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Why salary increase may cause more harm than good


By Hassan Gimba

“When you want to help people, you tell them the truth. When you want to help yourself, you tell them what they want to hear.” – Thomas Sowell.

This was published here on 14th November last year when the issues of salary increase and naira redesign were mooted. But it was first written on the 7th of May 2018 and republished on October 1st same year. The first time it was captioned “Salary Increase: Before the harm is done” and the second time, with a little tinkering, it was captioned “Salary Increase: The Implication and Labour’s Role.”

Two unrelated pieces of information prompted the writing of this piece. First was the statement from the chairman of the Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC), Mohammed Bello Shehu, when he paid a courtesy visit to the chairman of Nigerian Governors’ Forum, Governor Aminu Tambuwal of Sokoto State in his office in Abuja.

He said the commission had concluded arrangements to review, upwards, of course, the remuneration of public officers in Nigeria. The last time they carried such out for these categories of Nigerians “was in 2008, which makes it even overdue for review,” he stated.

The second was the decision by the Central Bank of Nigeria (CBN) to redesign the ₦200, ₦500, and ₦1000 notes by December 15, 2022. The apex bank said the existing notes will no longer be legal tender by January 31, 2023.

The CBN governor, Godwin Emefiele, announced on October 26 that 85 per cent of the currency in circulation is hoarded by Nigerians. Redesigning the notes will help prevent counterfeiting and thwart ransom collection by terrorists and kidnappers.

The plan is for the redesigned naira notes to start circulating from December 15 and be used alongside the old notes until January 31, when they will be phased out.

The RMAFC boss bemoaned the inadequate wages of public, political and judicial officeholders, leading to corruption.

His 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.

On the other hand, Emefiele’s move has the strong backing of the president. President Buhari supported the apex bank’s decision when Minister of Finance, Budget, and National Planning, Hajiya Zainab Ahmed, challenged it during a 2023 budget defence session.

As things stand now, none of the above measures can be stopped because of the firm belief in the most powerful office in the land that their time has come. Whatever people will say may not be enough to reverse the decisions already taken – what the Hausa man will call ihun ka banza. And so, this is just to put things down on record for the sake of posterity.

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, the president had 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).

And 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 one officers.

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

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 Davies 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 result, will get a boost because it will motivate the worker who gets a pay rise 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.

Prices in Nigeria rise with salary increases, never coming back down. The only exception was when President Musa Yar’adua lowered the pump price of petrol in 2007.

In 1972, the Udoji Commission proposed a Unified Grading and Salary Structure for the Civil Service. At that time, the naira was worth more than the dollar at ₦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 will be close to ₦1,080,000. 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 ($33 now). Then, just imagine $100 as the basic monthly salary today! That’s some tidy ₦90,000.

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. The salaries being currently received will then look very okay. Otherwise, ₦1 million as minimum wage will help no one as long as the naira is weak. Period.

The government should consider price control if salaries must be increased. 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.

Again, reducing salaries and allowances of public officers, especially elected officials and heads of MDAs, should be explored by the government. 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.

What do you think?


Written by Tom Chiahemen

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