, however, made a provisional increase of ₦35,000 to a category of workers “Based on our talks with labour, business and other stakeholders, we are introducing a provisional wage increment to enhance the federal minimum wage without causing undue inflation,” he said.

Nigeria has seen many commissions set up even before independence to consider the nation’s pay structure to arrive at an enduring one befitting of an income policy.

The major ones were the Hunt Commission (1934), the Bridges Committee of Enquiry (1941), the Tudor Davis Commission (1945), the Harragin Commission (1946), the Miller Commission of 1947, the Gorsuch Commission (1955), the Newns Commission, the Elwood Grading Team (1956) and the Mbanefo Commission of 1959.

Others were the Morgan Commission (1963), the Adebo Commission (1970 – 1971), the Public Service Review Commission (Udoji Report) (1974), the Cookey Commission (1981), the Fatai Williams Committee (1990), the Commission on the Review of Higher Education in Nigeria (Longe Commission), the 1994 Review Panel on the Civil Service Reforms (Ayida Panel) (1994), the Vision 2010 Committee Report (1997) and the Committee on Harmonisation of Remuneration in the Public Service (1998).

What this portends is that there will be a considerable increase in monthly cash flow. The recipients have more money coming in, meaning more money to spend. The people involved will now more easily meet their financial obligations. This increased purchasing power in many hands will galvanise production and improve the overall economy.

Productivity, as a consequence, will get a boost because the worker who gets a pay rise will be motivated to embrace his work with the seriousness it deserves. Thus, there would be more efficiency and effectiveness in the workplace, ultimately leading to increased productivity.

However, in Nigeria, once there is a salary increase, the price of everything goes up, and nothing that has gone up ever comes down again, going by experience, perhaps except for just one time when the late President Musa Yar’adua reduced the pump price of petrol in 2007.

In 1972, when the Udoji Commission recommended, among others, a Unified Grading and Salary Structure (UGSS) which embraced all posts in the Civil Service from the lowest to the highest, the naira was stronger than the dollar at about ₦60/$100. The commission increased the annual minimum wage from ₦312 to ₦720, the equivalent of $1200. As of the time of writing this, $100 was nudging ₦90,000!

Today, $1200 is over ₦1,200,000. What this means is that the Udoji Commission’s minimum wage of ₦60 ($100 then) had more purchasing power than today’s minimum wage of ₦30,000 ($30 now). Then, just imagine $100 as a basic monthly salary today! That’s some tidy ₦100,000.

One million naira as minimum wage will help no one as long as the naira is weak. Period.

Therefore, rather than increase salaries, the government should do all it can to strengthen the naira. A very strong naira will see market forces pushing down the price of commodities, thereby strengthening the purchasing power of Nigerians.

But if salaries must be increased, the government would do well to explore the idea of price control. While the advantage is that it may lead to lower prices for consumers, the consequence is that it may lead to lower supply and a reduction of quality. However, price stability helps to avoid both inflation and deflation.

Another idea that the government must explore is a drastic cut in salaries and allowances of public officers, especially those of elected officials, political appointees and heads of MDAs, rather than increasing them. After all, Nigeria does not have the money to pay university lecturers decent salaries. The saved money can be used to finance the salary increase. This way, the negative consequences will be mitigated.

Hassan Gimba is the Publisher and Editor-in-Chief of Neptune Prime.

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